Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 20-F
|
o
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
|
OR
|
||
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2010 | ||
|
OR
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
|
OR
|
||
|
o
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| Date of event requiring this shell company report | ||
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 or organization)
(Jurisdiction of incorporation or organization)
Plaza de
San Nicolás, 4
48005 Bilbao
Spain
48005 Bilbao
Spain
(Address of principal executive
offices)
Javier
Malagón Navas
Paseo de la Castellana, 81
28046 Madrid
Spain
Telephone number +34 91 537 7000
Fax number +34 91 537 6766
(Name, Telephone, E-mail and /or Facsimile Number and Address of Company Contact Person)
Paseo de la Castellana, 81
28046 Madrid
Spain
Telephone number +34 91 537 7000
Fax number +34 91 537 6766
(Name, Telephone, E-mail and /or Facsimile Number and Address of Company Contact Person)
Securities registered or to be
registered pursuant to Section 12(b) of the Act.
|
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
|
American Depositary Shares, each representing
|
New York Stock Exchange | |
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the right to receive one ordinary share,
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||
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par value €0.49 per share
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Ordinary shares, par value €0.49 per share
|
New York Stock Exchange* | |
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Guarantee of Non-Cumulative Guaranteed
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New York Stock Exchange** | |
|
Preferred Securities, Series C, liquidation preference
$1,000 each, of
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||
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BBVA International Preferred, S.A. Unipersonal
|
| * | The ordinary shares are not listed for trading, but are listed only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange. | |
| ** | The guarantee is not listed for trading, but is listed only in connection with the registration of the corresponding Non-Cumulative Guaranteed Preferred Securities of BBVA International Preferred, S.A. Unipersonal (a wholly-owned subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.). |
Securities
registered or to be registered pursuant to Section 12(g) of
the Act.
None
Securities
for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
None
The number of outstanding shares of each class of stock of
the Registrant as of December 31, 2010, was:
Ordinary
shares, par value €0.49 per share —
4,490,908,285
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes
þ
No
o
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(Section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
o
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2
of the
Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller
reporting company)
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
|
U.S.
GAAP
o
|
International Financial Reporting Standards as
Issued by the International Accounting Standards Board o |
Other þ |
If “Other” has been checked in response to the
previous question, indicate by check mark which financial
statement item the registrant has elected to follow.
Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act).
Yes
o
No
þ
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A.
TABLE OF
CONTENTS
1
Table of Contents
2
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CERTAIN
TERMS AND CONVENTIONS
The terms below are used as follows throughout this report:
| • | “BBVA” , “Bank” , the “Company” or “Group” means Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires. | |
| • | “BBVA Bancomer” means Bancomer S.A. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. | |
| • | “BBVA Compass” means Compass Bancshares, Inc. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires. | |
| • | “Consolidated Financial Statements” means our audited consolidated financial statements as of and for the years ended December 31, 2010, 2009 and 2008 prepared in accordance with the International Financial Reporting Standards adopted by the European Union ( “EU-IFRS” ) required to be applied under the Bank of Spain’s Circular 4/2004. | |
| • | “Latin America” refers to Mexico and the countries in which we operate in South America and Central America. |
First person personal pronouns used in this report, such as
“we”
,
“us”
, or
“our”
, mean BBVA. In this report,
“$”
,
“U.S. dollars”
, and
“dollars”
refer to United States Dollars and
“€”
and
“euro”
refer to
Euro.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains statements that constitute
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”
) Section 21E of the
U.S. Securities Exchange Act of 1934, as amended (the
“Exchange Act”
), and the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include words such as
“believe”, “expect”, “estimate”,
“project”, “anticipate”, “should”,
“intend”, “probability”, “risk”,
“VaR”, “target”, “goal”,
“objective” and similar expressions or variations on
such expressions. Forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and
actual results may differ materially from those in the
forward-looking statements as a result of various factors. The
accompanying information in this Annual Report, including,
without limitation, the information under:
| • | “Item 3. Key Information — Risk Factors”; | |
| • | “Item 4. Information on the Company”; | |
| • | “Item 5. Operating and Financial Review and Prospects”; and | |
| • | “Item 11. Quantitative and Qualitative Disclosures about Market Risk” |
identifies important factors that could cause such differences.
Other important factors that could cause actual results to
differ materially from those in forward-looking statements
include, among others:
| • | general political, economic and business conditions in Spain, the European Union ( “EU” ), Latin America, the United States and other regions, countries or territories in which we operate; | |
| • | changes in applicable laws and regulations, including taxes; | |
| • | the monetary, interest rate and other policies of central banks in Spain, the EU, the United States, Mexico and elsewhere; | |
| • | changes or volatility in interest rates, foreign exchange rates (including the euro to U.S. dollar exchange rate), asset prices, equity markets, commodity prices, inflation or deflation; | |
| • | ongoing market adjustments in the real estate sectors in Spain, Mexico and the United States; |
3
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| • | the effects of competition in the markets in which we operate, which may be influenced by regulation or deregulation; | |
| • | changes in consumer spending and savings habits, including changes in government policies which may influence investment decisions; | |
| • | our ability to hedge certain risks economically; | |
| • | the success of our acquisitions (including the acquisition of a shareholding in Türkiye Garanti Bankası A.Ş., as described below), divestitures, mergers and strategic alliances; | |
| • | our success in managing the risks involved in the foregoing, which depends, among other things, on our ability to anticipate events that cannot be captured by the statistical models we use; and | |
| • | force majeure and other events beyond our control. |
Readers are cautioned not to place undue reliance on such
forward-looking statements, which speak only as of the date
hereof. We undertake no obligation to release publicly the
result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the
date hereof, including, without limitation, changes in our
business or acquisition strategy or planned capital
expenditures, or to reflect the occurrence of unanticipated
events.
PRESENTATION
OF FINANCIAL INFORMATION
Accounting
Principles
Under Regulation (EC) no. 1606/2002 of the European Parliament
and of the Council of July 19, 2002, all companies governed
by the law of an EU Member State and whose securities are
admitted to trading on a regulated market of any Member State
must prepare their consolidated financial statements for the
years beginning on or after January 1, 2005 in conformity
with EU-IFRS. The Bank of Spain issued Circular 4/2004 of
December 22, 2004 on Public and Confidential Financial
Reporting Rules and Formats (
“Circular
4/2004”
), which requires Spanish credit institutions to
adapt their accounting system to the principles derived from the
adoption by the European Union of EU-IFRS.
On November 26, 2008, the Bank of Spain issued Circular
6/2008 (
“Circular 6/2008”
), modifying the
presentation format for consolidated financial statements from
the format stipulated in Circular 4/2004. Unless otherwise
indicated herein, as used hereafter, “Circular 4/2004”
refers to Circular 4/2004 as amended or supplemented from time
to time, including by Circular 6/2008. The Group prepares its
consolidated annual financial information in accordance with
EU-IFRS required to be applied under Circular 4/2004.
As we describe in Note 2.2.1.b to the Consolidated
Financial Statements, a loan is considered to be an impaired
loan and, therefore, its carrying amount is adjusted to reflect
the effect of its impairment when there is objective evidence
that events have occurred which, in the case of loans, give rise
to a negative impact on the future cash flows that were
estimated at the time the transaction was arranged. The
potential impairment of these assets is determined individually
or collectively.
The quantification of losses inherent in deterioration is
calculated collectively, both in the case of assets classified
as impaired and for the portfolio of current assets that are not
currently impaired but for which an imminent loss is expected.
Inherent loss, calculated using statistical procedures, is
deemed equivalent to the portion of losses incurred on the date
that the accompanying consolidated financial statements are
prepared that has yet to be allocated to specific transactions.
The Group estimates collective inherent loss of credit risk
corresponding to operations realized by Spanish financial
entities of the Group (approximately 68.7% of the loans and
receivables of the Group as of December 31,
2010) using the parameters set by Annex IX of the Bank
of Spain’s Circular 4/2004 on the basis of its experience
and
4
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the Spanish banking sector information regarding the
quantification of impairment losses and provisions for
insolvencies for credit risk.
Notwithstanding the above, the Group has historic statistical
data which it used in its internal ratings models
(“IRBs”) that were approved by the Bank of Spain for
some portfolios in 2009, albeit only for the purpose of
estimating regulatory capital under the new Basel Accord (BIS
II). It uses these internal models to calculate the economic
capital required in its activities and uses the expected loss
concept to quantify the cost of credit risk for incorporation in
its calculation of the risk-adjusted return on capital of its
operations.
To estimate the collective loss of credit risk corresponding to
operations with non-Spanish residents registered in foreign
subsidiaries of the Group, the Group applies similar methods and
criteria, using the Bank of Spain’s parameters but adapting
the default calendars to the particular circumstances of the
country. Additionally, in Mexico for consumer loans, credit
cards and mortgages portfolios, as well as for credit investment
maintained by the Group in the United States (which in the
aggregate represent approximately 13.9% of the loans and
receivables of the Group as of December 31, 2010), internal
models are used to calculate impairment losses based on the
historical experience of the Group. In both of these cases, the
provisions required under the Bank of Spain’s Circular
4/2004 standards fall within the range of provisions calculated
using the Group’s internal ratings models.
For the years ended December 31, 2010, 2009 and 2008, there
are no substantial differences in the calculations made under
both EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 and U.S. GAAP because the
allowance for loan losses for such years calculated under
EU-IFRS required to be applied under the Bank of Spain’s
Circular 4/2004 are similar to the best estimates of allowance
for loan losses under U.S. GAAP, which is the central
scenario determined using internal risk models based on our
historical experience.
Note 60 to our Consolidated Financial Statements provides
additional information about this reconciliation.
Statistical
and Financial Information
The following principles should be noted in reviewing the
statistical and financial information contained herein:
| • | Average balances, when used, are based on the beginning and the month-end balances during each year. We do not believe that such monthly averages present trends that are materially different from those that would be presented by daily averages. | |
| • | The book value of BBVA’s ordinary shares held by its consolidated subsidiaries has been deducted from equity. | |
| • | Unless otherwise stated, any reference to loans refers to both loans and leases. | |
| • | Interest income figures include interest income on non-accruing loans to the extent that cash payments have been received in the period in which they are due. | |
| • | Financial information with respect to subsidiaries may not reflect consolidation adjustments. | |
| • | Certain numerical information in this Annual Report may not sum due to rounding. In addition, information regarding period-to-period changes is based on numbers which have not been rounded. |
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not Applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not Applicable.
5
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| ITEM 3. | KEY INFORMATION |
| A. | Selected Consolidated Financial Data |
The historical financial information set forth below has been
selected from, and should be read together with, the
Consolidated Financial Statements included herein. For
information concerning the preparation and presentation of
financial information contained herein, see “Presentation
of Financial Information”. Also see Note 60 of the
Consolidated Financial Statements for a presentation of our
shareholders’ equity and net income attributed to parent
company reconciled to U.S. GAAP.
| For Year Ended December 31, | ||||||||||||||||||||
|
EU-IFRS(*)
|
2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
| (In millions of euros, except per share/ADS data (in euros)) | ||||||||||||||||||||
|
Consolidated Statement of Income data
|
||||||||||||||||||||
|
Interest and similar income
|
21,134 | 23,775 | 30,404 | 26,176 | 20,042 | |||||||||||||||
|
Interest and similar expenses
|
(7,814 | ) | (9,893 | ) | (18,718 | ) | (16,548 | ) | (11,904 | ) | ||||||||||
|
Net interest income
|
13,320 | 13,882 | 11,686 | 9,628 | 8,138 | |||||||||||||||
|
Dividend income
|
529 | 443 | 447 | 348 | 380 | |||||||||||||||
|
Share of profit or loss of entities accounted for using the
equity method
|
335 | 120 | 293 | 241 | 308 | |||||||||||||||
|
Fee and commission income
|
5,382 | 5,305 | 5,539 | 5,603 | 5,133 | |||||||||||||||
|
Fee and commission expenses
|
(845 | ) | (875 | ) | (1,012 | ) | (1,043 | ) | (943 | ) | ||||||||||
|
Net gains(losses) on financial assets and liabilities
|
1,441 | 892 | 1,328 | 1,545 | 1,261 | |||||||||||||||
|
Net exchange differences
|
453 | 652 | 231 | 411 | 376 | |||||||||||||||
|
Other operating income
|
3,543 | 3,400 | 3,559 | 3,589 | 3,413 | |||||||||||||||
|
Other operating expenses
|
(3,248 | ) | (3,153 | ) | (3,093 | ) | (3,051 | ) | (2,923 | ) | ||||||||||
|
Gross income
|
20,910 | 20,666 | 18,978 | 17,271 | 15,143 | |||||||||||||||
|
Administration costs
|
(8,207 | ) | (7,662 | ) | (7,756 | ) | (7,253 | ) | (6,330 | ) | ||||||||||
|
Depreciation and amortization
|
(761 | ) | (697 | ) | (699 | ) | (577 | ) | (472 | ) | ||||||||||
|
Provisions (net)
|
(482 | ) | (458 | ) | (1,431 | ) | (235 | ) | (1,338 | ) | ||||||||||
|
Impairment losses on financial assets (net)
|
(4,718 | ) | (5,473 | ) | (2,941 | ) | (1,903 | ) | (1,457 | ) | ||||||||||
|
Net operating income
|
6,742 | 6,376 | 6,151 | 7,303 | 5,545 | |||||||||||||||
|
Impairment losses on other assets (net)
|
(489 | ) | (1,618 | ) | (45 | ) | (13 | ) | (12 | ) | ||||||||||
|
Gains (losses) on derecognized assets not classified as
non-current asset held for sale
|
41 | 20 | 72 | 13 | 956 | |||||||||||||||
|
Negative Goodwill
|
1 | 99 | — | — | — | |||||||||||||||
|
Gains (losses) in non-current assets held for sale not
classified as discontinued operations
|
127 | 859 | 748 | 1,191 | 541 | |||||||||||||||
|
Income before tax
|
6,422 | 5,736 | 6,926 | 8,494 | 7,030 | |||||||||||||||
|
Income tax
|
(1,427 | ) | (1,141 | ) | (1,541 | ) | (2,079 | ) | (2,059 | ) | ||||||||||
|
Income from continuing transactions
|
4,995 | 4,595 | 5,385 | 6,415 | 4,971 | |||||||||||||||
|
Income from discontinued transactions (net)
|
— | — | — | — | — | |||||||||||||||
|
Net income
|
4,995 | 4,595 | 5,385 | 6,415 | 4,971 | |||||||||||||||
|
Net income attributed to parent company
|
4,606 | 4,210 | 5,020 | 6,126 | 4,736 | |||||||||||||||
|
Net income attributed to non-controlling interests
|
389 | 385 | 365 | 289 | 235 | |||||||||||||||
|
Per share/ADS(1) Data
|
||||||||||||||||||||
|
Net operating income(2)
|
1.79 | 1.71 | 1.66 | 2.03 | 1.63 | |||||||||||||||
|
Numbers of shares outstanding (at period end)
|
4,490,908,285 | 3,747,969,121 | 3,747,969,121 | 3,747,969,121 | 3,551,969,121 | |||||||||||||||
|
Income attributed to parent company(3)(4)
|
1.17 | 1.08 | 1.31 | 1.64 | 1.34 | |||||||||||||||
|
Dividends declared(4)
|
0.270 | 0.420 | 0.501 | 0.733 | 0.637 | |||||||||||||||
| (*) | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. | |
| (1) | Each American Depositary Share (“ADS”) represents the right to receive one ordinary share. | |
| (2) | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period excluding the weighted average of treasury shares during the period (3,762 million, 3,719 million, 3,706 million, 3,594 million and 3,406 million shares in 2010, 2009, 2008, 2007 and 2006, respectively). | |
| (3) | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period including the average number of estimated shares to be converted and, for comparative purposes, a correction factor to account for the capital increase carried out in November 2010, and excluding |
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| the weighted average of treasury shares during the period (3,983 million, 3,899 million, 3,846 million, 3,730 million and 3,535 million shares in 2010, 2009, 2008, 2007 and 2006, respectively). See Note 5 to the Consolidated Financial Statements. | ||
| (4) | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo opción”) mentioned in Item 4, Item 8 and Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning Per Share under IAS 33 and ASC260 are not met. |
| As of and for Year Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In millions of euros, except percentages) | ||||||||||||||||||||
|
Consolidated balance sheet data
|
||||||||||||||||||||
|
Total assets
|
552,738 | 535,065 | 542,650 | 501,726 | 411,663 | |||||||||||||||
|
Common stock
|
2,201 | 1,837 | 1,837 | 1,837 | 1,740 | |||||||||||||||
|
Loans and receivables (net)
|
364,707 | 346,117 | 369,494 | 337,765 | 279,658 | |||||||||||||||
|
Customer deposits
|
275,789 | 254,183 | 255,236 | 219,610 | 186,749 | |||||||||||||||
|
Debt certificates and subordinated liabilities
|
102,599 | 117,817 | 121,144 | 117,909 | 100,079 | |||||||||||||||
|
Non-controlling interest
|
1,556 | 1,463 | 1,049 | 880 | 768 | |||||||||||||||
|
Total equity
|
37,475 | 30,763 | 26,705 | 27,943 | 22,318 | |||||||||||||||
|
Consolidated ratios
|
||||||||||||||||||||
|
Profitability ratios:
|
||||||||||||||||||||
|
Net interest margin(1)
|
2.38 | % | 2.56 | % | 2.26 | % | 2.09 | % | 2.06 | % | ||||||||||
|
Return on average total assets(2)
|
0.89 | % | 0.85 | % | 1.04 | % | 1.39 | % | 1.26 | % | ||||||||||
|
Return on average equity(3)
|
15.8 | % | 16.0 | % | 21.5 | % | 34.2 | % | 37.6 | % | ||||||||||
|
Credit quality data
|
||||||||||||||||||||
|
Loan loss reserve
|
9,473 | 8,805 | 7,505 | 7,144 | 6,424 | |||||||||||||||
|
Loan loss reserve as a percentage of total loans and receivables
(net)
|
2.60 | % | 2.54 | % | 2.03 | % | 2.12 | % | 2.30 | % | ||||||||||
|
Substandard loans(4)
|
15,472 | 15,312 | 8,540 | 3,366 | 2,492 | |||||||||||||||
|
Substandard loans as a percentage of total loans and receivables
(net)(4)
|
4.24 | % | 4.42 | % | 2.31 | % | 1.00 | % | 0.89 | % | ||||||||||
| (*) | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. | |
| (1) | Represents net interest income as a percentage of average total assets. | |
| (2) | Represents net income as a percentage of average total assets. | |
| (3) | Represents net income attributed to parent company as a percentage of average equity. | |
| (4) | As of December 31, 2010, 2009 and 2008, non-performing assets, which include substandard loans and other non-performing assets, amounted to €15,936 million, €15,928 million and €8,859 million, respectively. As of December 31, 2010, 2009 and 2008, the non-performing assets ratios (which we define as substandard loans and other non-performing assets divided by loans and advances to customers and contingent liabilities) were 4.1%, 4.3% and 2.3%, respectively. |
7
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| As of and for Year Ended December 31, | ||||||||||||||||||||
|
U.S. GAAP Information(*)
|
2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
|
(In millions of euros, except per share/ADS data
|
||||||||||||||||||||
| (in euros) or as otherwise indicated) | ||||||||||||||||||||
|
Consolidates Statement of income data
|
||||||||||||||||||||
|
Net income(1)
|
4,688 | 4,210 | 4,435 | 5,698 | 5,212 | |||||||||||||||
|
Net income attributed to parent company
|
4,299 | 3,825 | 4,070 | 5,409 | 4,972 | |||||||||||||||
|
Net income attributed to the non controlling interest
|
389 | 385 | 365 | 289 | 240 | |||||||||||||||
|
Basic earnings per share/ADS(2)(3)
|
1.140 | 1.028 | 1.098 | 1.505 | 1.460 | |||||||||||||||
|
Diluted earnings per share/ADS(2)(3)
|
1.100 | 1.022 | 1.098 | 1.505 | 1.460 | |||||||||||||||
|
Dividends per share/ADS (in dollars)(2)(3)(4)
|
0.372 | 0.586 | 0.652 | 1.011 | 0.807 | |||||||||||||||
|
Consolidated Balance sheet data
|
||||||||||||||||||||
|
Total assets
|
561,767 | 543,594 | 549,037 | 510,569 | 420,971 | |||||||||||||||
|
Total equity
|
44,176 | 37,467 | 33,630 | 36,076 | 31,229 | |||||||||||||||
|
Basic shareholders’ equity per share/ADS(2)(3)(5)
|
11.38 | 9.73 | 8.84 | 9.85 | 8.94 | |||||||||||||||
|
Diluted shareholders’ equity per share/ADS(2)(3)(5)
|
11.38 | 9.73 | 8.84 | 9.85 | 8.94 | |||||||||||||||
| (*) | For 2009, BBVA is availing itself of the accommodation in Item 17(c)(2)(iv) of Form 20-F with respect to the application of IAS 21 for highly inflationary economies (Venezuela). Therefore, this reconciliation has been prepared in accordance with Item 18 of Form 20-F which is different from that required by US GAAP. See Note 60 to our Consolidated Financial Statements for additional information. |
| (1) | Includes “Net income attributed to parent company” and “Net income attributed to non controlling interest”. |
| (2) | Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period excluding the weighted average of treasury shares during the period. |
| (3) | Each ADS represents the right to receive one ordinary share. |
| (4) | Dividends per share/ADS are converted into dollars at the average exchange rate for the relevant period, calculated based on the average of the noon buying rates for euro from the Federal Reserve Bank of New York on the last date in respect of which such information is published of each month during the relevant period. |
| (5) | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo opción”) mentioned in Item 4, Item 8 and Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning Per Share under IAS 33 and ASC260 are not met. |
Exchange
Rates
Spain’s currency is the euro. Unless otherwise indicated,
the amounts that have been converted to euro in this Annual
Report have been done so at the corresponding exchange rate
published by the ECB on December 31 of the relevant year.
For convenience in the analysis of the information, the
following tables describe, for the periods and dates indicated,
information concerning the noon buying rate for euro, expressed
in dollars per €1.00. The term
“noon buying
rate”
refers to the rate of exchange for euros,
expressed in U.S. dollars per euro, in the City of New York
for cable transfers payable in foreign currencies as certified
by the Federal Reserve Bank of New York for customs purposes.
|
Year Ended December 31
|
Average(1) | |||
|
2006
|
1.2661 | |||
|
2007
|
1.3797 | |||
|
2008
|
1.4695 | |||
|
2009
|
1.3955 | |||
|
2010
|
1.3216 | |||
|
2011 (through March 25, 2011)
|
1.3884 | |||
| (1) | Calculated by using the average of the exchange rates on the last day of each month during the period. |
8
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|
Month Ended
|
High | Low | ||||||
|
September 30, 2010
|
1.3638 | 1.2708 | ||||||
|
October 31, 2010
|
1.4066 | 1.3688 | ||||||
|
November 30, 2010
|
1.4224 | 1.3036 | ||||||
|
December 31, 2010
|
1.3395 | 1.3089 | ||||||
|
January 31, 2011
|
1.3715 | 1.2944 | ||||||
|
February 28, 2011
|
1.3794 | 1.3474 | ||||||
|
March 31, 2011 (through March 25, 2011)
|
1.4212 | 1.3813 | ||||||
The noon buying rate for euro from the Federal Reserve Bank of
New York, expressed in dollars per €1.00, on March 25,
2011, was $1.4144.
As of December 31, 2010, approximately 36% of our assets
and approximately 39% of our liabilities were denominated in
currencies other than euro. See Note 2.2.16 to our
Consolidated Financial Statements.
For a discussion of our foreign currency exposure, please see
“Item 11. Quantitative and Qualitative Disclosures
About Market Risk — Market Risk in Non-Trading
Activities in 2010 — Structural Exchange Rate
Risk”.
| B. | Capitalization and Indebtedness |
Not Applicable.
| C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
| D. | Risk Factors |
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 have historically developed our lending business in Spain,
which continues to be our main place of business. As of
December 31, 2010, business activity in Spain accounted for
58% of our loan portfolio. See “Item 4. Information on
the Company — Selected Statistical
Information — ASSETS — Loans and Advances to
Customers — Loans by Geographic Area”. After
rapid economic growth until 2007, Spanish gross domestic product
grew by 0.9% in 2008 and contracted by 3.8% and 0.2% in 2009 and
in 2010, respectively. Our Economic Research Department
estimates that the Spanish economy, will not recover a strong
path of growth in terms of gross domestic product in 2011,
growing at an estimated pace of 0.9%. It is estimated, however,
that — given the current rate of growth of active
population in Spain- the economy will need to grow by around
2.0% for jobs to be created and attain a sustained recovery. The
persistence of high unemployment rates in Spain could have a
negative influence on our non-performing loan ratio.
After a relatively good performance in the subprime and
liquidity crises in 2009, the Spanish economy has suffered the
consequences of the peripheral sovereign crisis in 2010. The
Greek and Irish rescue programs and the possibility of a
Portuguese rescue program have spread doubts about the Spanish
economy. Financial stress in Europe has increased the cost of
financing of governments and financial institutions which, in
some cases, have lost the access to international funding. As a
result of this continued contraction, it is expected that
economic conditions and employment in Spain will continue to
deteriorate in 2011. Growth forecasts for the Spanish economy
could be further revised downwards if measures adopted in
response to the economic crisis, are not as effective as
expected.
After making a relatively broad and effective use of
expansionary fiscal policies in the most acute period of the
financial crisis, the Spanish government launched in 2010 an
ambitious program of fiscal consolidation and structural
reforms, partly in response to the rise of international
financial tensions following the first quarter of
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2010. As a result, domestic demand in 2010 was heavily impacted
by fiscal policy: directly, through the progressive contraction
on public sector demand (as a result, among other reasons, of
tighter fiscal targets), and indirectly, through the impact of
these reforms on the consumption and investment decisions of
private agents. The effects of these measures are expected to
continue having a negative effect on domestic demand in 2011,
including as a result of the tight fiscal targets of regional
governments for 2011. In addition, the pace of recovery in
private domestic demand in the short and medium terms are
expected to continue to be hampered by weak economic
fundamentals and the effects of the final phase of certain
adjustments in the private sector (such as private deleveraging
and adjustments in the residential construction sector).
The Spanish economy has also been affected by the slowdown in
global growth and is particularly sensitive to economic
conditions in the rest of the Euro area, the primary market for
Spanish goods and services exports. In addition, the effects of
the financial crisis have been particularly pronounced in Spain
given Spain’s heightened need for foreign financing as
reflected by its high current account and public deficits. Real
or perceived difficulties in making the payments associated with
these deficits can further damage Spain’s economic
situation and increase the costs of financing its public deficit.
Moreover, there are three factors affecting the Spanish economy
that may interfere with our business. First, the adjustment in
the real estate sector, which we expect will continue in the
coming years. Residential investment contracted by approximately
17.7% in 2010. In addition, demand for property could decrease
in 2011 as a result of the rise in the value added tax rate
applicable to real estate transactions in mid-2010 and the
elimination of government tax breaks for home purchases, as from
January 2011, which partly incentivized demand for property last
year. Second, the restructuring process in which the
Spanish’s financial sector is immersed (which needs to be
completed by September 2011 in accordance with the instruction
of Bank of Spain). Such restructuring process seeks, among other
things, to improve the solvency of the system, to achieve
greater transparency in the balance sheets of institutions and a
reduction of branch and labor overcapacity and will result in a
more concentrated financial sector, with fewer incumbent
institutions which will be more competitive. The recently
announced Financial Sector Reinforcement Plan imposes a new
minimum capital to Spanish banking institutions, above the
minimum levels required in other countries. Thus, stricter
requirements could affect Spanish institutions vis à vis
other institutions in Europe. Third, the possibility of
decoupling in the Euro area could lead to increased interest
rates before the Spanish economy is able to resume its previous
path of growth.
Our loan portfolio in Spain has been adversely affected by the
deterioration of the Spanish economy in 2010, 2009 and 2008. For
example, substandard loans to other resident sectors in Spain
increased in 2010, 2009 and 2008 mainly due to the sharp
increase in substandard mortgage loans to
€4,425 million as of December 31, 2010, from
€3,651 million as of December 31, 2009 and
€2,033 million as of December 31, 2008.
Substandard loans to real estate and construction customers in
Spain also increased substantially in 2010, 2009 and 2008 to
account for 16.8%, 15.4% and 5.6% of loans in such category as
of December 31, 2010, 2009 and 2008, respectively. Our
total substandard loans to customers in Spain jumped to
€10,954 million and €10,973 million as of
December 31, 2010 and 2009, respectively, from
€5,562 million as of December 31, 2008,
principally due to an increase in substandard loans to customers
in Spain generally as a result of the deterioration in the
macroeconomic environment. As a result of the increase in total
substandard loans to customers in Spain described above, our
total substandard loans to customers in Spain as a percentage of
total loans and receivables to customers in Spain increased
sharply to 5.2% and 5.4% as of December 31, 2010 and 2009,
respectively, from 2.7% as of December 31, 2008. Our loan
loss reserves to customers in Spain as a percentage of
substandard loans to customers in Spain as of December 31,
2010 and 2009 also declined significantly to 45% and 44%,
respectively, from 67% as of December 31, 2008.
Given the concentration of our loan portfolio in Spain, any
adverse changes affecting the Spanish economy are likely to have
a significant adverse impact on our loan portfolio and, as a
result, on our financial condition, results of operations and
cash flows.
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A
substantial percentage of our customer base is particularly
sensitive to adverse developments in the economy, which renders
our lending activities relatively riskier than if we lent
primarily to higher-income customer segments.
Medium- and small-sized 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-sized companies. Consequently, during periods of slowdown
in economic activity we may experience higher levels of past due
amounts, which could result in higher levels of allowance for
loan losses. We cannot assure you that we will not suffer
substantial adverse effects on our loan portfolio to these
customer segments in the event of additional adverse
developments in the economy.
Increased
exposure to real estate in Spain makes us more vulnerable to
developments in this market.
In the years prior to 2008, economic growth, strong labor
markets and low interest rates in Spain caused an increase in
the demand for housing, which resulted in an increase in demand
for mortgage loans. This increased demand and the widespread
availability of mortgage loans affected housing prices, which
rose significantly. After this buoyant period, demand began to
adjust in mid-2006. Since the last quarter of 2008, the supply
of new homes has been adjusting sharply downward in the
residential market in Spain, but a significant excess of unsold
homes still exists in the market. In 2011, we expect housing
supply and demand to adjust further, in particular if current
adverse economic conditions continue. As Spanish residential
mortgages are one of our main assets, comprising 32%, 31% and
25% of our loan portfolio as of December 31, 2010, 2009 and
2008, respectively, we are currently highly exposed to
developments in the residential real estate market in Spain. We
expect the current problems in the financial markets and the
deterioration of economic conditions in Spain to continue in the
near future. As a result, we expect housing prices in Spain to
decline further in 2011, which along with other adverse changes
in the Spanish real estate sector could have a significant
adverse impact on our loan portfolio and, as a result, on our
financial condition, results of operations and cash flows.
Our exposure to the real estate sector represented 8.9% of our
private individuals loan portfolio as of December 31, 2010
which is below the average in the Spanish financial sector
according to the Bank of Spain. Our non-performing loans
represented 21.3% of our real estate portfolio as of such date.
Our substandard real estate loan portfolio comprised of
non-performing loans and potential problem loans represented
35.6% of our real estate loan portfolio as of December 31,
2010.
Highly-indebted
households and corporations could endanger our asset quality and
future revenues.
Spanish households and businesses have reached, in recent years,
a high level of indebtedness, which represents increased risk
for the Spanish banking system. The high proportion of loans
referenced to variable interest rates makes debt service on such
loans more vulnerable to changes in interest rates than in the
past. In fact, the average debt burden of Spanish households as
a proportion of disposable income has increased substantially
from approximately 12% at the end of 2003 to approximately 16%
at the end of 2008, before moderating slightly to approximately
13% at the end of 2010. The deleveraging process, is taking more
time than we had originally forecasted.
Highly indebted households and businesses are less likely to be
able to service debt obligations as a result of adverse economic
events, which could have an adverse effect on our loan portfolio
and, as a result, on our financial condition and results of
operations. In addition, the increase in households’ and
businesses’ indebtedness also limits their ability to incur
additional debt, decreasing the number of new products we may
otherwise be able to sell them and limiting our ability to
attract new customers in Spain satisfying our credit standards,
which could have an adverse effect on our ability to achieve our
growth plans.
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Current
economic conditions may make it more difficult for us to
continue funding our business on favorable terms or at
all.
Historically, one of our principal sources of funds has been
savings and demand deposits. Time deposits represented 28%, 32%
and 34% of our total funding as of December 31, 2010, 2009
and 2008, respectively. Large-denomination time deposits may,
under some circumstances, such as during periods of significant
interest rate-based competition for these types of deposits, be
a less stable source of deposits than savings and demand
deposits. Moreover, since we rely heavily on short-term deposits
for our funding, we cannot assure you that, in the event of a
sudden or unexpected shortage of funds in the banking systems or
money markets in which we operate, we will be able to maintain
our current levels of funding without incurring higher funding
costs or having to liquidate certain of our assets. In addition,
the financial crisis triggered by the U.S. subprime market
turned out to be deeper and more persistent than expected. In
response to the financial crisis, governments around the world
implemented ambitious fiscal expansion programs during 2008 and
2009, trying to limit economic deterioration and boost their
economies. However, concerns expressed during 2009 over the
effectiveness of fiscal stimulus programs have given way to
concerns over the sustainability of public deficits, and
governments announced plans to remove the extraordinary fiscal
and monetary measures implemented to confront the financial
crisis. As public sources of liquidity, such as ECB
extraordinary measures, and expansionary economic policies are
removed from the market, we cannot assure you that we will be
able to continue funding our business or, if so, maintain our
current levels of funding without incurring higher funding costs
or having to liquidate certain of our assets.
We
face increasing competition in our business lines.
The markets in which we operate are highly competitive.
Financial sector reforms in the markets in which we operate have
increased competition among both local and foreign financial
institutions, and we believe that this trend will continue. In
addition, the trend towards consolidation in the banking
industry has created larger and stronger banks with which we
must now compete, some of which have recently received public
capital.
We also face competition from non-bank competitors, such as:
| • | department stores (for some credit products); | |
| • | automotive finance corporations; | |
| • | leasing companies; | |
| • | factoring companies; | |
| • | mutual funds; | |
| • | pension funds; and | |
| • | insurance companies. |
We cannot assure you that this competition will not adversely
affect our business, financial condition, cash flows and results
of operations.
Our
business is particularly vulnerable to volatility in interest
rates.
Our results of operations are substantially dependent upon the
level of our net interest income, which is the difference
between interest income from interest-earning assets and
interest expense on interest-bearing liabilities. Interest rates
are highly sensitive to many factors beyond our control,
including deregulation of the financial sectors in the markets
in which we operate, monetary policies pursued by the EU and
national governments, domestic and international economic and
political conditions and other factors. In Spain, competition
distortions in the term deposits market have intensified, and
this situation is expected to continue due to the liquidity
needs of certain financial institutions, which are offering high
interest rates to attract additional deposits.
Changes in market interest rates could affect the spread between
interest rates charged on interest-earning assets and interest
rates paid on interest-bearing liabilities and thereby
negatively affect our results of operations. For example, an
increase in interest rates could cause our interest expense on
deposits to increase more significantly and quickly than our
interest income from loans, resulting in a reduction in our net
interest income.
Since approximately 74% of our loan portfolio as of
December 31, 2010 consisted of variable interest rate loans
maturing in more than one year, our business is particularly
vulnerable to volatility in interest rates.
12
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Our
financial statements and periodic disclosure under securities
laws may not give you the same information as financial
statements prepared under U.S. accounting rules and periodic
disclosures provided by domestic U.S. issuers.
Publicly available information about public companies in Spain
is generally less detailed and not as frequently updated as the
information that is regularly published by or about listed
companies in the United States. In addition, although we are
subject to the periodic reporting requirements of the United
States Securities Exchange Act of 1934 (the “Exchange
Act”), the periodic disclosure required of foreign issuers
under the Exchange Act is more limited than the periodic
disclosure required of U.S. issuers. Finally, we maintain
our financial accounts and records and prepare our financial
statements in conformity EU-IFRS required to be applied under
the Bank of Spain’s Circular 4/2004, which differs in
certain respects from U.S. GAAP, the financial reporting
standard to which many investors in the United States may be
more accustomed. See Note 60 of the Consolidated Financial
Statements for the presentation of our stockholders’ equity
and net income reconciled to U.S. GAAP.
We
have a substantial amount of commitments with personnel
considered wholly unfunded due to the absence of qualifying plan
assets.
Our commitments with personnel which are considered to be wholly
unfunded are recognized under the heading
“Provisions — Funds for Pensions and Similar
Obligations” in the accompanying consolidated balance
sheets. These amounts include “Post-employment
benefits”, “Early Retirements” and
“Post-employment welfare benefits”, which amounted to
€2,497 million, €3,106 million and
€377 million, respectively, as of December 31,
2010, €2,536 million, €3,309 million and
€401 million, respectively, as of December 31,
2009 and €2,638 million, €3,437 million and
€284 million, respectively, as of December 31,
2008. These amounts are considered wholly unfunded due to the
absence of qualifying plan assets.
We face liquidity risk in connection with our ability to make
payments on these unfunded amounts which we seek to mitigate,
with respect to “Post-employment benefits”, by
maintaining insurance contracts which were contracted with
insurance companies owned by the Group. The insurance companies
have recorded in their balance sheets specific assets (fixed
interest deposit and bonds) assigned to the funding of these
commitments. The insurance companies also manage derivatives
(primarily swaps) to mitigate the interest rate risk in
connection with the payments of these commitments. We seek to
mitigate liquidity risk with respect to “Early
Retirements” and “Post-employment welfare
benefits” through oversight by the Group’s Assets and
Liabilities Committee (“ALCO”). The Group’s ALCO
manages a specific asset portfolio to mitigate the liquidity
risk regarding the payments of these commitments. These assets
are government and cover bonds (AAA/AA rated) which are issued
at fixed interest rates with maturities matching the
aforementioned commitments. The Group’s ALCO also manages
derivatives (primarily swaps) to mitigate the interest rate risk
in connection with the payments of these commitments. Should we
fail to adequately manage liquidity risk and interest rate risk
either as described above or otherwise, it could have a material
adverse effect on our business, financial condition, cash flows
and results of operations.
EU
sovereign risk.
We are a Spanish banking company and conduct substantial
business activities in Spain. Like other banks operating in
Spain and Europe, our performance and liquidity may be affected
by economic conditions affecting Spain and other EU member
states. There has been improvement in some macroeconomic
indicators during 2010. Nevertheless, certain countries in
Europe, including Spain, have relatively large sovereign debts
or fiscal deficits, or both, which has led to tensions in the
international debt capital markets and interbank lending market
and euro exchange rate volatility during the year.
The situation in Portugal is particularly challenging. The
resignation of the Prime Minister on March 24, 2011 has
triggered a political crisis which outcome is difficult to
predict. Opposition parties rejected government’s latest
austerity measures, forcing him to resign and most likely to
lead a government with limited powers until elections. In this
context, the possibility of a deepening of Portuguese economic
problems, triggering the need to resort to a European rescue
package cannot be ruled out. The exposure of BBVA to Portugal
accounted for arround 1% of our total assets and 2% of the
Group’s outstanding credit as of December 31, 2010.
13
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The publication in July 2010 of the 2010 EU-wide stress test
exercise coordinated by the Committee of European Banking
Supervisors (CEBS), in cooperation with the European Central
Bank (ECB), in the euro area partially alleviated pressures and
helped restore confidence in the Spanish and European banking
sector. However, new and stricter European stress tests are
expected to be published in June or July of 2011, and the
results of such tests may place additional pressure on the
Spanish and European banking sector. Economic conditions remains
uncertain in Spain and the European Union and may deteriorate in
the future, which could adversely affect the cost and
availability of funding available to Spanish and European banks,
including BBVA, or otherwise adversely affect BBVA’s
business, financial condition and results of operations.
We may
be subject to more stringent capital requirements and new
restrictions on our operation and business.
The new Basel III capital standards will be phased in from
January 1, 2013 until January 1, 2019. The European
transposition of these standards will be done through the CRD IV
after the summer of 2011 but the Spanish Government has
anticipated Basel III with the Royal-Decree Law 2/2011, of
February 18 (RD-L 2/2011), as part of a wider plan of the
Spanish Government for the strengthening of the financial
sector. See “Item 4. Information on the
Company — Supervision and Regulation —
Capital Requirements.” There can be no assurance that
implementation of these new standards, or any other new
regulation, will not adversely affect our ability to pay
dividends, or require us to issue securities that qualify as
regulatory capital or to liquidate assets or curtail business,
which may have adverse effects on our business, financial
condition and results of operations.
This unexpected plan of the Spanish government is good news for
the Spanish financial sector because it provides a clear roadmap
for the continuation of the financial system restructuring,
encouraging private capital participation and conversion into
banks. It will also contribute to dispels market fears about the
solvency of the Spanish financial market. Moreover new RD-L
2/2011 also paves the way for a good performance in the next EU
stress tests (June) as well as compliance with Basel III, at
least Basel III-2013 even if it requires as core capital a
milder definition of what is considered in Basel III as
common equity.
In addition, our operations may also be affected by other recent
regulatory reforms in response to the financial crisis,
including the enactment in the United States in July 2010 of the
Dodd-Frank Act. Among other changes, beginning five years after
enactment of the Dodd-Frank Act, the Federal Reserve Board will
apply minimum capital requirements to U.S. intermediate
bank holding company subsidiaries of
non-U.S. banks.
Although there remains uncertainty as to how regulatory
implementation of this law will occur, various elements of the
new law may cause changes that impact the profitability of our
business activities and require that we change certain of our
business practices, and could expose us to additional costs
(including increased compliance costs). These changes may also
cause us to invest significant management attention and
resources to make any necessary changes.
Risks
Relating to Latin America
Events
in Mexico could adversely affect our operations.
We are substantially dependant on our Mexican operations, with
approximately 37% and 32% of our net income attributed to parent
company in 2010 and 2009, respectively, being generated in
Mexico. We face several types of risks in Mexico which could
adversely affect our banking operations in Mexico or the Group
as a whole. Given the internationalization of the financial
crisis, the Mexican economy felt the effects of the global
financial crisis and the adjustment process that was underway is
accelerating. This process has intensified since the end of the
third quarter of 2008 and has continued to intensify due to the
high dependence on the U.S. economy. The initial effects
are in manufacturing and in those areas with a greater degree of
exposure to the international environment, although internal
demand is also showing clear signs of moderation. In 2011 we
expect that macro economic recovery will only be maintained if
there is a sustained U.S. recovery resulting in higher
exports and foreign investment. Domestic demand will not recover
unless there is a gradual recovery of confidence and employment,
interest rates remain low and an expansionary fiscal policy is
in place. We cannot rule out the possibility that in a more
unfavorable environment for the global economy, and particularly
in United States or otherwise growth in Mexico will be negative
in 2011.
14
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Beginning in 2008 and through 2009 and 2010, our mortgage and
especially our consumer loan portfolio in Mexico started showing
higher delinquency rates. If there is a persistent increase in
unemployment rates, which could arise if there is a more
pronounced or prolonged slowdown in the United States, it is
likely that such rates will further increase. In addition,
although the Bank of Mexico (“Banxico”) is expected to
maintain its current monetary stance throughout 2011, any
tightening of monetary policy could make it more difficult for
new customers of our mortgage and consumer loan products in
Mexico to service their debts, which could have a material
adverse effect on the business, financial condition, cash flows
and results of operations of our Mexican subsidiary or the Group
as a whole. In addition, price regulation and competition could
squeeze the profitability of our Mexican subsidiary. If this
were to occur, the market share of our Mexican subsidiary could
decrease given its risk management standards.
Finally, political instability or social unrest could weigh on
the economic outlook, which could increase economic uncertainty
and capital outflows. Additionally, if the approval of certain
structural reforms is delayed, this could make it more difficult
to reach potential growth rates in the Mexican economy.
Any of these risks or other adverse developments in laws,
regulations, public policies or otherwise in Mexico may
adversely affect the business, financial condition, operating
results and cash flows of our Mexican subsidiary or the Group as
a whole.
Our
Latin American subsidiaries’ growth, asset quality and
profitability may be affected by volatile macroeconomic
conditions, including significant inflation and government
default on public debt, in the Latin American countries where
they operate.
The Latin American countries in which we operate have
experienced significant economic volatility in recent decades,
characterized by recessions, foreign exchange crises and
significant inflation. This volatility has resulted in
fluctuations in the levels of deposits and in the relative
economic strength of various segments of the economies to which
we lend. Negative and fluctuating economic conditions, such as a
changing interest rate environment, also affect our
profitability by causing lending margins to decrease and leading
to decreased demand for higher-margin products and services. In
addition, significant inflation can negatively affect our
results of operations as was the case in the year ended
December 31, 2009, when as a result of the characterization
of Venezuela as a hyperinflationary economy, we recorded a
€90 million decrease in our net income attributed to
parent company.
In spite of good inflation results in recent months, medium-term
concerns are growing due to high domestic demand growth rates in
almost every country. Argentina, Brazil, Peru and possibly Chile
are getting close to eliminating excess production capacity,
which means they will need to curb growth in demand over the
coming months to avoid inflation pressures. Countries that are
pursuing inflation targets have accordingly adjusted inflation
rates. Although rates are not yet close to neutral levels,
central banks have stopped or reduced the pace of interest rate
increases earlier than we had expected.
Negative and fluctuating economic conditions in some Latin
American countries could result in government defaults on public
debt. This could affect us in two ways: directly, through
portfolio losses, and indirectly, through instabilities that a
default in public debt could cause to the banking system as a
whole, particularly since commercial banks’ exposure to
government debt is generally high in several Latin American
countries in which we operate.
While we seek to mitigate these risks through what we believe to
be conservative risk policies, no assurance can be given that
our Latin American subsidiaries’ growth, asset quality and
profitability will not be further affected by volatile
macroeconomic conditions in the Latin American countries in
which we operate.
Latin
American economies can be directly and negatively affected by
adverse developments in other countries.
Financial and securities markets in Latin American countries in
which we operate are
,
to varying degrees, influenced by
economic and market conditions in other countries in Latin
America and beyond. Negative developments in the economy or
securities markets in one country may have a negative impact on
other emerging market economies. These developments may
adversely affect the business, financial condition, operating
results and cash flows of our subsidiaries in Latin America.
These economies are also vulnerable to conditions in global
financial markets and especially to commodities price
fluctuations, and these vulnerabilities usually reflect
15
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adversely in financial market conditions through exchange rate
fluctuations, interest rate volatility and deposits volatility.
For example, at the beginning of the financial crisis these
economies were hit by a simultaneous drop in commodity export
prices, a collapse in demand for non-commodity exports and a
sudden halting of foreign bank loans. Even though most of these
countries withstood the triple shock rather well, with limited
damage to their financial sectors, we have seen non performing
loan ratios rise as well as contraction in bank deposits and
loans. As a global economic recovery remains fragile, there are
risks of a relapse. If the global financial crisis continues
and, in particular, if the effects on the Chinese and
U.S. economies intensify the business, financial condition,
operating results and cash flows of our subsidiaries in Latin
America are likely to be materially adversely affected.
We are
exposed to foreign exchange and, in some instances, political
risks as well as other risks in the Latin American countries in
which we operate, which could cause an adverse impact on our
business, financial condition, results of
operations.
We operate commercial banks in ten Latin American countries and
our overall success as a global business depends, in part, upon
our ability to succeed in differing economic, social and
political conditions. We are confronted with different legal and
regulatory requirements in many of the jurisdictions in which we
operate. These include, but are not limited to, different tax
regimes and laws relating to the repatriation of funds or
nationalization or expropriation of assets. Our international
operations may also expose us to risks and challenges which our
local competitors may not be required to face, such as exchange
rate risk, difficulty in managing a local entity from abroad,
and political risk which may be particular to foreign investors.
For example, on January 8, 2010, the Venezuelan monetary
authorities decided to devalue the Bolivar fuerte by 50% from a
fixed exchange rate of 2.15 per U.S. dollar since its
creation to 4.30 per U.S. dollar. Our presence in Latin
American markets also requires us to respond to rapid changes in
market conditions in these countries. We cannot assure you that
we will continue to succeed in developing and implementing
policies and strategies that are effective in each country in
which we operate or that any of the foregoing factors will not
have a material adverse effect on our business, financial
condition and results of operations.
We are also a major player in the private pension sector in
place in most of these countries and are, therefore, affected by
changes in the value of pension fund portfolios under
management, as well as general financial conditions and the
evolution of wages and employment. For example, while recovering
in 2009 and 2010, most pension fund management companies
(“AFPs” for their Spanish acronym) experienced a sharp
contraction and posted negative results in 2008 as a consequence
of the fall in the value of their portfolios, showing the
vulnerability of the sector.
Regulatory
changes in Latin America that are beyond our control may have a
material effect on our business, financial condition, results of
operations and cash flows.
A number of banking regulations designed to maintain the safety
and soundness of banks and limit their exposure to risk are
applicable in certain Latin American countries in which we
operate. Local regulations differ in a number of material
respects from equivalent regulations in Spain and the United
States.
Changes in regulations that are beyond our control may have a
material effect on our business and operations, particularly in
Venezuela and Argentina. In addition, since some of the banking
laws and regulations have been recently adopted, the manner in
which those laws and related regulations are applied to the
operations of financial institutions is still evolving. No
assurance can be given that laws or regulations will be enforced
or interpreted in a manner that will not have a material adverse
effect on our business, financial condition, results of
operations and cash flows.
Private pension management companies are heavily regulated and
are exposed to major risks concerning changes in those
regulations in areas such as reserve requirements, fees and
competitive conditions. They are also exposed to political
risks. For example, at the end of 2008 the government of
Argentina passed a law transferring pension funds, including
those managed by our subsidiary in Argentina, from private
managers to the government entity managing the remainder of the
formerly public pension system.
16
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Risks
Relating to Other Countries
Our
strategic growth in Asia exposes us to increased regulatory,
economic and geopolitical risk relating to emerging markets in
the region, particularly in China.
In 2008 and 2009, we further increased our ownership interest in
members of the CITIC Group, a Chinese banking group, by
increasing our stake in CITIC International Financial Holdings
Ltd (“CIFH”) to 29.7% and China CITIC Bank
(“CNCB”) to 10.07%. CIFH is a banking entity
headquartered in Hong Kong and CNCB is a banking entity
headquartered in China. On December 3, 2009, we announced
the exercise of the option to purchase 1,924,343,862 additional
shares of CNCB. Furthermore, on April 1, 2010, after
obtaining the corresponding authorizations, the purchase of an
additional 4.93% of CNCB’s capital was finalized for
€1,197 million. See “Item 4. Information on
the Company — Business Overview — Wholesale
Banking and Asset Management”.
As a result of our expansion into Asia, we are exposed to
increased risks relating to emerging markets in the region,
particularly in China. The Chinese government has exercised, and
continues to exercise, significant influence over the Chinese
economy. Chinese governmental actions concerning the economy and
state-owned enterprises could have a significant effect on
Chinese private sector entities in general, and on CIFH or CNCB
in particular.
We also are exposed to regulatory uncertainty and geopolitical
risk as a result of our investments in Asia. Changes in laws or
regulations or in the interpretation of existing laws or
regulations, whether caused by a change in government or
otherwise, could adversely affect our investments. Moreover,
Asian economies can be directly and negatively affected by
adverse developments in other countries in the region and beyond.
Any of these developments could have a material adverse effect
on our investments in Asia or the business, financial condition,
results of operations and cash flows of the Group.
Our
continued expansion in the United States increases our exposure
to the U.S. market.
Our expansion in the United States makes us more vulnerable to
developments in this market, particularly the real estate
market. During the summer of 2007, the difficulties experienced
by the subprime mortgage market triggered a real estate and
financial crisis, which has had significant effects on the real
economy and which has resulted in significant volatility and
uncertainty in markets and economies around the world. As we
have acquired entities or assets in the United States,
particularly BBVA Compass and certain deposits and liabilities
of Guaranty Bank (“Guaranty”), our exposure to the
U.S. market has increased. Adverse changes to the
U.S. economy in general, and the U.S. real estate
market in particular, resulted in our determination to write
down goodwill related to our acquisition of BBVA Compass and
record additional loan loss provisions in the year ended
December 31, 2009 in the aggregate amount of
€1,050 million (net of taxes). Similar or worsening
economic conditions in the United States could have a material
adverse effect on the business, financial condition, results of
operations and cash flows of our subsidiary BBVA Compass, or the
Group as a whole, and could require us to provide BBVA Compass
with additional capital.
Risks
Related to Acquisition of Shareholding in Garanti
We may
incur unanticipated losses in connection with the acquisition of
Garanti.
As of March 22, 2011, we have acquired a 24.89% interest in
Türkiye Garanti Bankası A.Ş.
(“Garanti”) (the “Garanti acquisition”). In
preparing the terms of the Garanti acquisition, we relied on
certain information regarding Garanti which may be inexact,
incomplete or outdated. Furthermore, we made various assumptions
regarding the future operations, profitability, asset quality
and other matters relating to Garanti which may prove to be
incorrect.
Garanti’s performance under International Financial
Reporting Standards or Accounting Practice Regulations as
promulgated by the Banking Regulation and Supervision Agency of
Turkey (“BRSA”) may differ materially from our
expectations or the expectations of research analysts, which
could result in a decline in the market value of Garanti shares
and the value of our proposed investment in Garanti.
In addition, we may be exposed to unknown risks relating to such
acquisition that could significantly affect the value of our
investment in Garanti. Furthermore, a variety of factors that
are partially or entirely beyond our and
17
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Garanti’s control, such as negative market developments,
increased competition, governmental responses to the global
financial crisis and regulatory changes, could have a material
adverse effect on Garanti’s business, financial condition
and results of operations, which could result in a decline in
the market value of Garanti shares and the value of our proposed
investment in Garanti.
Since
Garanti operates primarily in Turkey, economic and other
developments in Turkey may have a material adverse effect on
Garanti’s business, financial condition and results of
operations and the value of our proposed investment in
Garanti.
Most of Garanti’s operations are conducted, and most of its
customers are located, in Turkey.
Accordingly, Garanti’s ability to recover on loans, its
liquidity and financial condition and its results of operations
are substantially dependent upon the political, economic,
financial and geopolitical conditions prevailing in or that
otherwise affect Turkey. If the Turkish economy is adversely
affected by, among other factors, a reduction in the level of
economic activity, continuing inflationary pressures,
devaluation or depreciation of the Turkish Lira, a natural
disaster or an increase in domestic interest rates, then a
greater portion of Garanti’s customers may not be able to
repay loans when due or meet their other debt service
requirements to Garanti, which would increase Garanti’s
past due loan portfolio and could materially reduce its net
income and capital levels. Furthermore, political uncertainty or
instability within Turkey and in some of its neighboring
countries has historically been one of the potential risks
associated with investments in Turkish companies. In addition, a
further deterioration in the EU accession process may negatively
affect Turkey. Any of these risks could have a material adverse
effect on Garanti’s business, financial condition and
results of operations and the value of our proposed investment
in Garanti.
Despite Turkey’s increased political and economic stability
in recent years and the implementation of institutional reforms
to conform to international standards, Turkey is an emerging
market and it is subject to greater risks than more developed
markets. Financial turmoil in any emerging market could
negatively affect other emerging markets, including Turkey, or
the global economy in general. Moreover, financial turmoil in
emerging markets tends to adversely affect stock prices and debt
securities prices of other emerging markets as investors move
their money to more stable and developed markets, and may reduce
liquidity to companies located in the affected markets. An
increase in the perceived risks associated with investing in
emerging economies in general, or Turkey in particular, could
dampen capital flows to Turkey and adversely affect the Turkish
economy and, as a result, Garanti’s business, financial
condition and results of operations and the value of our
proposed investment in Garanti.
Foreign
exchange, political and other risks relating to Turkey could
cause an adverse effect on Garanti’s business, financial
condition and results of operations and the value of our
proposed investment in Garanti.
As a result of the consummation of the Garanti acquisition, we
will be exposed to foreign exchange, political and other risks
relating to Turkey. For example, currency restrictions and other
restraints on transfer of funds may be imposed by the Turkish
government, Turkish government regulation or administrative
polices may change unexpectedly or otherwise negatively affect
Garanti, the Turkish government may increase its participation
in the economy, including through expropriations or
nationalizations of assets, or the Turkish government may impose
burdensome taxes or tariffs. The occurrence of any or all of the
above risks could have a material adverse effect on
Garanti’s business, financial condition and results of
operations and the value of our proposed investment in Garanti.
In addition, a significant majority of Garanti’s total
securities portfolio is invested in securities issued by the
Turkish government. In addition to any direct losses that
Garanti might incur, a default, or the perception of increased
risk of default, by the Turkish government in making payments on
its securities or the possible downgrade in Turkey’s credit
rating would likely have a significant negative impact on the
value of the government securities held in Garanti’s
securities portfolio and the Turkish banking system generally
and make such government securities difficult to sell, and may
have a material adverse effect on Garanti’s business,
financial condition and results of operations and the value of
our proposed investment in Garanti.
18
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We
have entered into a shareholders’ agreement with
Doğuş Holding A.Ş. in connection with the Garanti
acquisition.
We have entered into a shareholders’ agreement with
Doğuş in connection with the Garanti acquisition.
Pursuant to the shareholders’ agreement, we and
Doğuş have agreed to manage Garanti through the
appointment of board members and senior management
Doğuş is one of the largest Turkish conglomerates and
has business interests in the financial services, construction,
tourism and automotive sectors. Any financial reversal, negative
publicity or other adverse circumstance relating to
Doğuş could adversely affect Garanti or BBVA.
Furthermore, we must successfully cooperate with Doğuş
in order to manage Garanti and grow its business. It is possible
that we and Doğuş will be unable to agree on the
management or operational strategies to be followed by Garanti,
which could adversely affect Garanti’s business, financial
condition and results of operations and the value of our
proposed investment and lead to our failure to achieve the
expected benefits from the Garanti acquisition.
Regulatory
Risks
Governmental
responses to recent market disruptions may be inadequate and may
have unintended consequences.
In response to the global financial crisis, legislators and
financial regulators have taken a number of steps to stabilize
the financial markets. These steps have included various fiscal
stimulus programs and the provision of direct and indirect
assistance to distressed financial institutions, assistance by
banking authorities in arranging acquisitions of weakened banks
and broker/dealers, implementation of various programs by
regulatory authorities to provide liquidity to various credit
markets and temporary prohibitions on short sales of certain
financial institution securities. Additional legislative and
regulatory measures were adopted in various countries around the
world, including, for example in the United States, where
measures with respect to modifications of residential mortgages
and an overhaul of the financial regulatory framework were
adopted. In addition to these actions, various regulatory
authorities in member states of the European Union and the
United States took regulatory steps to support financial
institutions, to guarantee deposits and to seek to stabilize the
financial markets. Premature removal of such support measures as
a result of perceived improvement in the financial markets and
concerns over the sustainability of public deficits, could
result in a prolonged economic downturn and further instability
in the financial markets.
In addition, regulatory proposals in the European Union and the
United States, have pointed at splitting wholesale and retail
activities, increasing minimum capital requirements,
establishing a tax for systemic or relevant financial
institutions, among other proposals. While these and previous
measures have been proposed or taken to support the markets,
they may have certain consequences on the global financial
system or our businesses, including reducing competition,
increasing the general level of uncertainty in the markets or
favoring or disfavoring certain lines of business, institutions
or depositors. We cannot predict the effect of any other
regulatory changes resulting from the global financial crisis
and any such changes can have a material adverse effect on our
business, financial condition, results of operations, cash flow
and business plans. Some of the most significant concerns are
related to new liquidity standards, an increase of the minimum
capital ratio or the regulation of systemic institutions, which
may seriously affect our business model.
| ITEM 4. | INFORMATION ON THE COMPANY |
| A. | History and Development of the Company |
Our legal name is Banco Bilbao Vizcaya Argentaria, S.A.
BBVA’s predecessor bank, (BBV), was incorporated in Spain
as a limited liability company (a “
sociedad
anónima”
or “S.A.”) under the Spanish
Corporations Law on October 1, 1988. BBVA is incorporated
for an unlimited term. The Company conducts its business under
the commercial name “BBVA”. BBVA is registered with
the Commercial Registry of Vizcaya (Spain). It has its
registered office at Plaza de San Nicolás 4, Bilbao,
48005, Spain, telephone number +34 91 3746201. BBVA’s agent
in the U.S. for U.S. federal securities law purposes
is Emilio Juan de las Heras Muela (1345 Avenue of the Americas,
45th Floor New York, NY 10105, telephone number +1
(212) 728-1660).
19
Table of Contents
Capital
Expenditures
Our principal investments are financial: subsidiaries and
affiliates. The main capital expenditures from 2008 to the date
of this Annual Report were the following:
2010
On April 1, 2010, after obtaining the corresponding
authorizations, the purchase of an additional 4.93% of
CNCB’s capital was finalized for €1,197 million.
As of December 31, 2010, BBVA had a 29.68% holding in CIFH
and a 15% holding in CNCB.
In May 2010, the Group announced that it had reached an
agreement to acquire the Credit Uruguay Banco, from a French
financial group, through its subsidiary BBVA Uruguay. On
January 18, 2011, after obtaining the corresponding
authorizations, the purchase of Credit Uruguay Banco was
completed for approximately €78 million.
In November 2010, BBVA signed an agreement with the
Dog
̌
us group and
the General Electric group, the primary shareholders of Garanti,
a Turkish bank, concerning the acquisition of a 24.89% holding
of the common stock of Garanti, for a total price of
$5,838 million, which is equivalent to a payment of
approximately €4,195 million (considering the exchange
rate as of October 29, 2010 at $/€ 1.3916).
The agreement with
Dog
̌
us group
includes an agreement for the joint management of Garanti and
the appointment of some of the members of its board of
directors. In addition, BBVA has an option to purchase an
additional 1% of Garanti during the five years following the
completion of the acquisition.
As of March 22, 2011 after having obtained the necessary
authorizations, BBVA has completed the acquisition of 24.8902%
of the total issued share capital of Garanti.
2009
On August 21, 2009, through our subsidiary BBVA Compass, we
acquired certain assets and liabilities of Guaranty from the
U.S. Federal Deposit Insurance Corporation (the
“FDIC”) through a public auction for qualified
investors. BBVA Compass acquired assets, mostly loans, for
$11,441 million (approximately €8,016 million)
and assumed liabilities, mostly customer deposits, for
$12,854 million (approximately €9,006 million).
These acquired assets and liabilities represented 1.5% and 1.8%
of our total assets and liabilities on the acquisition date.
In addition, the purchase included a loss-sharing agreement with
the FDIC under which the latter undertook to assume 80% of the
losses on up to the first $2,285 million of the loans
purchased by us and up to 95% of the losses, if any, on the
loans exceeding this amount. This commitment has a maximum term
of either five or ten years, depending on the portfolios.
2008
During 2008, there were no significant changes in the Group,
except for the merger of our banking subsidiaries in Texas
(Laredo National Bank, Inc., Texas National Bank, Inc., and
State National Bank, Inc.) into BBVA Compass.
In 2008, we further increased our ownership interest in members
of the CITIC Group, a Chinese banking group, by increasing our
stake in CIFH up to 29.7% and CNCB up to 10.07%. CIFH is a
banking entity headquartered in Hong Kong and previously listed
on the Hong Kong stock exchange. Pursuant to an agreement
between us and Gloryshare Investments Limited (the controlling
shareholder of CIFH), CIFH’s shares were delisted from the
Hong Kong Stock Exchange on November 5, 2008.
20
Table of Contents
Capital
Divestitures
Our principal divestitures are financial, in subsidiaries and in
affiliates. The main capital divestitures from 2008 to the date
of this Annual Report were the following:
2010
During 2010, we sold our participations in certain non-strategic
associates and also we have concluded the liquidation and merger
of several issuers, financial services and real estate
affiliates. Additional information on these transactions is
included in Appendix V to the Consolidated Financial
Statements.
2009
During 2009, we sold our participations in certain non-strategic
associates (including our 22.9% stake in Air Miles España,
S.A.) which gave rise to no significant gains.
As a part of the reorganization process in the United States and
Mexico, we concluded the liquidation and merger of several
affiliates of BBVA Compass and of BBVA Bancomer.
2008
In March, 2008, we sold our 5.01% interest in the Brazilian
bank, Banco Bradesco, S.A. (“Bradesco”) to
Bradesco’s principal shareholders, Cidade de
Deus — Companhia Comercial de Participaçoes and
Fundaçao Bradesco, for a market price of
€863 million. This sale gave rise to a gain of
€727 million.
| 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 investments in some of Spain’s
leading companies.
Business
Areas
In 2010, we focused our operations on six major business areas,
which are further broken down into business units, as described
below:
| • | Spain and Portugal | |
| • | Mexico | |
| • | South America | |
| • | The United States | |
| • | Wholesale Banking and Asset Management | |
| • | Corporate Activities |
The foregoing description of our business areas is consistent
with our current internal organization. Unless otherwise
indicated, the financial information provided below for each
business area does not reflect the elimination of transactions
between companies of the Group within one business area or
between different business areas, since we consider these
transactions to be an integral part of each business area’s
activities. For purposes of the presentation and discussion of
our consolidated operating results in “Item 5.
Operating and Financial Review and Prospects”, however,
such intra- and inter-business area transactions are eliminated
and the eliminations are generally reflected in the operating
results of the
Corporate Activities
business area.
In 2010, certain changes were made in respect of the criteria
followed in 2009 to reflect the composition of our business
areas. These changes affected:
| • | The United States and Wholesale Banking & Asset Management (WB&AM). In order to give a global view of the Group’s business in the United States, we decided to include the New York branch activities, formerly |
21
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| within WB&AM, in the United States area. This change is consistent with BBVA’s current method of reporting its business units |
| • | South America and Corporate Activities. In 2009, when the Venezuelan economy was considered hyperinflationary for accounting purposes for the first time, this impact was registered under Corporate Activities. In 2010, an adjustment for the hyperinflation experienced in Venezuela has been recorded in the South America area which was also applied to the 2009 financial statements to maintain the figures of our business areas comparable. Therefore, the 2009 results of these business segments have been restated to make them comparable to their 2010 results. |
In addition, we have modified the allocation of certain costs
relating mainly to rent expenses and, to a lesser extent, sales
of IT services from the corporate headquarters to the business
areas. As a result of this modification, data for the years 2009
and 2008 has been revised to ensure that the information
provided for the different periods is comparable.
The financial information for our business areas for 2009 and
2008 presented below has been prepared on a uniform basis,
consistent with our organizational structure in 2010.
During 2009, several factors occurred with respect to the
Venezuelan economy that made us reconsider the accounting
treatment we applied in the translation of the financial
statements of our subsidiaries in that country: the inflation
index reached in 2009, the cumulative inflation index over the
last three years and restrictions in the official foreign
exchange market. Consequently, according to the requirements of
International Accounting Standard IAS 21, we considered the
Venezuelan economy as hyperinflationary for 2009. In 2009, the
characterization of Venezuela as a hyperinflationary economy,
implied a €90 million decrease in our net income
attributed to parent company.
On January 8, 2010, the Venezuelan monetary authorities
decided to devaluate the Bolivar fuerte by 50% from a fixed
exchange rate of 2.15 per U.S. dollar since its creation to
4.30 per U.S. dollar. On January 19, 2010 the
Venezuelan authorities announced that they would grant a
preferential rate of 2.60 Bolivar fuerte per dollar for new
items, among which payment of dividends is included, as long as
the request for Authorization of Acquisition of Foreign Exchange
was filed before January 8, 2010.
Despite the uncertainty related to the final exchange rate of
Venezuelan currency (Bolivar fuerte) compared to euro, the
devaluation has had no significant impact on our consolidated
financial statements in 2010 due to the fact that our
investments in Venezuela represent approximately 2% of our
consolidated assets and 1% of our consolidated equity as of
December 31, 2010.
The following table sets forth information relating to net
income attributed to parent company for each of our business
areas for the years ended December 31, 2010, 2009 and 2008:
|
% of Net Income/(Loss)
|
||||||||||||||||||||||||
|
Net Income/(Loss) Attributed
|
Attributed
|
|||||||||||||||||||||||
| to Parent Company | to Parent Company | |||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2010 | |||||||||||||||||||
| (In millions of euros) | (In percentage) | |||||||||||||||||||||||
|
Spain and Portugal
|
2,070 | 2,275 | 2,473 | 45 | % | 54 | % | 49 | % | |||||||||||||||
|
Mexico
|
1,707 | 1,357 | 1,930 | 37 | % | 32 | % | 38 | % | |||||||||||||||
|
South America
|
889 | 780 | 727 | 19 | % | 19 | % | 14 | % | |||||||||||||||
|
The United States
|
236 | (950 | ) | 308 | 5 | % | (23 | )% | 6 | % | ||||||||||||||
|
Wholesale Banking and Asset Management
|
950 | 853 | 722 | 21 | % | 20 | % | 14 | % | |||||||||||||||
|
Subtotal
|
5,852 | 4,315 | 6,160 | 127 | % | 103 | % | 123 | % | |||||||||||||||
|
Corporate Activities
|
(1,246 | ) | (105 | ) | (1,140 | ) | (27 | )% | (2 | )% | (23 | )% | ||||||||||||
|
Income Attributed to the Parent Company
|
4,606 | 4,210 | 5,020 | 100 | % | 100 | % | 100 | % | |||||||||||||||
22
Table of Contents
The following table sets forth information relating to net
interest income for each of our business areas for the years
ended December 31, 2010, 2009 and 2008
| Net Interest Income | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2010 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Spain and Portugal
|
4,675 | 4,910 | 4,784 | |||||||||
|
Mexico
|
3,688 | 3,307 | 3,707 | |||||||||
|
South America
|
2,495 | 2,566 | 2,149 | |||||||||
|
The United States
|
1,794 | 1,679 | 1,471 | |||||||||
|
Wholesale Banking and Asset Management
|
831 | 982 | 618 | |||||||||
|
Subtotal
|
13,483 | 13,445 | 12,729 | |||||||||
|
Corporate Activities
|
(163 | ) | 437 | (1,043 | ) | |||||||
|
Net interest income
|
13,320 | 13,882 | 11,686 | |||||||||
Spain
and Portugal
The Spain and Portugal business area focuses on providing
banking services and consumer finance to private individuals,
enterprises and institutions in Spain and Portugal.
The principal figures relating to this business area as of
December 31, 2010 and December 31, 2009 were:
| • | Loans and advances to customers were €200,930 million as of December 31, 2010, an increase of 0.9% from €199,190 million as of December 31, 2009. This amount is particularly relevant if we take into account the adverse economic environment in which it was generated, with weak consumption, stagnation of mortgage lending and gradual deleveraging of companies. In this context, mortgage lending in the household segment grew by 4.0% in 2010. In addition, exposure to sectors and products of greater risk declined in 2010. | |
| • | Customers deposits were €103,469 million as of December 31, 2010 compared to €91,826 million as of December 31, 2009, an increase of 12.7%. During 2010, we attracted more than €12,000 million in customers deposits, which have a high level of stability and an average cost that is lower than the market (0.8% compared to the sector’s 1.4% in 2010). | |
| • | Mutual fund assets under management were €21,455 million as of December 31, 2010, a decrease of 28.2% from €29,898 million as of December 31, 2009. The decrease is due to the increasing demand for other products, such as time deposits and the decreasing returns in the stock markets. The main decreases were related to those assets under management with lowest added value, such as short-term fixed-income, money market funds, long-term fixed-income and those that do not involve active management. | |
| • | Pension fund assets under management were €9,986 million as of December 31, 2010, a decrease of 3.3% from €10,329 million as of December 31, 2009. |
The main business units included in the Spain and Portugal area
are:
| • | Spanish Retail Network: manages individual customers, high net-worth individuals (private banking) and small companies and retailers in the Spanish market; | |
| • | Corporate and Business Banking: manages business with small and medium enterprises (“SMEs”), large companies, institutions and developers in the Spanish market; and | |
| • | Other units: |
| • | Consumer Finance: manages renting and leasing business, credit to individual and to enterprises for consumer products and internet banking; |
| • | BBVA Portugal: manages the banking business in Portugal; and |
| • | European Insurance: manages the insurance business in Spain and Portugal |
23
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Spanish
Retail Network
The area’s business activity in 2010 took place within the
framework of the launch of the “Plan Uno”, which
involves a new banking distribution model that seeks to achieve
sustainable business growth, under the premise that “BBVA
only wins when the customer benefits”. The implementation
of this plan has been based on the capabilities of a
leading-edge technological platform that has made it possible,
on the one hand, to generate customized commercial products with
extra benefits based on the degree of loyalty, and on the other
hand to integrate “physical” and “virtual”
banking. Customer focus has been aimed at launching various
asset and deposit products which have improved the area’s
positioning.
In investment, the increase in mortgage demand by individual
customers reflects the positive acceptance of the products
“
Sí, damos hipotecas
” (Yes, we do give
mortgages),
“Ven a Casa”
(Come home) and
“Hipoteca On Line BBVA”
(BBVA on-line
mortgage). In the consumer finance segment,
“Crédito Coche+Seguro gratis”
(Car
loan+free insurance) and the home improvements line have been
launched. New consumer and mortgage payment protection insurance
products have also been designed. In on-balance sheet funds,
loyalty has increased and new deposits have been attracted from
the transactional schemes
“Ventajas Uno”
(Benefits One) and
“Cuenta Uno”
(Account One),
which have resulted in over 3 million individual customers
and self-employed people being exempt from paying fees and
commissions; the two new
“Quincenas del
Libretón”
(Passbook Fortnights); a new
“La Jornada de tu Vida”
(Day of your Life)
promotion and stable saving products, such as: a new edition of
the
“Depósitos Fortaleza”
(Strength
Deposits)
“Depósito BBVA Uno”
(BBVA One
Deposit) and
“Depósito Líder”
(Leader
Deposit). In off-balance sheet funds, the most significant
products are the guaranteed mutual funds
“BBVA
Acción Europa”
(BBVA Europe Share), “BBVA
Ranking”, “BBVA 4x3”,
“BBVA Gama
Solidez”
(BBVA Soundness Range) and
“Planes
Renta”
(Income Plans).
“BBVA Tranquilidad
14B”
(BBVA Peace of Mind 14B),
“BBVA
Tranquilidad 14C”
(BBVA Peace of Mind 14C) and
“BBVA Tranquilidad 16”
(BBVA Peace of Mind
16) have been added to the pension fund range.
Various campaigns have been launched in order to boost product
contracting over the Internet such as a new edition of
“Crédito Coche”
(Car Loan),
“Depósito BBVA Uno Online”
(BBVA One
Deposit On-line),
“Compra de Vivienda con Garantía
Hipotecaria”
(Home Purchase with Secured Loan) and
“Venta de Activos”
(Sale of Assets). A dynamic
microsite has also been developed for offering commercial
products to companies and institutions. In this latter segment,
BBVA has been awarded public contracts by CIEMAT (Research
Center for Energy, Environment and Technology), BOE (Official
Gazette), State Council, General Treasury of the Social
Security, Madrid Regional Government, AECID (Spanish Agency for
International Cooperation) and Spanish Fleet of Official Cars.
Specific segments of individual customers, such as the young and
over 59s, have benefited from the use of social networks and the
promotional campaign “59+ Program”, with financial and
non-financial products tailored to their needs.
The management model of BBVA Patrimonios, based on principles of
guidance, closeness to the customer, differentiation and
innovation, is focused on winning new customers. To this end,we
have implemented
“Planifica”
(Plan), a tax
advice tool, along with the new
“Centro de Soluciones de
Inversión”
(Investment Solutions Center), which
have enabled 1,600 new guided portfolios to be opened.
In businesses,
“Plan Convenios”
(Agreement
Plan) has been put in place with three different management
models:
“Plan Asociaciones”
(Association Plan)
aimed at the primary representative associations of
self-employed workers (National Association of Self-employed
Workers, Professional and Self-employed Worker Union, Hotel and
Restaurant Trade Federation, Cab Driver Association, Tobacco
Dealer Association and Lottery Ticket Seller Association),
“Plan Colegios Profesionales”
(Professional
Association Plan) (Pharmacists, Dentists, Architects, Attorneys,
Lawyers and Tax Accountants) and the
“Plan
Franquicias”
(Franchise Plan).
Corporate
and Business Banking
BBVA has confirmed its leading role in the distribution of lines
of credit under preferential conditions with the signing of the
ICO-2010 agreement, with the lines
“Inversión
Nacional”
(National Investment),
“Inversión Internacional”
(International
Investment),
“Emprendedores”
(Entrepreneurs),
“ICO liquidez”
(ICO Liquidity),
“ICO-FuturE”,
“ICO-Economía
Sostenible”
(ICO-Sustainable Economy) and those
intended for the manufacturing
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sector, foreign and domestic trade, and tourism, among others.
In addition, BBVA was one of the two awardees of the
“ICO Directo”
(ICO Direct) line for SMEs and
self-employed workers. It has also expanded its range of
products, which include:
“Límite No
Comprometido”
(Uncommitted Limit),
“Cuenta de
Crédito Flexible”
(Flexible Charge Account),
“Bonos TPV BEC”
(TPV BEC Bonds),
“Depósito BEC Plus”
(BEC Plus Deposit),
“Cuenta de Crédito Vinculación”
(Loyalty Charge Account) and
“Cuenta de Crédito
Tipo Cero”
(Zero Rate Charge Account). Finally, the
insurance offer (“D&O” and “Environmental
Responsibility”) and non-financial services (principally
“Training”, “General Expenses”,
“Vehicles” and “Security”) improved once
again in 2010. Agreements have also been signed with the
European Investment Bank (EIB) to help companies carry out their
business activity, with the new lines
“PYMES”
(SMEs) and
“Energías Renovables”
(Renewable Energy).
Other
Units
Consumer
Finance
The Consumer Finance unit manages consumer finance and on-line
banking, via Uno-e, BBVA Finanzia S.p.A. (“Finanzia”)
and other subsidiaries in Spain, Portugal and Italy.
As of December 31, 2010, loans and advances to customers of
the Consumer Finance Unit in Spain was €5,546 million,
a decrease of 1.5% from December 31, 2009. The car loan
unit, through prescription, was able to respond to the
market’s needs with the
“Cero Pelotero”
campaign that facilitated the purchase of automobiles after the
withdrawal of the relevant government aid program. At the same
time, it was able to increase cross-selling mainly as a result
of its high level of assurance.
BBVA
Portugal
As of December 31, 2010, total loans and advances to
customers in BBVA Portugal rose to €7,448 million (an
increase of 22.8%
year-on-year),
boosted by the increase in mortgages (an increase of 26.0%
year-on-year)
and corporate lending (an increase of 16.2%
year-on-year)
as a result of the various campaigns launched throughout the
year, such as
Hipoteca Blue BBVA
and
Nos
Adaptamos
. Customer funds in 2010 closed with an increase of
10.7%, due to the increased demand for customer deposits under
management (an increase of 16.7%
year-on-year).
In Italy, loans and advances to customers reached
€663 million as of December 31, 2010 (an increase
of 41.3%
year-on-year).
European
Insurance
This unit manages an extensive range of insurances through
direct insurance, brokerage and reassurance, using different
networks.
A total of €1,084 million was written in premiums over
2010, of which €900 million corresponds to the
individual business (life and non-life) and
€184 million to groups. The life and accident
insurance business remained positive, contributing
€365 million in premiums (an increase of 9.1%
year-on-year),
boosted by the activity in payment protection products. BBVA
Seguros is the market leader in individual life and accident
insurance policies. In non-life policies, the
€186 million (an increase of 1.7%
year-on-year)
from multi-risk home and fire insurance stand out. The volume of
funds under management in private savings policies reached
€8,140 million, of which €3,115 million
correspond to individual clients and the rest to company
insurance schemes. Moreover, BBVA has brokered premiums of
€180 million in 2010.
Mexico
The principal figures relating to this business area as of
December 31, 2010 and December 31, 2009 were:
| • | Loans and advances to customers were €34,743 million as of December 31, 2010, an increase of 26.9% (an increase of 11.0% at constant exchange rates) from €27,373 million as of December 31, 2009. | |
| • | Customer deposits were €37,013 million as of December 31, 2010, an increase of 15.7% (an increase of 1.2% at constant exchange rates) from €31,998 million as of December 31, 2009. |
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| • | Mutual fund assets under management were €15,341 million as of December 31, 2010, a significant increase of 45.5% (an increase of 27.2% at constant exchange rates) from €10,546 million as of December 31, 2009. | |
| • | Pension fund assets under management were €12,781 million as of December 31, 2010, an increase of 34.3% (an increase of 17.4% at constant exchange rates) from €9,519 million as of December 31, 2009. |
The Mexican peso exchange rate as of December 31, 2010,
appreciated against the euro, increasing 14.4% compared to the
exchange rate as of December 31, 2009. Comparing average
exchange rates, the Mexican currency also increased to the
euro 12.3%
year-on-year.
The aforementioned changes had a positive impact on the
area’s financial statements and activity. See
“Item 5. Operating and Financial Review and
Prospects — Operating Results — Factors
Affecting the Comparability of our Results of Operations and
Financial Condition”. To provide a better picture of how
the business has evolved the comments below will refer to
year-on-year
change at constant exchange rates unless otherwise indicated.
The business units included in the Mexico area are: Retail and
Corporate banking, and Pensions and Insurance.
Retail
and Corporate banking
In 2010, BBVA Bancomer put in place the
“2010-2012
Growth Plan”, the overriding goals of which are: the
customer being the focus of the business, improved product
distribution and the attainment of greater process efficiency.
Technology and innovation are an integral part of this plan. The
Bank launched the “Bancomer Express account”
, the
first cell phone account in Mexico linked to the customer’s
cell phone and debit card, which offers the option of making
transfers between accounts, withdrawing money, checking balances
and buying in stores. This account gives new customers access to
financial services for the low-income segment, as it charges no
fees or commissions for account administration and maintenance,
and requires no minimum balances. Another example of
technological innovation was the launch of the
“Bancomer
Cell Phone”
product, which has promoted the use of
virtual channels.
As for the distribution network, BBVA Bancomer had 6,760 ATMs as
of December 31, 2010, 523 more than as of December 31,
2009. The productivity of the branch network has increased by
17%
year-on-year.
One of the reasons for this is the introduction of
practicajas
(a new kind of ATM), which reduce the volume
of operations in branches and increase the sale of products. The
following mortgage products were launched:
“Ahorra y
Estrena”
(Save and Move In), a mortgage loan for people
with variable income that enables them to finance their home
with monthly installments equivalent to the balances of their
monthly savings; and the
“Alia2 Plus”
loan in
partnership with Fovissste (Housing Fund of the Security and
Social Services Institute for State Workers), which allows
affiliates to increase the amount of their loan and buy a home
at a fixed interest rate with set repayment amounts. The Bank
also launched the produc
t “Bancomer Cofinavit AG”
in similar conditions, this time in partnership with
Infonavit (National Housing Fund for Workers Institute). In
2010, for the third year in a row, BBVA Bancomer was awarded the
2009 National Housing Prize. This time the award was granted for
offering a variety of solutions as a response to the crisis,
supporting more than 50,000 affected customers.
In the business segment, the unit specializing in
micro-enterprises and small businesses launched the
“Micro-Business Card”
, with lines of credit
from 20,000 to 180,000 Mexican pesos, designed to finance mainly
their working capital. This product is backed by guarantees from
Nacional Financiera. The risk is therefore shared with the
Federal Government.
In customer deposits, there was a new edition of the
“Quincena del Ahorro”
(Two Weeks of Saving)
campaign, through which 1 million prizes were given out for
the first time, more than €572 million of funds were
attracted and over 300,000 new accounts were opened. We should
also note the
“Equipa tu Negocio”
(Equip your
Business) campaign for attracting demand deposits in the SMEs
segment, pursuant to which more than 37,800 clients were awarded
prizes.
In exchange-traded funds (ETF), BBVA Bancomer launched an ETF
called “BRTRAC” which invests in Brazil’s top
15 companies. It also launched “BBVANDQ”, which
offers customers the opportunity to invest in a fund that
replicates the NASDAQ in the United States. In addition, the
Bank launched the
“Fondo Triple Líquido”
(Triple Liquidity Fund), offering capital protection, monthly
reinvestment of interest and money availability every
28 days. Five new international funds were launched,
expanding the range available to include new regions and
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Table of Contents
countries (in particular, Asia not including Japan, Latin
America, and other emerging countries), technological companies
and dollar-denominated government debt. We believe BBVA Bancomer
has the most comprehensive international fund portfolio on the
market.
Pensions
and Insurance
In 2010, Seguros BBVA Bancomer continued with its model focused
on offering products differentiated by segment and sales channel
which have enabled it to uphold its leadership within the
bancassurance segment, with a 41% market share as of
September 30, 2010 (source: AMIS). Similarly, it became the
country’s fourth largest insurance company, of the
67 companies operating in the country, and the number two
in terms of net profit, generating 19.5% of the sector’s
earnings in Mexico.
In 2010, the sales network issued 1,078,069 policies, the
highest figure since 2003. This growth is based primarily on car
insurance products and on
“VidaSegura
Preferente”
(Preferential SecureLife) and
“HogarSeguro”
(SecureHome).
Outside the branch network, alternative channels continued to
grow and reached an all-time sales record with approximately
64,000 policies in force as of December 31, 2010.
South
America
The South America business area includes our banking, insurance
and pension businesses in South America.
The principal figures relating to this business area as of
December 31, 2010 and December 31, 2009 were:
| • | Loans and advances to customers were €30,408 million as of December 31, 2010, an increase of 20.4% (an increase of 21.9% at constant exchange rates) from €25,256 million as of December 31, 2009. | |
| • | Customer deposits were €33,496 million as of December 31, 2010, an increase of 14.3% (22.1% at constant exchange rates) from €29,312 million as of December 31, 2009. | |
| • | Mutual fund assets under management were €3,063 million as of December 31, 2010, an increase of 17.0% (4.0% at constant exchange rates) from €2,617 million as of December 31, 2009. | |
| • | Pension fund assets under management were €48,800 million as of December 31, 2010, an increase of 35.2% (17.1% at constant exchange rates) from €36,104 million as of December 31, 2009. |
The following is a brief description of our operations on a
country-by-country
basis in the South America business area. The operating results
described below refer to each individual unit’s
contribution to the South America business area’s operating
results, unless otherwise stated.
The business units included in the South America business area
are:
| • | Retail and Corporate Banking; includes banks in Argentina, Chile, Colombia, Panama, Paraguay, Peru, Uruguay and Venezuela; | |
| • | Pension businesses; includes pensions businesses in Bolivia, Chile, Colombia, Ecuador and Peru ; | |
| • | Insurance businesses; includes insurance businesses in Argentina, Chile, Colombia, and Venezuela. |
Retail
and Corporate Banking
Argentina
The Argentinean economy performed well in 2010, with GDP growth
of 8%, boosted by the good performance of both the foreign
sector and domestic demand, as well as a relatively stable
political climate. Inflation, however, remains high.
In 2010, BBVA Banco Francés has implemented important
initiatives to improve relations with its customers, both
individuals (through the alliance with the entertainment
producer
Time for Fun,
the agreement with LAN, the
Francés GO campaign and the launch of the first car leasing
scheme) and companies (through the launch of credit
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lines for SMEs, greater range of products for the agricultural
segment and an agreement with the BMW Group). In funds under
management, variable-interest deposits were launched (linked,
respectively, to commodity prices, stock market indices and
currency trading rates).
The
year-on-year
growth in lending was 43.0% as of December 31, 2010, There
were notable increases in consumer finance (with an increase of
88 basis points) and credit cards (with an increase of
79 basis points),and no deterioration in asset quality
(while the NPA ratio continued to be lower than the average NPA
of our peers in Argentina, according to our estimates). Customer
funds increased by 22.7% and were highly concentrated in
transactional accounts (which increased by 22.2% year-on -year).
The net interest income of BBVA Banco Frances, which grew
year-on-year
by 16.5% in 2010, while net fees and commissions increased by
15.6%. Operating expenses increased by 28.5% in 2010, affected
by the upturn in inflation and the expansion projects launched
by the unit. The high asset quality has enabled loan-loss
provisioning to remain at similar levels to 2009. The net
attributable profit of this unit in 2010 was €111 million.
Chile
The Chilean economy grew by over 5% in 2010, mainly as a result
of the strength of domestic demand and the favorable impact of
high commodity prices, particularly copper. Inflation as of
December 31, 2010 was less than 3%, within the Central
Bank’s target. The Central Bank has gradually reduced its
monetary incentives over 2010 and raised the interest rate by
300 basis points to 3.5%. In this environment BBVA Chile
has strengthened its positioning in the retail businesses by
transforming its branch network and the virtual channels, as
well as the commercial and distribution models. As a result, the
sales volume has doubled, the product range has grown and
customer satisfaction levels have improved.
The loan book grew by 12.2% in
2010 year-on-year.
There was a notable increase in credit cards (which increased by
80.4%
year-on-year)
through new products
(“Signature and
MasterCard”
), as well as associations with other brands
(
“Enjoy”
) and stores. Increased lending led to
an increase in market share in 2010 of 46 basis points in
consumer finance and credit cards and 17 basis points in
mortgages, according to our estimates. The consumer finance unit
Forum strengthened its leading position and extended its product
range and penetration in its different brands. Finance
experienced an increase of 31% in
2010 year-on-year,
without any deterioration in risk indicators (the NPA ratio was
1.9% as of December 31, 2010). In customer funds, current
accounts were up by 22.1%, a gain of 13 basis points in
market share of transactional deposits, according to our
estimates. Long — term bonds were issued in an
aggregate amount of over €300 million.
BBVA Chile and Forum contributed a net attributable profit of
€115 million in 2010 (an increase of 41.9%
year-on-year).
This increase was mainly attributable to the increase in net
interest income (which increased by 12.1%
year-on-year)
and net fees and commissions (an increase of 27.6%), even though
net trading income was below 2009 levels, which included high
capital gains from the sale of equity holdings. Expenses
increased 7.4% in 2010,
year-on-year.
In addition, loan-loss provisions decreased by 39.4%
year-on-year
due to the improved asset quality.
Colombia
Colombia also experienced an improvement of its economy,
particularly in the second half of 2010, due to a significant
increase in public and private investment, as well as a notable
recovery in exports and the maintenance of interest rates at
all-time lows. As a result, GDP grew by 5% in 2010.
Under the guidelines set out by the
Plan Uni
dos
(“United Plan”) and the
“New Model of Customer
Service”
, BBVA Colombia has performed well, in both
lending and funds. This has led to a
year-on-year
gain in market share of 17 basis points in 2010, according
to our estimates. Mortgage loans and corporate lending played a
significant role in this respect, with increases in the market
share of 78 and 16 basis points, respectively. In business
with individual customers the product range was extended (in
cards, real estate leasing and payroll bank accounts and
others), while in the corporate segment the Bank’s presence
in the agroindustrial sector was strengthened and the
Cash
Net
tool was consolidated as a method of customer cash
management.
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Table of Contents
In customer funds, there was a
year-on-year
growth of 22.3% in current and savings accounts. In 2010, BBVA
Colombia was recognized as the “Bank of the Year” in
the country by The Banker. It also received an award as the best
Colombian bank for good corporate governance practices, social
responsibility and ethics from Latin Finance.
The remarkable fall in interest rates over the year had a
negative effect on the results in the sector in 2010. BBVA
Colombia has offset much of this impact by greater growth in
lending and by applying a strategy of strict defense of spreads,
which has limited the decrease in net interest income (which
decreased by 4.9% year-on year). Expenses remained in check,
with a slight increase of 1.4%. There was a significant
limitation of loan-loss provisions (which decreased by 32.4%
year-on-year),
which benefited from the reduction in non-performing assets
(which decreased by 26.6%
year-on-year).
As a result, the net attributable profit in 2010 amounted to
€184 million, an increase of 12.0% from the previous
year.
Panama
The Panamanian economy has improved over the year, boosted by
the recovery in international trade, higher liquidity and its
achievement of an investment grade rating. BBVA Panamá has
focused its strategy on improving its recognition in the market
through various sponsorship deals (including the Panamanian
Soccer League) that have supported the product range for
individuals, helped by the opening of a new branch. In the
corporate segment, efforts have been aimed at the agricultural
sector and the Free Zone, with improvements in COMEX and
insurance products.
Lending increased in 2010 by 6.8% over the year and customer
funds increased by 5.8% over the same period. In 2010, BBVA
Panama had a net attributable profit of €31 million, with a
positive performance in both income and expenses.
Paraguay
The Paraguayan economy performed very well in 2010, boosted by
the strong agricultural sector and the reactivation plans
implemented by the country’s economic authorities. In 2010,
BBVA Paraguay showed commercial strength, with the launch of
numerous commercial campaigns, in both the corporate and
institutions and retail businesses. Two highlights were the
strategic alliance with John Deere, in corporate and
institutions, and the launch of the VIP segment in retail
banking. Eight new branches were opened over the year as part of
an expansion plan which will continue in 2011.
The foregoing has enabled a
year-on-year
growth in lending of 45.2% in 2010 and an increase in customer
funds of 24.3%, without any deterioration of the NPA ratio,
which continues at minimum levels, or profitability.
BBVA Paraguay had a net attributable profit of
€39 million in 2010, an increase of 21.7%
year-on-year.
Euromoney named it the “Best Bank” in the country for
the fourth year in a row.
Peru
In 2010, the Peruvian economy grew almost by 10%, mainly as a
result of the recovery in private consumption, high levels of
business confidence and favorable financing conditions. This
recovery has led the economic authorities to start a cycle of
rises in policy rates with the aim of keeping inflationary
pressures in check.
BBVA Banco Continental undertook numerous commercial initiatives
in all segments in 2010 and increased its sales capacity with an
8% increase in its branch network, a 23% increase in the number
of ATMs and a 184% increase in its “express” agent
network. As a result, lending portfolio increased by 19.5%
year-on-year
and customer funds by 20.6%. There was a particularly notable
increase in consumer finance (35 basis points) and
corporate lending (46 basis points). Our market share in
customer funds increased by 203 basis points according to
our estimates. In the private individuals segment, mainly as a
result of the
“Mundo Sueldo”
product, the
number of customers who deposit their payroll into their
accounts increased in 2010 by 23%
year-on-year,
and the number of companies making salary payments directly
increased by 38%
year-on-year.
The VIP individuals segment saw the launch of the
“Black”
card in partnership with MasterCard. In
Corporate and Investment Banking, the aim was to create closer
links with customers, with improved financial advice and a
broader range of products. A number of hedging derivatives were
launched for corporate customers for this purpose.
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Table of Contents
In 2010, the bank was recognized as the Best Bank in Peru by
Global Finance and the Best Foreign Trade Bank in Peru by Trade
Finance. It also ranked third as Best Bank in Latin America in
the ranking prepared by América Economía, and ranked
third in the sustainability ranking drawn up by
Management & Excellence and Latin Finance.
In 2010, BBVA Banco Continental had a net attributable profit of
€134 million (an increase of 6.5%
year-on-year),
mainly as a result of the effect of improved economic activity
on revenues. Net interest income grew by 4.8% in 2010, despite
the downward pressure on spreads, and net fees and commissions
were up by 12.7%
year-on-year,
with a high recurrent component. Expenses were up by 9.7%, a
moderate rate given the expansion in the commercial network,
while the efficiency ratio remained low (30.6%). The NPA ratio
as of December 31, 2010 remained low (1.9%), with no
pressure on the volume of loan-loss provisioning.
Uruguay
The positive performance of the foreign sector, particularly due
to agricultural and livestock production, has contributed to GDP
growth of 9% in 2010. The most important event of the year for
BBVA Uruguay was the agreement to purchase Crédit Uruguay.
The deal has converted the unit in the second biggest financial
institution in the country. Within its organic business, BBVA
Uruguay has shown commercial strength in 2010, in both the
individuals and corporate segments. In the corporate segment,
the bank has focused its efforts on the agricultural and
livestock business, with the launch of new products such as
leasing, the
“Cuenta Pymes”
(SME account) and
special financing lines.
In 2010, the banking business benefited from the recovery in
economic growth, although it continued to suffer from an
environment of low interest rates. In this context BBVA Banco
Uruguay generated a net attributable profit of
€3 million.
Venezuela
Despite high oil prices in 2010, the Venezuelan economy posted a
negative growth, due mainly to the limitation on currency flows
settled on the official exchange market, a deteriorating
business environment, restrictions on electricity in the first
half of 2010 and sluggish private demand.
Despite this situation, BBVA Banco Provincial has continued to
invest in improving infrastructures with the aim of guaranteeing
security, adapting spaces for the preferential treatment of
customers with disabilities, and carrying on with the extension
of the
“express”
zones. In addition, it
launched the
“BBVA Provinet”
and
“Provinet Móvil”
portals to provide
customers easier access to accounts. Of particular importance in
the individuals segment were the credit card initiatives, with
the launch of numerous promotions in partnership with VISA and
MasterCard, as well as the re-launch of the
Crédit Auto
product in partnership with General Motors and Chrysler. A
new fund called
“Nómina Estándar”
was
launched aimed at low-income individuals. It introduces a
“popular card” as a way of payment adapted to the
financial needs of this customer segment.
The loan book increased over the year 2010 by 41.0%. Customer
funds increased in 2010 by 46.6%
year-on-year.
In 2010 BBVA Banco Provincial generated a net attributable
profit of €115 million (an increase of 23.0%
year-on-year),
based on the excellent performance of business and positive
handling of spreads, which has been reflected in the progress of
net interest income (an increase of 28.9%
year-on-year).
As a result of the positive performance of other revenues and a
moderate increase in expenses (below the rate of inflation), the
efficiency ratio has improved to 48.0%. In 2010, BBVA Banco
Provincial was once again named Best Bank in Venezuela by three
prestigious publications: Euromoney (for the fourth year in a
row), Global Finance (also for the fourth year in a row) and The
Banker.
Pensions
and Insurance
In 2010 the Pensions and Insurance unit contributed with a net
attributable profit of €191 million, 28.4% more than in the
previous year. There was positive progress in the pension-fund
business (€126 million, an increase of 19.3% year-on
year) and the insurance business (€64 million, an
increase of 50.9%
year-on-year).
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Pensions
The year was positive for the pension fund business, despite the
more moderate performance of the financial markets compared to
2009. The recovery of the labor markets in the region has
improved the volume of fund revenues, which has in turn boosted
net fee income in the sector. This has been in an environment in
which the impact of regulatory changes in some countries has
been negative. At the close of the year, assets under management
by all fund managers amounted to €48,800 million (an
increase of 17.1%
year-on-year),
while the funds attracted over the year were up by 16.6% from
2009. BBVA thus remains the biggest pension business group in
the region according to our estimates.
In 2010, AFP Provida in Chile transformed its customer
relationship models, with particular focus on pension advice and
building customer loyalty, strengthening links with the
highest-income segments and providing a range of new voluntary
pension savings products. It generated a profit of
€89 million, 20.8% more than in the previous year,
mainly as a result of increased fund revenues (an increase of
9.9%
year-on-year)
and its positive effect on the institution’s net fee income
(an increase of 21.5%
year-on-year).
Funds under management increased by 14.0% in 2010. AFP Horizonte
in Colombia increased its assets by 24.3%, its number of
pension-savers by 3.8%, and its fund revenues by 32.9%.Profit in
2010 was €26 million. Finally, AFP Horizonte in Peru
had a profit of €16 million, and also increased its
fund revenues (an increase of 9.0%
year-on-year),
number of pension savers (an increase of 5.3%
year-on-year)
and assets under management (an increase of 25.8%
year-on-year).
Insurance
The insurance business also had a very positive year. The BBVA
companies were very buoyant commercially with the launch of new
products and their new distribution and sales channels were
consolidated. Thanks to this, the volume of written premiums by
all the companies (excluding those in Colombia, which decreased
for strategic reasons) increased by 28.2% over the year.
Combined with the moderate levels of claims and expenses, the
result was a net attributable profit of €64 million,
of which €26 million were from the Grupo Consolidar in
Argentina, €17 million from the Group’s companies
in Chile, €13 million from the Colombian companies and
€8 million from Seguros Provincial in Venezuela.
The
United States
The principal figures relating to this business area as of
December 31, 2010 and December 31, 2009 were:
| • | Loans and advances to customers were €38,408 million as of December 31, 2010, a decrease of 4.1% (a decrease of 11.1% at constant exchange rates) from €40,056 million as of December 31, 2009. | |
| • | Customer deposits were €42,343 million as of December 31, 2010, a decrease of 31.9% (36.9% at constant exchange rates), compared to €62,200 million as of December 31, 2009. This is mainly as a result of the fall in term deposits in the New York branch. |
On August 21, 2009, through our subsidiary BBVA Compass, we
acquired certain assets and liabilities of Guaranty from the
FDIC through a public auction for qualified investors. BBVA
Compass acquired assets, mostly loans, for $11,441 million
(approximately €8,016 million) and assumed
liabilities, mostly customer deposits, for $12,854 million
(approximately €9,006 million). These acquired assets
and liabilities represented 1.5% and 1.8% of our total assets
and liabilities on the acquisition date. The agreement with the
FDIC limits the credit risk associated with the acquisition. The
purchase included a loss-sharing agreement with the FDIC under
which the latter undertook to assume 80% of the losses, if any,
on up to the first $2,285 million of the loans purchased by
us and up to 95% of the losses on the loans exceeding this
amount. This commitment has a maximum term of either five or ten
years, depending on the type of portfolio. This investment,
which included 164 branches and 300,000 customers in Texas and
California, offers us an opportunity to strengthen our United
States’ banking franchise in the retail market, while
limiting our investment risk.
The business units included in the United States area are:
| • | BBVA Compass Banking Group | |
| • | Other units: BBVA Puerto Rico and Bancomer Transfers Services (“BTS”) |
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BBVA
Compass Banking Group
BBVA Compass represents approximately 74% of the area’s
total assets and garners the retail and corporate banking
business in the United States (excluding Puerto Rico).
As of December 31, 2010 the loan portfolio was down 7.1%
year-on-year
to €31,256 million. The fall in lending is the result
of reduced finance for real estate construction and the planned
run-off in consumer finance for car dealerships and students.
This drop has in part been offset by the increase in residential
real estate, which was up 34.7% over the year; and to a lesser
extent, by commercial loans, which were up by 11.2%
year-on-year.
It is worth noting that $3,294 million in new residential
mortgages was generated during the year, 22.3% up from the
previous year. In all, the residential real estate portfolio
accounted for 20.8% of total lending in BBVA Compass as of
December 31, 2010, compared to 14.8% in 2009, and
commercial loans accounted for 29.7% (25.7% the previous year).
In contrast, real estate construction was down
8.1 percentage points to 12.6% and consumer finance was
down 2.2 percentage points to 16.3%.
Customer deposits decreased from €33,105 million as of
December 31, 2009 to €32,493 million as of
December 31, 2010 (a decrease of 1.8% year-on year at
constant exchange rates) as a results of the fall in term
deposits (a decrease of 21%
year-on-year).
However, lower-cost funds, as current accounts, increased by
7.7%, and as of December 31, 2010 represented 73.4% of all
the unit’s funds compared to 66.9% as of December 31,
2009. This change in the deposit mix, has resulted in a
reduction of the average cost of deposits from 1.03% in 2009 to
0.65% in 2010.
The mix in the loan portfolio and deposits has led to an
increase in customer spread of 16 basis points over the
year. This is because the interest rates accrued on customer
deposits have fallen more than the yield on loans (despite the
change in the mix towards items with lower risk and spread). As
a result, the net interest income of €1,566 million is
7.1% up from 2009, while net fees and commissions have increased
by 1.0% over the same period. Although both net trading income
and the other gains (losses) item were down, gross income ended
the year at €2,168 million, 2.7% up from 2009.
However, the increased operating expenses, due to the process of
integrating Guaranty, led to a 1.7% fall in the operating income
over the previous year to €816 million. Impairment on
financial assets improved significantly, reflecting the
exceptional measures taken in 2009 and the risk control
mechanisms implemented over 2010. As a result, the net
attributable profit increased to €149 million
(compared to a loss of €1,063 million in 2009, or a
loss of €42 million without one-off charges, at
constant exchange rates).
Below are the highlights of each of the units making up BBVA
Compass:
As of December 2010,
Commercial Banking
, the unit
that handles business with SMEs, managed a loan portfolio of
€15,927 million (down 13.9%
year-on-year)
and customer deposits of €8,789 million (an increase
of 7.2%
year-on-year).
This is the result of a reduction in finance for real-estate
developers (a decrease of 45.2%
year-on-year),
which was partly offset by a notable effort made by BBVA Compass
with respect to SMEs. A number of products have been launched
aimed at SMEs, such as
“Integrated Payables”
,
which offer a way of combining payments into a single file and
route them using the lowest cost method, and allow the updating
of the
“Controlled Disbursement Account”
, which
provides customers with the
“CDA Perfect
Presentation”
reports notifying them of all the checks
entering their accounts each day and thus enabling companies to
maximize their liquidity management.
Corporate Banking
, specialized in large corporations, has
increased its loan portfolio by 3.2%, with a major rise in
deposits (up 80.5%
year-on-year).
Retail Banking
has a volume of loans of
€10,730 million (up 4.3%
year-on-year).
The reduction in the auto dealer and student loan portfolios was
more than offset by an increase in the residential real estate
portfolio. Customer funds fell by 6.8%, due to the 9.0%
reduction in higher-cost funds, while more liquid funds
increased by 2.8%. BBVA Compass and SmartyPig concluded a
strategic alliance in 2010 through which BBVA Compass will act
as a depositary for SmartyPig customers in the United States.
“Compass for your Cause”, a program designed for NGOs
and launched at the end of 2009, has not only tripled the number
of organizations involved, but increased the number of donors to
NGOs by more than 700% as of December 31, 2010. Finally, in
the health sector, joint teams have been formed by
representatives from the Retail, Commercial, Wealth Management
and Insurance units. They offer a wide variety of products,
including a new service that allows payments to be collected
from patients at medical consultations.
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The
Wealth Management
unit had a total loan portfolio of
€2,047 million, deposits of €3,686 million and
assets under management of €13,188 million as of
December 31, 2010. In 2010 it launched the fixed-income
product
“Fixed Annuity”
, which has attracted
€350 million in similar assets from other banks
throughout 2010. The
“Managed Money plan”
offers customers who do not meet the typical Wealth Management
profile the chance to have an investment account managed by
professionals.
Finally, the business in the New York branch followed the same
pattern as the rest of the WB&AM units in the Group: a
focus on higher added-value and more loyal customers, price
management and the promotion of cross-selling. As a result, the
loan portfolio was down by 31.4% in 2010, while gross income
fell by 17.9%. Non-performing assets (“NPA”) remain
low, and the greater loan-loss provisions compared to 2009 have
resulted in increased coverage.
Other
units
As of December 31, 2010, BBVA Puerto Rico managed a loan
portfolio of €2,850 million, down 9.3% from the
previous year. Customer deposits amounted to
€1,588 million, at similar levels to the close of
2009. The operating income fell over the year by 10.0% to
€70 million, but the reduced impairment losses on
financial assets (which experienced a
year-on-year
fall of 64.1%) resulted in a net attributable profit of over
€1 million, compared to a loss of
€71 million in the previous year.
Finally, BTS reported a net attributable profit of
€11 million, €1.7 million down from the
previous year. Revenues dropped by 9.5% as the number of
transactions declined by 4.0%.
Wholesale
Banking and Asset Management
The Wholesale Banking and Asset Management area focuses on
providing services to large international companies and
investment banking, capital markets and treasury management
services to clients.
The principal figures relating to this business area as of
December 31, 2010 and December 31, 2009 were:
| • | Loans and advances to customers were €35,754 million as of December 31, 2010, an increase of 16.5% from €30,684 million as of December 31, 2009. | |
| • | Customer deposits were €43,819 million as of December 31, 2010 compared to €34,864 million as of December 31, 2009, an increase of 25.7%. | |
| • | Mutual fund assets under management were €3,576 million as of December 31, 2010, a decrease of 8.6% from €3,914 million as of December 31, 2009. | |
| • | Pension fund assets under management were €7,209 million as of December 31, 2010, a decrease of 0.2% from €7,224 million as of December 31, 2009. |
The business units included in the Wholesale Banking and Asset
Management area are:
| • | Corporate and Investment Banking: coordinates origination, distribution and management of a complete catalogue of corporate and investment banking products (corporate finance, structured finance, syndicated loans and debt capital markets) and provides global trade finance and global transaction services with coverage of large corporate customers specialized by sector (industry bankers); | |
| • | Global Markets: handles the origination, structuring, distribution and risk management of market products, which are placed through our trading rooms in Europe, Asia and the Americas; | |
| • | Asset Management: designs and manages the products that are marketed through our different branch networks including traditional asset management, alternative asset management and Valanza (our private equity unit); | |
| • | Industrial and Other Holdings: helps to diversify the area’s businesses with the aim of creating medium and long-term value through active management of a portfolio of industrial holdings and other Spanish and international projects; and |
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| • | Asia: relates to our stakes in CIFH in Hong Kong (approximately 30%) and in CNCB (approximately 15%) and our commitment to China as demonstrated by aggregate historic investments that exceed €4,000 million as of the date of this Annual Report. This unit also manages the operational branches and representative offices established at this region and other agreements such as the recent joint-venture with the Indian bank Baroda to create a credit card company operating in India. |
Corporate
and Investment Banking
A number of organizational changes in the Mexico business were
made in
Corporate and Investment Banking (C&IB
),
with a separation of customer and product activity in investment
banking. A global unit of investment products has been created
covering business with these products in all geographical areas.
With these changes,
C&IB
is making progress in the
separation of responsibilities associated with the management of
balance-sheet products and fees, and is strengthening its global
management model, both in relation to customer spread and
product range.
The following changes were also made in 2010:
The area of
Debt Capital Markets
launched a global dollar
distribution platform to provide a comprehensive debt service to
clients. The origination teams in the main offices in Europe,
Asia and the Americas have also been reinforced. In Europe, a
group providing debt advice and ratings has been created to help
the origination of business in the different product areas, and
to offer a variety of high-added-value services to customers.
The
Structured Trade Finance
area has consolidated the
operation of its units in Mexico and Frankfurt, and reinforced
its teams there. It has also gained market recognition with the
signing of a significant number of transactions. As a result of
the agreement signed with CITIC, our partner in China, the first
operation ever with Sinosure coverage (ECA China) has been
signed in favor of a Spanish company. Customer relations have
continued to be strengthened in the BIBEC (Investment Banking
for Companies and Corporations) segment by extending the
regional teams in Spain and Portugal.
In the
Global Transaction Services
unit, the first global
connection channel for companies and corporations via SWIFT and
Host-to-Host
was launched in the International Cash Management department.
This enables information to be sent between the bank and the
customer. BBVA Net Cash, the electronic banking channel, has
increased its product range with new products and services for
customers in the United Kingdom and France, and a new Securities
Depositary model. A security device called Token Plus has been
incorporated to enable BBVA customers with a visual disability
to validate operations through this channel. In the United
States, Compass
e-Access,
the unique-use validation code for electronic banking was
incorporated, offering an alternative to the use of security
tokens. The float pricing system used to assign the availability
of check funds deposited by customers in the Bank was also
updated.
The area of
C&IB
in the U.S. and South America
has completed the implementation of Master Plans to consolidate
the new model of coverage and segmentation of the customer base.
Global
Markets
The
Global Markets (“GM”)
unit is undertaking
significant investments to reinforce its
Distribution team
in the main international financial centers, Hong Kong and
London, with the recruitment of senior teams. At the same time,
investment is being undertaken to improve access technology to
Latin American stock exchanges. GM has integrated BBVA Bancomer
into the BBVA global equity platform. This means a move from
having local operational capacity in Mexico to more global
functions for the management of equity orders.
In 2010, product innovation was consolidated in Latin America
with the launch, in collaboration with the
Asset Management
unit, of a new Exchange Traded Fund (ETF) called BRTRAC that
aims to hold all the common stocks of the BMV Brasil 15 index
(the first index constructed by the Mexican Stock Exchange with
foreign securities).
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Asset
Management
In 2010,
Asset Management’s
activity in new products
has continued to be focused on responding to customer needs, as
well as on innovation. In the first half of 2010, at a time of
major concerns about the situation in peripheral countries and
high risk aversion, we reinforced our conservative product range
with the launch of a Fixed Income fund whose portfolio is made
up exclusively of government bonds from “core
countries” in the euro zone, the
BBVA Bonos Core
.
The product catalog was also strengthened with the launch of two
new funds:
BBVA Bolsa España Dividendo
, an equity
fund whose management is focused on companies with high dividend
payments; and
BBVA Bonos Corporativos Flotantes
, a
fixed-income fund that aims to benefit from the opportunities
currently offered by the credit market. A range of dynamic asset
distribution management funds was launched in the second half of
the year: the
Gama Evolucion (V5 and V10)
.
In guaranteed products, 2010 has again been a year with many
maturities and most of the activity was focused on renewals.
Thus, in Commercial Banking eight guaranteed equity funds were
launched (seven of which were renewed from 2009), nine
guaranteed fixed-income funds of the
Planes Renta
type
(all of which were renewed from 2009) and nine guaranteed
fixed-income
Fon-Plazo
type funds (four of which were
renewed from 2009). In addition, four guaranteed fixed-income
funds in the Gama Solidez have again been launched by HNWI,
continuing with the success this range had the previous year. In
Quality Funds, three new products began to be sold as funds of
funds. All three have a very dynamic management philosophy
through international fund managers.
The activity of Pensions in 2010 has included the incorporation
of new plans into the unit and strengthened BBVA’s position
in pensions in Spain.
Industrial
and Other Holdings
This unit diversifies the area’s businesses with the aim of
creating value in the medium and long terms through the active
management of a portfolio of industrial holdings and private
equity, international and real estate funds. The management
fundamentals are profitability, asset turnover, liquidity and
optimal use of economic capital.
Currently, it manages a portfolio of holdings in more than
50 companies from a wide variety of sectors. Among them are
Corporación IBV, Bolsas y Mercados Españoles (BME),
Técnicas Reunidas, Tubos Reunidos, Desarrollo
Urbanístico Chamartín, the international funds Darby
Latin American Private Equity Fund L.P., Palladium Equity
Partners III L.L.C. and CITIC Capital China Real Estates
Fund III.
Investments were made in equity holdings for
€47 million in 2010, and sales of minor stakes of
portfolio holdings for approximately €30 million.
Asia
The wholesale business in Asia performed very well in 2010 and
continues to be the basis for organic growth in the region. The
loan portfolio was up 13.8% from December 31, 2009, with
customer funds increasing by 74.1%, attributable in part to GM
Asia. The accumulated net attributable profit increased by
95.6%. Over the year, BBVA has strengthened its trading capacity
in the zone, with the opening of trading floor in Singapore and
Tokyo.
In addition, the acquisition of an additional 4.93% stake in
CNCB was made effective in April 2010 for approximately
€1,000 million, increasing the Group’s holding in
the entity to its current 15%. BBVA is one of the few strategic
international investors that has not only maintained but
actually increased its position in the Chinese banking sector
during the crisis. CNCB carried out a capital increase in 2010
(at a ratio of 2.2 new shares for 10 existing shares). The Board
of the Chinese bank approved this increase to support the
development and high rate of growth of its banking business. The
bank closed an excellent year in 2010, with strong growth rates
in practically all its lines of business. Profit generation was
above market expectations, with the accumulated figure to
September 2010 up 47.6%
year-on-year.
In 2010 the collaboration agreement for pensions was also
concluded with CNCB. Its aim is to take advantage of BBVA’s
capacity and CNCB’s local presence to develop pension plans
in China.
In India, another of the strategic markets in the Asian
continent and in the sphere of retail banking, BBVA and the Bank
of Baroda entered into an agreement in December to create a
joint company for credit cards. Once approval from the
regulatory authorities has been obtained, the Group will be able
to acquire a 51% interest in the
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credit card unit of the Bank of Baroda, BobCards. BBVA will
invest €34 million in this transaction, which will
also give it a strategic position in India through a leading
bank that has a network of 3,100 branches and 36 million
customers.
Corporate
Activities
The Corporate Activities area handles our general management
functions. These mainly consist of structural positions for
interest rates associated with the euro balance sheet and
exchange rates, together with liquidity management and
shareholders’ funds.
This area also books the costs from central units that have a
strictly corporate function and makes allocations to corporate
and miscellaneous provisions, such as early retirement and
others of a corporate nature. In 2009 it also incorporated the
newly created Real-Estate Management unit, which brings together
our Spanish real-estate business.
The business units included in the Corporate Activities business
area are:
| • | Asset/Liabilities Management: administers our interest and exchange-rate structure as well as our overall liquidity and shareholders’ funds; | |
| • | Holdings in Industrial and Other Companies: manages our investment portfolio in industrial and financial companies applying strict criteria for risk control, economic capital consumption and return on investment, with diversification over different industries; and | |
| • | Real Estate Management: manages the real estate assets in Spain, including assets from foreclosures, repossessions, purchases from distressed customers and the assets in BBVA Propiedad, the real estate fund. |
Asset/Liability
Management
The Asset/Liability Management is responsible for actively
managing structural interest-rate and foreign exchange
positions, as well as the Group’s overall liquidity and
shareholders’ funds.
Liquidity management aims to fund the growth of the banking
business at suitable maturities and costs, using a wide range of
instruments that provide access to a large number of alternative
sources of finance. A core principle in the BBVA Group’s
liquidity management is to encourage the financial independence
of its banking subsidiaries in the Americas. This aims to ensure
that the cost of liquidity is correctly reflected in price
formation and the sustainable growth in the lending business.
The Group’s capital management has a twofold aim: to
maintain the levels of capitalization appropriate to the
business targets in all the countries in which it operates; and,
at the same time, to maximize the return on shareholders’
funds through efficient allocation of capital to different
units, good management of the balance sheet and proportionate
use of the various instruments that comprise the Group’s
equity: stock, preferred stock and subordinate debt. In the last
quarter of 2010, BBVA has successfully executed a capital
increase after the announcement of its purchase of 24.9% of the
Turkish bank Garanti.
Foreign exchange risk management of BBVA’s long-term
investments, basically stemming from its franchises in the
Americas and soon also its business in Turkey, aims to preserve
the Group’s capital ratios and ensure stability of its
income statement, while controlling the impact on reserves and
the costs of this management. In 2010, BBVA has maintained a
policy of actively hedging its investments in Mexico, Chile,
Peru and the dollar area. Its aggregate hedging was close to
30%. In addition to this corporate-level hedging, dollar
positions are held at a local level by some of the subsidiary
banks. The Group also hedges its foreign exchange exposure on
expected 2011 results in the Americas. In 2010, the favorable
performance of most of the currencies in the Americas has had a
positive effect on the Group’s equity and income statement.
For 2011, the same policy will be pursued in managing the
Group’s foreign exchange risk from the perspective of its
effect on capital ratios and on the income statement.
The unit also actively manages the structural interest-rate
exposure on the Group’s balance sheet. This aims to keep
the performance of short and medium-term net interest income
more uniform by cutting out interest-rate fluctuations. In 2010,
the results of this management have been satisfactory.
Strategies were implemented to provide
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a hedge against a less positive economic outlook in Europe for
the whole of 2010 and 2011, with relatively limited risk on the
balance sheets in the United States and Mexico. These strategies
are managed both with hedging derivatives (caps, floors, swaps,
FRAs) and with balance-sheet instruments (mainly government
bonds with the highest credit and liquidity ratings). At the
close of the year, the Group held asset portfolios denominated
in euros, U.S. dollars and Mexican pesos.
Holdings
in Industrial and Other Companies
This unit manages the portfolio of industrial and financial
investments in companies operating in the telecommunications,
media, electricity, oil, gas and financial sectors. Like
Asset/Liability Management, this unit lies within the
Group’s Finance Division.
BBVA applies strict requirements to this portfolio in terms of
risk-control procedures, use of economic capital and return on
investment, diversifying investments across different sectors.
It also applies dynamic hedging and monetization management
strategies to holdings. In 2010, investments were made totaling
€434 million and divestitures amounted to
€409 million.
On December 31, 2010, the market value of the
Holdings
in Industrial & Financial Companies
portfolio was
€4,168 million, with unrealized capital gains of
€993 million.
In 2010, the management of the industrial and financial holdings
generated €317 million in dividends and
€142 million in trading income, giving a net
attributable profit of € 404 million.
Real
Estate Management
The Group has always counted with expert teams for the
management of the real estate and developer sector. Thus, the
Real Estate Management
unit’s focus is to provide
specialized management of the real estate assets it has acquired
from foreclosures, repossessions, purchases from distressed
customers and the assets in BBVA Propiedad, the real estate
fund. In 2010, the Group has continued to make an important
effort to provision for these assets (€657 million)
with the aim to maintain their coverage above 30%, taking as
reference updated appraisals.
Supervision
and Regulation
The Spanish government traditionally has been closely involved
with the Spanish banking system, both as a direct participant
through its ownership of ICO and as a regulator retaining an
important role in the regulation and supervision of financial
institutions.
The Bank
of Spain
The Bank of Spain was established in 1962 as a public law entity
(
entidad de derecho público
) that operates as
Spain’s autonomous central bank. In addition, it has the
ability to function as a private bank. Except in its public
functions, the Bank of Spain’s relations with third parties
are governed by private law and its actions are subject to the
civil and business law codes and regulations.
Until January 1, 1999, the Bank of Spain was also the sole
entity responsible for implementing Spanish monetary policy. For
a description of monetary policy since the introduction of the
euro, see “— Monetary Policy”.
Since January 1, 1999, the Bank of Spain has performed the
following basic functions attributed to the European System of
Central Banks (
“ESCB”
):
| • | defining and implementing the ESCB’s monetary policy, with the principal aim of maintaining price stability across the euro area; | |
| • | conducting currency exchange operations consistent with the provisions of Article 111 of the Treaty on European Union (“EU Treaty”), and holding and managing the Member States’ official currency reserves; | |
| • | promoting the sound working of payment systems in the euro area; and | |
| • | issuing legal tender banknotes. |
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Recognizing the foregoing functions as a fully-fledged member of
the Eurosystem, the
Ley de Autonomía del Banco de
España
(the Bank of Spain Law of Autonomy) stipulates
the performance of the following functions by the Bank of Spain:
| • | holding and managing currency and precious metal reserves not transferred to the ECB; | |
| • | supervising the solvency and behavior of credit institutions, other entities and financial markets, for which it has been assigned supervisory responsibility, in accordance with the provisions in force; | |
| • | promoting the sound working and stability of the financial system and, without prejudice to the functions of the ECB, of national payment systems; | |
| • | placing coins in circulation and the performance, on behalf of the State, of all such other functions entrusted to it in this connection; | |
| • | preparing and publishing statistics relating to its functions, and assisting the ECB in the compilation of the necessary statistical information; | |
| • | providing treasury services and acting as financial agent for government debt; | |
| • | advising the government, preparing the appropriate reports and studies; and | |
| • | exercising all other powers attributed to it by legislation. | |
| • | Subject to the rules and regulations issued by the Ministry of Economy, the Bank of Spain has the following supervisory powers over Spanish banks: | |
| • | conducting periodic inspections of Spanish banks to evaluate a bank’s compliance with current regulations including the preparation of financial statements, account structure and credit policies; | |
| • | advising a bank’s board of directors and management on its dividend policy; | |
| • | undertaking extraordinary inspections of banks; and | |
| • | collaborating with other regulatory entities to impose penalties for infringement or violation of applicable regulations. |
Fondo de
Garantía de Depósitos
The
Fondo de Garantía de Depósitos en
Establecimientos Bancarios
(“FGD”) (the Guaranteed
Bank Deposits Fund), which operates under the guidance of the
Bank of Spain, guarantees both bank and securities deposits up
to €100,000 per customer for each type of deposit, which is
the minimum insured amount for all EU member banks. Pursuant to
Bank of Spain regulations, the FGD may purchase doubtful loans
or may acquire, recapitalize and sell banks that are
experiencing difficulties.
The FGD is funded by annual contributions from member banks. The
rate of such contributions in 2010 was 0.06% of the year-end
amount of bank deposits to which the guarantee extended and
0.06% over the 5% of the securities held on clients behalf, in
accordance with legislation in effect. Nevertheless, once the
capital of the FGD exceeds its requirements, the Minister of
Economy may reduce the member banks’ contributions and,
when the FGD’s funds exceed the capital requirements by one
percent or more of the member banks’ deposits, such
contributions may be suspended.
In order to safeguard the stability of its members, the FGD may
also receive contributions from the Bank of Spain. As of
December 31, 2010, all of the Spanish banks belonging to
the BBVA Group were members of the FGD and thus obligated to
make annual contributions to it.
Fondo
Garantía Inversores
Royal Decree 948 of August 3, 2001 regulates investor
guarantee schemes related to both investment firms and to credit
institutions. These schemes are set up through an investment
guarantee fund for securities broker and
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broker-dealer firms and the deposit guarantee funds already in
place for credit institutions. A series of specific regulations
have also been enacted, defining the system for contributing to
the funds.
The General Investment Guarantee Fund Management Company
was created in a relatively short period of time and is a
business corporation with capital in which all the fund members
hold an interest. Member firms must make a joint annual
contribution to the fund equal to 0.06% over the 5% of the
securities that they hold on their client’s behalf.
However, it is foreseen that these contributions may be reduced
if the fund reaches a level considered to be sufficient.
Liquidity
Ratio
In an effort to implement European Union monetary policy,
effective January 1, 1999, the ECB and the national central
banks of the member states of the European Monetary Union
(“EMU”) adopted a regulation that requires banks to
deposit an amount equal to two percent of their qualifying
liabilities, as defined by the regulation, with the central bank
of their home country. These deposits will earn an interest rate
equal to the average interest rate of the ESCB. Qualifying
liabilities for this purpose include:
| • | deposits; | |
| • | debt securities issued; and | |
| • | monetary market instruments. |
Furthermore, the liquidity ratio is set at 0% instead of 2% for
those qualifying liabilities that have a maturity over two years
and are sold under repurchase agreements.
Investment
Ratio
In the past, the government used the investment ratio to
allocate funds among specific sectors or investments. As part of
the liberalization of the Spanish economy, it was gradually
reduced to a rate of zero percent as of December 31, 1992.
However, the law that established the ratio has not been
abolished and the government could re-impose the ratio, subject
to applicable EU requirements.
Fondo de
Restructuración Ordenada Bancaria (Ordered Banking
Restructuring Fund)
The crisis that has affected the financial markets since 2007
obliged the Spanish authorities to create the
Ordered Banking
Restructuring Fund
(FROB) by Decree-Law 9/2009 of
June 26, 2009. Its purpose is to help the restructuring
processes undertaken by credit institutions and strengthen their
capital positions subject to certain conditions. The FROB will
support the restructuring strategy of those institutions that
require assistance, in three distinct stages:
| • | search for a private solution by the credit institution itself; | |
| • | adopt measures to tackle any weaknesses that may affect the viability of credit institutions; and | |
| • | initiate a restructuring process in which the Fund itself has to intervene directly. |
The FROB has to act in what is an absolutely exceptional
situation that is closely linked to the development of the
financial crisis. In order to comply with its objectives, FROB
will be funded jointly from the Spanish national budget and the
deposit guarantee funds of credit institutions. The FROB will be
able to raise funds on securities markets through the issue of
debt securities, lending and engaging in any other debt
transaction necessary to fulfill its objects.
Capital
Requirements
Bank of Spain Circular 3/2008 (“Circular 3/2008”), of
May 22, on the calculation and control of minimum capital
requirements, regulates the minimum capital requirements for
Spanish credit institutions, on an individual and consolidated
group basis, and sets forth how to calculate capital meeting
such requirements, as well as the
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various internal capital adequacy assessment processes credit
institutions should have in place and the information they
should disclose to the market.
Circular 3/2008 is the final implementation, for credit
institutions, of the legislation on capital and consolidated
supervision of financial institutions, which was contained in
Law 36/2007, of November 16, amending Law 13/1985, of
May 25, on the investment ratios, capital and reporting
requirements of financial intermediaries, and other financial
regulations, which also includes Royal Decree 216/2008, of
15 February, on the capital of financial institutions.
Circular 3/2008 also conforms Spanish legislation to Directive
2006/48/EC of the European Parliament and of the Council, of
June 14, 2006, and Directive 2006/49/EC of the European
Parliament and of the Council, of 14 June 2006. The minimum
capital requirements for credit institutions and their
consolidated groups were thoroughly revised in both EC
directives based on the new Capital Accord adopted by the Basel
Committee on Banking Supervision (“Basel II”).
The minimum capital requirements established by Circular 3/2008
are calculated on the basis of the Group’s exposure to
(i) credit risk and dilution risk (on the basis of the
assets, obligations and contingent exposures and commitments
that present these risks, depending on their amounts,
characteristics, counterparties, guarantees, etc.); (ii) to
counterparty risk and position and settlement risk in the
trading book; (iii) to foreign exchange risk (on the basis
of the overall net foreign currency position); and (iv) to
operational risk. Additionally, the Group is subject to
compliance with the risk concentration limits established in
Circular 3/2008 and with the requirements related to corporate
governance, internal capital adequacy assessment, measurement of
interest rate risk and certain additional public disclosure
obligations set forth therein. With a view to guaranteeing
compliance with the aforementioned objectives, the Group
performs integrated management of these risks, in accordance
with its internal policies. See Note 7 to the Consolidated
Financial Statements.
As of December 31, 2010, 2009 and 2008, the eligible
capital of the Group exceeded the minimum required under the
regulations then in force. See Note 33 to the Consolidated
Financial Statements.
Under Basel II calculation of the minimum regulatory
capital requirements under the new standards, referred to as
“Pillar 1”, is supplemented with an internal capital
adequacy assessment and supervisory review process, referred to
as “Pillar 2”. The Group’s internal capital
adequacy assessment process is based on the internal model for
the quantification of the economic capital required on the basis
of the Group’s overall risk profile. Finally, Basel II
standards establish, through what is referred to as “Pillar
3”, strict transparency requirements regarding the
information on risks to be disclosed to the market.
Circular 3/2008 has been recently modified by Circular 9/2010,
of December 22, in order to proceed with the implementation
in Spain of part of the changes to the solvency framework
approved at a European level (Directives 2009/111/EC, 2009/83/EC
and 2009/27/EC).
The main changes considered in these directives are:
| • | European harmonization of large exposures limits: a bank will be restricted in lending beyond a certain limit (25% of regulatory capital) to any one party. | |
| • | Improved quality of banks’ capital: clear EU-wide criteria for assessing whether ‘hybrid’ capital, i.e. including both equity and debt, is eligible to be counted as part of a bank’s overall capital | |
| • | Improved liquidity risk management: for banking groups that operate in multiple countries, their liquidity risk management — i.e. how they fund their operations on a day-to-day basis — will also be discussed and coordinated within ‘colleges of supervisors’. | |
| • | Improved risk management for securitized products: rules on securitized debt — the repayment of which depends on the performance of a dedicated pool of loans — have been tightened. Firms that re-package loans into tradable securities will be required to retain some risk exposure to these securities, while firms that invest in the securities will be allowed to make their decisions only after conducting comprehensive due diligence. If they fail to do so, they will be subject to capital penalties. |
As part of a wider plan of the Spanish Government for the
strengthening of the financial sector, the Royal Decree- Law
2/2011, of February 18, has established higher minimum
capital requirements for Spanish credit
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institutions, with a new core capital requirement for all credit
institutions of up to a minimum of 8%. This ratio will be of 10%
for those institutions that are not listed on a Spanish Stock
Exchange, which have a small presence of private investors, and
are dependent upon wholesale funding markets for over 20% of
their assets, since they have more limited access to the capital
markets.
Capital
Management
Basel Capital Accord — Basel II —
Economic Capital
The Group’s capital management is performed at both the
regulatory and economic levels.
Regulatory capital management is based on the analysis of the
capital base and the capital ratios (core capital, Tier 1,
etc.) using Basel (“BIS”) and Bank of Spain criteria.
See Note 33 to the Consolidated Financial Statements.
The aim is to achieve a capital structure that is as efficient
as possible in terms of both cost and compliance with the
requirements of regulators, ratings agencies and investors.
Active capital management includes securitizations, sales of
assets, and preferred and subordinated issues of equity and
hybrid instruments.
The Bank has obtained the approval of its internal model of
capital estimation (“IRB”) in 2009 and 2008 for
certain portfolios.
From an economic standpoint, capital management seeks to
optimize value creation at the Group and at its different
business units.
The Group allocates economic capital (“CER”)
commensurate with the risks incurred by each business. This is
based on the concept of unexpected loss at a certain level of
statistical confidence, depending on the Group’s targets in
terms of capital adequacy. These targets are applied at two
levels: the first is core equity, which determines the allocated
capital. The Group uses this amount as a basis for calculating
the return generated on the equity (“ROE”) in each
business. The second level is total capital, which determines
the additional allocation in terms of subordinated debt and
preference shares. The CER calculation combines lending risk,
market risk (including structural risk associated with the
balance sheet and equity positions), operational risk and fixed
asset and technical risks in the case of insurance companies.
Stockholders’ equity, as calculated under BIS rules, is an
important metric for the Group. However, for the purpose of
allocating capital to business areas the Group prefers CER. It
is risk-sensitive and thus better reflects management policies
for the individual businesses and the business portfolio. These
provide an equitable basis for assigning capital to businesses
according to the risks incurred and make it easier to compare
returns.
To internal effects of management and pursuit of the business
areas, the Group realizes a capital allocation to each business
area.
Concentration
of Risk
The Bank of Spain regulates the concentration of risk. Since
January 1, 1999, any exposure to a person or group
exceeding 10% of a group’s or bank’s regulatory
capital has been deemed a concentration. The total amount of
exposure represented by all of such concentrations may not
exceed 800% of regulatory capital. Exposure to a single person
or group may not exceed 25% (20% in the case of non-consolidated
companies of the economic group) of a bank’s or
group’s regulatory capital.
Legal
and Other Restricted Reserves
We are subject to the legal and other restricted reserves
requirements applicable to Spanish companies. Please see
“— Capital Requirements”.
Allowance
for Loan Losses
For a discussion of the Bank of Spain regulations relating to
allowances for loan losses and country risk, see
Note 2.2.1.b) to the Consolidated Financial Statements.
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Regulation
of the Disclosure of Fees and Interest Rates
Interest rates on most kinds of loans and deposits are not
subject to a maximum limit. Banks must publish their
preferential rates, rates applied on overdrafts, and fees and
commissions charged in connection with banking transactions.
Banking clients must be provided with written disclosure
adequate to permit customers to ascertain transaction costs. The
foregoing regulations are enforced by the Bank of Spain in
response to bank client complaints.
Law 44/2002 concerning measures to reform the Spanish financial
system contained a rule concerning the calculation of variable
interest applicable to loans and credit secured by mortgages,
bails, pledges or any other equivalent guarantee.
Employee
Pension Plans
Under the relevant collective labor agreements, BBVA and some of
its subsidiaries provide supplemental pension payments to
certain active and retired employees and their beneficiaries.
These payments supplement social security benefits from the
Spanish state. See Note 2.2.12 and Note 26 to the
Consolidated Financial Statements.
Dividends
If a bank meets the Bank of Spain’s minimum capital
requirements described above under “— Capital
Requirements”, it may dedicate all of its net profits to
the payment of dividends, although, in practice, banks consult
with the Bank of Spain before declaring a dividend. We calculate
that as of December 31, 2010, we had approximately
€11,241 million of unrestricted reserves in excess of
applicable capital and reserve requirements available for the
payment of dividends. Compliance with such requirements
notwithstanding, the Bank of Spain may advise a bank against the
payment of dividends on grounds of prudence. In no event may
dividends be paid from non-distributable reserves. Banks which
fail to comply with the capital adequacy ratio by more than 20%
are required to devote all of their net profits to increasing
their capital ratios. Banks which fail to meet the required
ratio by 20% or less must obtain prior approval of the Bank of
Spain to distribute any dividends and must devote at least 50%
of net profits to increasing their capital ratios. In addition,
banks, and their directors and executive officers that do not
comply with the liquidity and investment ratios and capital
adequacy requirements may be subject to fines or other
sanctions. Compliance with the Bank of Spain’s capital
requirements is determined on both a consolidated and individual
basis. Our Spanish subsidiaries are in compliance with these
capital adequacy requirements on both a consolidated and
individual basis. If a bank has no net profits, the board of
directors may propose at the general meeting of the stockholders
that a dividend be declared out of retained earnings.
The Bank of Spain recommends that interim dividends not exceed
an amount equal to one-half of net income attributed to parent
company from the beginning of the corresponding fiscal year. No
interim dividend may be declared when a bank does not meet the
minimum capital requirements and, according to the
recommendations of the Bank of Spain, interim dividends may not
be declared until the Bank of Spain has sufficient knowledge
with respect to the year’s profits. Although banks are not
legally required to seek prior approval from the Bank of Spain
before declaring interim dividends, the Bank of Spain had asked
that banks consult with it on a voluntary basis before declaring
interim dividends. It should be noted that the Bank of Spain
recommended in 2008 to Spanish banks general moderation on the
distribution of dividends, to increase their voluntary reserves
in order to strengthen their financial situation and to
distribute any dividends in treasury stock.
Our bylaws allow for dividends to be paid in cash or in kind as
determined by shareholder resolution.
Scrip
Dividend
At the BBVA Annual General Meeting held on March 11, 2011,
the shareholders passed a resolution adopting a scrip dividend
scheme called “Dividendo Opción”. This is an
alternative remuneration scheme for BBVA shareholders, who may
now opt to receive an amount equivalent to one of the interim
dividends of 2011 and the final dividend corresponding to 2010
in cash or new shares to be issued in two
free-of-charge
capital increases. The aim of this new remuneration scheme is to
provide BBVA shareholders with a flexible and tax efficient
instrument and to
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offer BBVA shareholders the option to receive newly-issued
shares of the Bank, without altering BBVA’s policy of cash
remuneration, in line with more efficient, flexible remuneration
policies followed by other international banks.
Consequently, shareholders will have the “Dividendo
Opción” available to them on the dates when the final
dividend of 2010 and one of the interim dividends of 2011 are
typically paid out. They may then decide which option suits them
best at the time, whilst always continuing to be able to receive
all their remuneration in cash if they wish.
Each capital increase is independent of the other, such that one
or the other may be made on different dates and one or the other
may not be made.
Limitations
on Types of Business
Spanish banks are subject to certain limitations on the types of
businesses in which they may engage directly, but they are
subject to few limitations on the types of businesses in which
they may engage indirectly.
Mortgage
Legislation
Law 41/2007 reformed an important part of Law 2/1981 of
March 25, on mortgage markets as well as specific
provisions of Law 2/1994 of March 30, on the subrogation
and modification of mortgage loans and the Mortgage Law of
February 8, 1946 all with the purpose of providing the
Spanish mortgage market with greater flexibility, sophistication
and efficiency. A number of reforms have been introduced
relating to (i) asset or financing transactions carried out
by credit institutions and (ii) liability transactions,
i.e., those of moving of mortgage loans and credits that credit
institutions carry out as refinancing mechanisms.
Royal Decree 716/2009, implements several aspects of Law 2/1981,
of March 25, 1981, on mortgage market regulation and other
mortgage and financial system rules, reformed by Law 41/2007. It
replaces Royal Decree
685/1982
of
March 17, 1982 which also implemented several aspects of
Law 2/1981 and which is thus repealed. The most significant
developments introduced are (i) the modification on the
loan-to-value
ratio requirement intending to improve the quality of Spanish
mortgage-backed securities; (ii) the elimination of many of
the administrative requirements for the issuance of covered
bonds and mortgage bonds; and (iii) the implementation of a
special accounting record of the loans and credit facilities
used to back issuances of covered bonds and mortgage-backed
bonds.
Mutual
Fund Regulation
Mutual funds in Spain are regulated by the
Dirección
General del Tesoro y Política Financiera del Ministerio de
Economía
(the Ministry of the Economy) and by the
Comisión Nacional del Mercado de Valores
(“CNMV”). All mutual funds and mutual fund
management companies are required to be registered with the
CNMV. Spanish mutual funds may be subject to investment limits
with respect to single sectors or companies and overall
portfolio diversification minimums. In addition, periodic
reports including a review of the fund’s performance and
any material events affecting the fund are required to be
distributed to the fund’s investors and filed with the CNMV.
Reform of
the Spanish Companies Act
The consolidated text of the Spanish Capital Companies Act,
adopted under Legislative Royal Decree 1/2010, of July 2,
has repealed the former Companies Act, adopted under Legislative
Royal Decree 1564/1989, of December 22. This royal
legislative decree stems from the authorization set out in the
Law 3/2009, of April 3, on structural changes in companies,
enabling the Government to proceed to consolidate the
legislation for joint stock (
“sociedades
anónimas”
) and limited liability
(
“sociedades de responsabilidad limitada”
) in a
single text, bringing together the contents of the two
aforementioned acts, as well, the part of the Securities
Exchange Act that regulates the most purely corporate-related
aspects of joint stock companies whose securities are traded on
an official secondary market. The consolidated text also
includes the articles of the Commercial Code that address
limited partnerships, a derivative corporate device that is
barely used in practice.
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Reform of
the Spanish Auditing Law
Law 12/2010, of June 30, amends Law 19/1988, of
July 12, on Account Audits, Law 24/1988, of July 28,
on Securities Exchanges and the consolidated text of the former
Companies Act adopted by Legislative Royal Decree 1564/1989, of
December 22 (currently, the Capital Companies Act), for its
adaptation to EU regulations. This new law transposes Directive
EU/2006/43 which regulates aspects, among others, related to:
authorization and registry of auditors and auditing companies,
confidentiality and professional secrecy which the auditors may
observe, rules on independency and liability as well as certain
rules on the composition and functions of the auditing committee.
U.S.
Regulation
Banking
Regulation
BBVA is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the “BHC
Act”). As such it is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Among other things,
the Group’s direct and indirect activities and investments
in the United States are limited to retail and commercial
banking and other activities that are “closely related to
banking”, as determined by the Federal Reserve. BBVA is
also required to obtain the prior approval of the Federal
Reserve before acquiring, directly or indirectly, the ownership
or control of more than 5% of any class of voting stock of any
U.S. bank or bank holding company.
Under current Federal Reserve policy, BBVA is required to act as
a source of financial strength for its U.S. bank
subsidiaries and U.S. branch. Among other things, this
source of strength obligation may result in a requirement for
BBVA, as sole shareholder, to inject capital into any of its
U.S. bank subsidiaries.
The Group’s U.S. bank subsidiaries and BBVA’s
U.S. branch are also subject to supervision and regulation
by a variety of other U.S. regulatory agencies. BBVA’s
New York Branch is licensed by the New York State Banking
Department (the “NYSBD”) and is supervised by both the
NYSBD and the Federal Reserve. BBVA’s wholly-owned direct
U.S. subsidiary, BBVA USA Bancshares, Inc., and its
wholly-owned subsidiary, Compass Bancshares, Inc., are both bank
holding companies within the meaning of the BHC Act and are
subject to supervision and regulation by the Federal Reserve.
BBVA Compass, wholly-owned by Compass Bancshares, Inc., is a
state-chartered bank that is a member of the Federal Reserve
System and therefore is supervised by the Federal Reserve and
the State of Alabama Banking Department. BBVA Compass has
branches in Alabama, Texas, Arizona, Florida, Colorado,
California, and New Mexico. BBVA Compass is a depository
institution insured by, and subject to the regulation of, the
Federal Deposit Insurance Corporation. BBVAPR Holding
Corporation, wholly-owned by BBVA, is a bank holding company
within the meaning of the BHC Act and is subject to supervision
and regulation by the Federal Reserve. Banco Bilbao Vizcaya
Argentaria Puerto Rico, wholly-owned by BBVAPR Holding
Corporation, is a state non-member bank chartered and supervised
by the
Oficina del Comisionado de Instituciones Financieras
de Puerto Rico
and its primary federal regulator is the
Federal Deposit Insurance Corporation
Bancomer Transfer Services is an affiliate of BBVA, which is
licensed as a money transmitter by the State of California
Department of Financial Institutions and as a money services
business by the Texas Department of Banking and certain other
state regulators. Bancomer Transfer Services is also registered
as a money services business with the Financial Crimes
Enforcement Network of the U.S. Department of the Treasury.
A major focus of U.S. governmental policy relating to
financial institutions in recent years has been aimed at
fighting money laundering and terrorist financing. Regulations
applicable to BBVA and its affiliates impose obligations to
maintain appropriate policies, procedures, and controls to
detect, prevent, and report money laundering. In particular,
Title III of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act), as amended, requires
financial institutions operating in the United States to
(i) give special attention to correspondent and
payable-through bank accounts, (ii) implement enhanced
reporting due diligence, and “know your customer”
standards for private banking and correspondent banking
relationships, (iii) scrutinize the beneficial ownership
and activity of certain
non-U.S. and
private banking customers (especially for so-called politically
exposed persons), and (iv) develop new anti-money
laundering programs, due diligence policies and controls to
ensure the detection and reporting of money laundering. Such
required compliance programs are intended to supplement any
existing compliance programs for
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purposes of requirements under the Bank Secrecy Act and the
Office of Foreign Assets Control regulations. Failure of a
financial institution to maintain and implement adequate
programs to combat money laundering and terrorist financing
could have serious legal and reputational consequences for the
institution.
Regulation
of Other U.S. Entities
The Group’s U.S. broker-dealers are subject to the
regulation and supervision of the SEC and the Financial Industry
Regulatory Authority (FINRA) with respect to their securities
activities.
Dodd-Frank
Act
On July 21, 2010, the United States enacted the Dodd-Frank
Wall Street Reform and Consumer Protection Act, which we refer
to as the Dodd-Frank Act, which provides a broad framework for
significant regulatory changes that will extend to almost every
area of U.S. financial regulation. The Dodd-Frank Act
addresses, among other issues, systemic risk oversight, bank
capital standards, the liquidation of failing systemically
significant U.S. financial institutions,
over-the-counter
derivatives, the ability of banking entities to engage in
proprietary trading activities and invest in hedge funds and
private equity funds (known as the “Volcker Rule”),
consumer and investor protection, hedge fund registration,
securitization, investment advisors and the role of
credit-rating agencies.
Implementation of the Dodd-Frank Act will require detailed
rulemaking over multiple years by various regulators and could
result in additional costs or limit or restrict the way we
conduct our business, although uncertainty remains about the
final details, impact and timing of the rules.
Among other changes, beginning five years after enactment of the
Dodd-Frank Act, the Federal Reserve Board will apply minimum
capital requirements to U.S. intermediate bank holding
company subsidiaries of
non-U.S. bank
holding companies (such as BBVA USA Bancshares, Inc., Compass
Bancshares, Inc. and BBVAPR Holding Corporation). The exact
requirements that will apply to such U.S. intermediate bank
holding companies are currently unknown; however, the Federal
Reserve Board is expected to require a minimum tier 1
risk-based capital ratio of at least 4% and a total risk-based
capital ratio of at least 8%. The Dodd-Frank Act also provides
regulators with tools to impose greater capital, leverage and
liquidity requirements and other prudential standards,
particularly for financial institutions that pose significant
systemic risk and bank holding companies with greater than
$50 billion in assets. In imposing such heightened
prudential standards on
non-U.S. bank
holding companies such as BBVA, the Federal Reserve Board is
directed to take into account the principle of national
treatment and equality of competitive opportunity, and the
extent to which the foreign bank holding company is subject to
comparable home country standards.
The Dodd-Frank Act also limits the ability of banking entities,
except solely outside the United States in the case of
non-U.S. banking
entities, to sponsor or invest in private equity or hedge funds
(including an aggregate investment limit of 3% of tier 1
capital in funds that are sponsored by the bank holding company)
and to engage in certain types of proprietary trading unrelated
to serving clients. The Dodd-Frank Act also changes the Federal
Deposit Insurance Corporation (FDIC) deposit insurance
assessment framework (the amounts paid by FDIC-insured
institutions into the deposit insurance fund of the FDIC),
primarily by basing assessments on an FDIC-insured
institution’s total assets less tangible equity rather than
U.S. domestic deposits, which is expected to shift a
greater portion of the aggregate assessments to large banks
(such as BBVA Compass).
Under the so-called swap “push-out” provisions of the
Dodd-Frank Act, the derivatives activities of U.S. banks
(such as BBVA Compass) and U.S. branch offices of foreign
banks (such as BBVA’s New York branch) will be restricted,
which may necessitate changes to how we conduct our derivatives
activities. Entities that are swap dealers, security-based swap
dealers, major swap participants or major security-based swap
participants will be required to register with the SEC or the
U.S. Commodity Futures Trading Commission, or both, and
will become subject to the requirements as to capital, margin,
business conduct, recordkeeping and other requirements
applicable to such entities.
There are various qualitative and quantitative restrictions on
the extent to which we and our nonbank subsidiaries can borrow
or otherwise obtain credit from our U.S. banking
subsidiaries or engage in certain other transactions involving
those subsidiaries. When permissible, these transactions must be
on terms that would
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ordinarily be offered to unaffiliated entities, must be secured
by designated amounts of specified collateral in most cases and
are subject to volume limitations. These restrictions also apply
to certain transactions of our New York Branch with our New York
broker-dealer and certain of our other affiliates. Effective in
July 2012, Dodd-Frank subjects credit exposure arising from
derivative transactions, securities borrowing and lending
transactions, and repurchase/reverse repurchase agreements to
these collateral and volume transactionslimitations.
Regulations which the Financial Stability Oversight Council or
the Consumer Financial Protection Bureau established under the
Dodd-Frank Act may adopt could affect the nature of the
activities that a bank (including BBVA Compass ) may conduct,
and may impose restrictions and limitations on the conduct of
such activities.
Furthermore, the Dodd-Frank Act requires issuers with listed
securities, which may include foreign private issuers such as
BBVA, to establish a “clawback” policy to recoup
previously awarded compensation in the event of an accounting
restatement. The Dodd-Frank Act also grants the SEC
discretionary rule-making authority to impose a new fiduciary
standard on brokers, dealers and investment advisers, and
expands the extraterritorial jurisdiction of U.S. courts
over actions brought by the SEC or the United States with
respect to violations of the antifraud provisions in the
Securities Act of 1933, the Securities Exchange Act of 1934 and
the Investment Advisers Act of 1940.
Monetary
Policy
The integration of Spain into the EMU on January 1, 1999
implied the yielding of monetary policy sovereignty to the ESCB.
The ESCB is composed of the ECB and the national central banks
of the 16 member countries that form the EMU (Slovakia joined
the EMU on January 1, 2009).
The ESCB determines and executes the single monetary policy of
the 16 member countries of the EMU. The ESCB collaborates with
the central banks of member countries to take advantage of the
experience of the central banks in each of its national markets.
The basic tasks to be carried out by the ESCB include:
| • | defining and implementing the single monetary policy of the EU; | |
| • | conducting foreign exchange operations in accordance with the set exchange policy; | |
| • | lending to national monetary financial institutions in collateralized operations; | |
| • | holding and managing the official foreign reserves of the member states; and | |
| • | promoting the smooth operation of the payment systems. |
In addition, the EU Treaty establishes a series of rules
designed to safeguard the independence of the system, in its
institutional as well as in its administrative functions.
| C. | Organizational Structure |
As of December 31, 2010, the Group was made up of
302 companies accounted for under the full consolidation
method and 7 under the proportionate consolidation method. A
further 68 companies are accounted for by the equity method.
The companies are principally domiciled in the following
countries: Argentina, Belgium, Bolivia, Brazil, Cayman Islands,
Chile, Colombia, Ecuador, France, Germany, Ireland, Italy,
Luxembourg, Mexico, Netherlands, Netherlands Antilles, Panama,
Peru, Portugal, Puerto Rico, Spain, Switzerland, United Kingdom,
United States of America, Uruguay and Venezuela. The Group has
an active presence in Asia.
46
Table of Contents
Below is a simplified organizational chart of BBVA’s most
significant subsidiaries as of December 31, 2010.
|
BBVA
|
||||||||||||||||
|
Country of
|
Voting
|
BBVA
|
Total
|
|||||||||||||
|
Subsidiary
|
Incorporation | Activity | Power | Ownership | Assets | |||||||||||
| (In millions of euros, except percentages) | ||||||||||||||||
|
BBVA BANCOMER, S.A. DE C.V.
|
MEXICO | BANK | 100.0 | 100.0 | 69,667 | |||||||||||
|
COMPASS BANK
|
THE UNITED
STATES |
BANK | 100.0 | 100.0 | 51,111 | |||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.
|
CHILE | BANK | 68.2 | 68.2 | 11,638 | |||||||||||
|
BANCO CONTINENTAL, S.A.
|
PERU | BANK | 92.2 | 46.1 | 10,078 | |||||||||||
|
BBVA SEGUROS, S.A., DE SEGUROS Y REASEGUROS
|
SPAIN | INSURANCE | 100.0 | 100.0 | 10,913 | |||||||||||
|
BBVA COLOMBIA, S.A.
|
COLOMBIA | BANK | 95.4 | 95.4 | 8,634 | |||||||||||
|
BANCO PROVINCIAL S.A. — BANCO UNIVERSAL
|
VENEZUELA | BANK | 55.6 | 55.6 | 8,493 | |||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A.
|
PORTUGAL | BANK | 100.0 | 100.0 | 8,094 | |||||||||||
|
BBVA BANCO FRANCES, S.A.
|
ARGENTINA | BANK | 76.0 | 76.0 | 5,250 | |||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, S.A.
|
PUERTO RICO | BANK | 100.0 | 100.0 | 3,615 | |||||||||||
|
FINANZIA, BANCO DE CREDITO, S.A.
|
SPAIN | BANK | 100.0 | 100.0 | 7,779 | |||||||||||
|
PENSIONES BANCOMER, S.A. DE C.V.
|
MEXICO | INSURANCE | 100.0 | 100.0 | 2,529 | |||||||||||
|
COMPASS SOUTHWEST, LP
|
THE UNITED
STATES |
BANK | 100.0 | 100.0 | 4,008 | |||||||||||
|
SEGUROS BANCOMER, S.A. DE C.V.
|
MEXICO | INSURANCE | 100.0 | 100.0 | 2,432 | |||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.
|
PANAMA | BANK | 98.9 | 98.9 | 1,586 | |||||||||||
|
UNO-E BANK, S.A.
|
SPAIN | BANK | 100.0 | 100.0 | 1,361 | |||||||||||
|
BBVA PARAGUAY, S.A.
|
PARAGUAY | BANK | 100.0 | 100.0 | 1,121 | |||||||||||
|
BBVA SUIZA, S.A. (BBVA SWITZERLAND)
|
SWITZERLAND | BANK | 100.0 | 100.0 | 1,407 | |||||||||||
| D. | Property, Plants and Equipment |
We own and rent a substantial network of properties in Spain and
abroad, including 3,024 branch offices in Spain and, principally
through our various affiliates, 4,337 branch offices abroad as
of December 31, 2010. As of December 31, 2010,
approximately 83% of our branches in Spain and 57% of our
branches abroad were rented from third parties pursuant to
short-term leases that may be renewed by mutual agreement. The
number of branches leased in Spain has increased in 2009 and
2010 as a result of the sale and leaseback operation described
in Note 16 to the Consolidated Financial Statements.
We purchased through a real estate company of the Group the
Parque Empresarial Foresta
located in a development area
in the north of Madrid from Group Gmp pursuant to an agreement
executed on June 19, 2007. The BBVA Group will construct
its new corporate headquarters at this location. As of
December 31, 2010, the accumulated investment for this
project amounted to €484 million.
| E. | Selected Statistical Information |
The following is a presentation of selected statistical
information for the periods indicated. Where required under
Industry Guide 3, we have provided such selected statistical
information separately for our domestic and foreign activities,
pursuant to our calculation that our foreign operations are
significant according to
Rule 9-05
of
Regulation S-X.
47
Table of Contents
Average
Balances and Rates
The tables below set forth selected statistical information on
our average balance sheets, which are based on the beginning and
month-end balances in each year. We do not believe that monthly
averages present trends materially different from those that
would be presented by daily averages. Interest income figures,
when used, include interest income on non-accruing loans to the
extent that cash payments have been received. Loan fees are
included in the computation of interest revenue.
| Average Balance Sheet — Assets and Interest from Earning Assets | ||||||||||||||||||||||||||||||||||||
|
Year Ended
|
Year Ended
|
Year Ended
|
||||||||||||||||||||||||||||||||||
| December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
|
Average
|
Average
|
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||||||||||||
| Balance | Interest | Yield(1) | Balance | Interest | Yield(1) | Balance | Interest | Yield(1) | ||||||||||||||||||||||||||||
| (In millions of euro, except percentages) | ||||||||||||||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
21,342 | 239 | 1.12 | % | 18,638 | 253 | 1.36 | % | 14,396 | 479 | 3.33 | % | ||||||||||||||||||||||||
|
Debt securities, equity instruments and derivatives
|
145,990 | 3,939 | 2.70 | % | 138,030 | 4,207 | 3.05 | % | 118,356 | 4,659 | 3.94 | % | ||||||||||||||||||||||||
|
Loans and receivables
|
358,587 | 16,797 | 4.68 | % | 355,121 | 19,194 | 5.40 | % | 352,727 | 25,087 | 7.11 | % | ||||||||||||||||||||||||
|
Loans and advances to credit institutions
|
25,561 | 501 | 1.96 | % | 26,152 | 697 | 2.66 | % | 31,229 | 1,367 | 4.38 | % | ||||||||||||||||||||||||
|
In euro(2)
|
15,888 | 210 | 1.32 | % | 16,190 | 353 | 2.18 | % | 21,724 | 933 | 4.29 | % | ||||||||||||||||||||||||
|
In other currencies(3)
|
9,673 | 291 | 3.01 | % | 9,962 | 344 | 3.45 | % | 9,505 | 434 | 4.57 | % | ||||||||||||||||||||||||
|
Loans and advances to customers
|
333,026 | 16,296 | 4.89 | % | 328,969 | 18,498 | 5.62 | % | 321,498 | 23,720 | 7.38 | % | ||||||||||||||||||||||||
|
In euro(2)
|
219,862 | 7,023 | 3.19 | % | 222,254 | 9,262 | 4.17 | % | 218,634 | 13,072 | 5.98 | % | ||||||||||||||||||||||||
|
In other currencies(3)
|
113,164 | 9,273 | 8.19 | % | 106,715 | 9,236 | 8.65 | % | 102,864 | 10,648 | 10.35 | % | ||||||||||||||||||||||||
|
Other financial income
|
— | 159 | — | — | 120 | — | — | 179 | — | |||||||||||||||||||||||||||
|
Non-earning assets
|
32,889 | — | — | 31,180 | — | — | 32,377 | — | — | |||||||||||||||||||||||||||
|
Total average assets
|
558,808 | 21,134 | 3.78 | % | 542,969 | 23,775 | 4.38 | % | 517,856 | 30,404 | 5.87 | % | ||||||||||||||||||||||||
| (1) | Rates have been presented on a non-taxable equivalent basis. | |
| (2) | Amounts reflected in euro correspond to predominantly domestic activities. | |
| (3) | Amounts reflected in other currencies correspond to predominantly foreign activities. |
48
Table of Contents
| Average Balance Sheet — Liabilities and Interest Paid on Interest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||
|
Year Ended
|
Year Ended
|
Year Ended
|
||||||||||||||||||||||||||||||||||
| December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
|
Average
|
Average
|
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||||||||||||
| Balance | Interest | Yield(1) | Balance | Interest | Yield(1) | Balance | Interest | Yield(1) | ||||||||||||||||||||||||||||
| (In millions of euro, except percentages) | ||||||||||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||||||
|
Deposits from central banks and credit institutions
|
80,177 | 1,515 | 1.89 | % | 74,017 | 2,143 | 2.89 | % | 77,159 | 3,809 | 4.94 | % | ||||||||||||||||||||||||
|
In euro
|
45,217 | 863 | 1.91 | % | 35,093 | 967 | 2.75 | % | 32,790 | 1,604 | 4.89 | % | ||||||||||||||||||||||||
|
In other currencies
|
34,960 | 652 | 1.87 | % | 38,924 | 1,176 | 3.02 | % | 44,369 | 2,205 | 4.97 | % | ||||||||||||||||||||||||
|
Customer deposits
|
259,330 | 3,550 | 1.37 | % | 249,106 | 4,056 | 1.63 | % | 237,387 | 8,390 | 3.53 | % | ||||||||||||||||||||||||
|
In euro(2)
|
121,956 | 1,246 | 1.02 | % | 116,422 | 1,326 | 1.14 | % | 115,166 | 3,765 | 3.27 | % | ||||||||||||||||||||||||
|
In other currencies(3)
|
137,374 | 2,304 | 1.68 | % | 132,684 | 2,730 | 2.06 | % | 122,221 | 4,625 | 3.78 | % | ||||||||||||||||||||||||
|
Debt securities and subordinated liabilities
|
119,684 | 2,334 | 1.95 | % | 120,228 | 3,098 | 2.58 | % | 119,249 | 6,100 | 5.12 | % | ||||||||||||||||||||||||
|
In euro(2)
|
89,020 | 1,569 | 1.76 | % | 91,730 | 2,305 | 2.51 | % | 96,764 | 5,055 | 5.22 | % | ||||||||||||||||||||||||
|
In other currencies(3)
|
30,664 | 765 | 2.49 | % | 28,498 | 793 | 2.78 | % | 22,485 | 1,045 | 4.65 | % | ||||||||||||||||||||||||
|
Other financial costs
|
— | 415 | — | — | 596 | — | — | 418 | — | |||||||||||||||||||||||||||
|
Non-interest-bearing liabilities
|
66,541 | — | — | 70,020 | — | — | 56,867 | — | ||||||||||||||||||||||||||||
|
Equity
|
33,076 | — | — | 29,598 | — | — | 27,194 | — | ||||||||||||||||||||||||||||
|
Total average liabilities
|
558,808 | 7,814 | 1.40 | % | 542,969 | 9,893 | 1.82 | % | 517,856 | 18,717 | 3.61 | % | ||||||||||||||||||||||||
| (1) | Rates have been presented on a non-taxable equivalent basis. | |
| (2) | Amounts reflected in euro correspond to predominantly domestic activities. | |
| (3) | Amounts reflected in other currencies correspond to predominantly foreign activities. |
49
Table of Contents
Changes
in Net Interest Income-Volume and Rate Analysis
The following table allocates changes in our net interest income
between changes in volume and changes in rate for 2010 compared
to 2009, and 2009 compared to 2008. Volume and rate variance
have been calculated based on movements in average balances over
the period and changes in interest rates on average
interest-earning assets and average interest-bearing
liabilities. The only
out-of-period
items and adjustments excluded from the following table are
interest payments on loans which are made in a period other than
the period during which they are due. Loan fees were included in
the computation of interest income.
| 2010/2009 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume(1) | Rate(1)(2) | Net Change | ||||||||||
| (In millions of euros) | ||||||||||||
|
Interest income
|
||||||||||||
|
Cash and balances with central bank
|
37 | (51 | ) | (14 | ) | |||||||
|
Debt securities, equity instruments and derivatives
|
243 | (511 | ) | (268 | ) | |||||||
|
Loans and advances to credit institutions
|
(16 | ) | (179 | ) | (195 | ) | ||||||
|
In euros
|
(7 | ) | (136 | ) | (142 | ) | ||||||
|
In other currencies
|
(10 | ) | (43 | ) | (53 | ) | ||||||
|
Loans and advances to customers
|
228 | (2,429 | ) | (2,201 | ) | |||||||
|
In euros
|
(100 | ) | (2,139 | ) | (2,239 | ) | ||||||
|
In other currencies
|
558 | (521 | ) | 37 | ||||||||
|
Other financial income
|
— | 39 | 39 | |||||||||
|
Total income
|
693 | (3,333 | ) | (2,641 | ) | |||||||
|
Interest expense
|
||||||||||||
|
Deposits from central banks and credit institutions
|
178 | (806 | ) | (628 | ) | |||||||
|
In euros
|
279 | (382 | ) | (104 | ) | |||||||
|
In other currencies
|
(120 | ) | (404 | ) | (524 | ) | ||||||
|
Customer deposits
|
166 | (672 | ) | (505 | ) | |||||||
|
In euros
|
63 | (143 | ) | (80 | ) | |||||||
|
In other currencies
|
96 | (522 | ) | (425 | ) | |||||||
|
Debt certificates and subordinated liabilities
|
(14 | ) | (750 | ) | (764 | ) | ||||||
|
In euros
|
(68 | ) | (668 | ) | (736 | ) | ||||||
|
In other currencies
|
60 | (88 | ) | (27 | ) | |||||||
|
Other financial costs
|
— | (181 | ) | (181 | ) | |||||||
|
Total expense
|
288 | (2,367 | ) | (2,078 | ) | |||||||
|
Net interest income
|
405 | (966 | ) | (562 | ) | |||||||
| (1) | Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate. | |
| (2) | Rates have been presented on a non-taxable equivalent basis. |
50
Table of Contents
| 2009/2008 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume(1) | Rate(1)(2) | Net Change | ||||||||||
| (In millions of euros) | ||||||||||||
|
Interest income
|
||||||||||||
|
Cash and balances with central bank
|
141 | (366 | ) | (225 | ) | |||||||
|
Debt securities, equity instruments and derivatives
|
774 | (1,226 | ) | (452 | ) | |||||||
|
Loans and advances to credit institutions
|
(222 | ) | (449 | ) | (670 | ) | ||||||
|
In euros
|
(238 | ) | (342 | ) | (580 | ) | ||||||
|
In other currencies
|
21 | (112 | ) | (91 | ) | |||||||
|
Loans and advances to customers
|
551 | (5,774 | ) | (5,222 | ) | |||||||
|
In euros
|
216 | (4,027 | ) | (3,810 | ) | |||||||
|
In other currencies
|
396 | (1,725 | ) | (1,412 | ) | |||||||
|
Other financial income
|
— | (59 | ) | (59 | ) | |||||||
|
Total income
|
1,474 | (8,104 | ) | (6,629 | ) | |||||||
|
Interest expense
|
||||||||||||
|
Deposits from central banks and credit institutions
|
(155 | ) | (1,512 | ) | (1,667 | ) | ||||||
|
In euros
|
113 | (750 | ) | (637 | ) | |||||||
|
In other currencies
|
(271 | ) | (759 | ) | (1,029 | ) | ||||||
|
Customer deposits
|
414 | (4,348 | ) | (4,334 | ) | |||||||
|
In euros
|
41 | (2,094 | ) | (2,439 | ) | |||||||
|
In other currencies
|
396 | (2,291 | ) | (1,895 | ) | |||||||
|
Debt certificates and subordinated liabilities
|
50 | (3,052 | ) | (3,002 | ) | |||||||
|
In euros
|
(263 | ) | (2,481 | ) | (2,744 | ) | ||||||
|
In other currencies
|
280 | (537 | ) | (258 | ) | |||||||
|
Other financial costs
|
— | 178 | 178 | |||||||||
|
Total expense
|
908 | (9,733 | ) | (8,825 | ) | |||||||
|
Net interest income
|
567 | 1,629 | 2,197 | |||||||||
| (1) | Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate. | |
| (2) | Rates have been presented on a non-taxable equivalent basis. |
Interest
Earning Assets — Margin and Spread
The following table analyzes the levels of our average earning
assets and illustrates the comparative gross and net yields and
spread obtained for each of the years indicated.
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euro, except percentages) | ||||||||||||
|
Average interest earning assets
|
525,914 | 511,789 | 485,479 | |||||||||
|
Gross yield(1)
|
4.02 | % | 4.65 | % | 6.17 | % | ||||||
|
Net yield(2)
|
3.78 | % | 4.38 | % | 5.78 | % | ||||||
|
Net interest margin(3)
|
2.53 | % | 2.71 | % | 2.41 | % | ||||||
|
Average effective rate paid on all interest-bearing liabilities
|
1.70 | % | 2.23 | % | 4.31 | % | ||||||
|
Spread(4)
|
2.32 | % | 2.41 | % | 1.86 | % | ||||||
| (1) | Gross yield represents total interest income divided by average interest earning assets. | |
| (2) | Net yield represents total interest income divided by total average assets. | |
| (3) | Net interest margin represents net interest income as percentage of average interest earning assets. | |
| (4) | Spread is the difference between gross yield and the average cost of interest-bearing liabilities. |
51
Table of Contents
ASSETS
Interest-Bearing
Deposits in Other Banks
As of December 31, 2010, interbank deposits represented
3.88% of our assets. Of such interbank deposits, 35.04% were
held outside of Spain and 64.96% in Spain. We believe that our
deposits are generally placed with highly rated banks and have a
lower risk than many loans we could make in Spain. Such
deposits, however, are subject to the risk that the deposit
banks may fail or the banking system of certain of the countries
in which a portion of our deposits are made may face liquidity
or other problems.
Securities
Portfolio
As of December 31, 2010, our securities were carried on our
consolidated balance sheet at a carrying amount of
€96,020 million, representing 17.37% of our assets.
€29,902 million, or 31.14%, of our securities
consisted of Spanish Treasury bonds and Treasury bills. The
average yield during 2010 on investment securities that BBVA
held was 4.11%, compared to an average yield of approximately
4.68% earned on loans and receivables during 2010. The market or
appraised value of our total securities portfolio as of
December 31, 2010, was €95,263 million. See
Notes 10, 12 and 14 to the Consolidated Financial
Statements. For a discussion of our investments in affiliates,
see Note 17 to the Consolidated Financial Statements. For a
discussion of the manner in which we value our securities, see
Notes 2.2.1.a and 8 to the Consolidated Financial
Statements.
52
Table of Contents
The following table analyzes the carrying amount and market
value of debt securities as of December 31, 2010,
December 31, 2009 and December 31, 2008. Trading
portfolio is not included in the tables below because the
amortized costs and fair values of these items are the same. See
Note 10 to the Consolidated Financial Statements
| December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||
|
Amortized
|
Fair
|
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||||||||
| Cost | Value(1) | Cost | Value(1) | Cost | Value(1) | |||||||||||||||||||
| (Millions of euros) | ||||||||||||||||||||||||
|
DEBT SECURITIES —
|
||||||||||||||||||||||||
|
AVAILABLE FOR SALE PORTFOLIO
|
||||||||||||||||||||||||
|
Domestic —
|
21,929 | 20,566 | 24,577 | 24,869 | 11,743 | 11,910 | ||||||||||||||||||
|
Spanish Government
|
16,543 | 15,337 | 18,312 | 18,551 | 6,233 | 6,371 | ||||||||||||||||||
|
Other debt securities
|
5,386 | 5,229 | 6,265 | 6,318 | 5,510 | 5,539 | ||||||||||||||||||
|
Issued by Central Banks
|
— | — | — | — | 9 | 9 | ||||||||||||||||||
|
Issued by credit institutions
|
4,221 | 4,090 | 5,097 | 5,202 | 4,330 | 4,338 | ||||||||||||||||||
|
Issued by other institutions
|
1,165 | 1,139 | 1,168 | 1,116 | 1,171 | 1,192 | ||||||||||||||||||
|
International —
|
30,108 | 30,309 | 31,868 | 32,202 | 28,108 | 27,920 | ||||||||||||||||||
|
The United States —
|
6,850 | 6,832 | 6,804 | 6,805 | 10,573 | 10,442 | ||||||||||||||||||
|
U.S. Treasury and other U.S. Government agencies
|
579 | 578 | 414 | 416 | 444 | 444 | ||||||||||||||||||
|
States and political subdivisions
|
187 | 193 | 214 | 221 | 382 | 396 | ||||||||||||||||||
|
Other debt securities
|
6,084 | 6,061 | 6,176 | 6,168 | 9,747 | 9,602 | ||||||||||||||||||
|
Issued by Central Banks
|
— | — | — | — | 240 | 242 | ||||||||||||||||||
|
Issued by credit institutions
|
2,982 | 2,873 | 2,597 | 2,610 | 4,341 | 4,327 | ||||||||||||||||||
|
Issued by other institutions
|
3,102 | 3,188 | 3,579 | 3,558 | 5,166 | 5,033 | ||||||||||||||||||
|
Other countries (*
) —
|
23,258 | 23,477 | 25,064 | 25,397 | 17,535 | 17,478 | ||||||||||||||||||
|
Securities of other foreign
Governments (**) |
15,733 | 15,958 | 17,058 | 17,363 | 9,624 | 9,653 | ||||||||||||||||||
|
Other debt securities
|
7,525 | 7,519 | 8,006 | 8,034 | 7,911 | 7,825 | ||||||||||||||||||
|
Issued by Central Banks
|
945 | 945 | 1,296 | 1,297 | 1,045 | 1,045 | ||||||||||||||||||
|
Issued by credit institutions
|
4,983 | 4,999 | 4,795 | 4,893 | 5,924 | 5,958 | ||||||||||||||||||
|
Issued by other institutions
|
1,597 | 1,575 | 1,915 | 1,844 | 942 | 823 | ||||||||||||||||||
|
TOTAL AVAILABLE FOR SALE PORTFOLIO
|
52,037 | 50,875 | 56,445 | 57,071 | 39,851 | 39,830 | ||||||||||||||||||
|
HELD TO MATURITY PORTFOLIO
|
||||||||||||||||||||||||
|
Domestic —
|
7,503 | 6,771 | 2,626 | 2,624 | 2,392 | 2,339 | ||||||||||||||||||
|
Spanish Government
|
6,611 | 5,942 | 1,674 | 1,682 | 1,412 | 1,412 | ||||||||||||||||||
|
Other debt securities
|
892 | 829 | 952 | 942 | 980 | 927 | ||||||||||||||||||
|
Issued by Central Banks
|
— | — | — | — | — | — | ||||||||||||||||||
|
Issued by credit institutions
|
290 | 277 | 342 | 344 | 342 | 344 | ||||||||||||||||||
|
Issued by other institutions
|
602 | 552 | 610 | 598 | 638 | 583 | ||||||||||||||||||
|
International —
|
2,443 | 2,418 | 2,811 | 2,869 | 2,890 | 2,882 | ||||||||||||||||||
|
Securities of other foreign Governments
|
2,181 | 2,171 | 2,399 | 2,456 | 2,432 | 2,437 | ||||||||||||||||||
|
Other debt securities
|
262 | 247 | 412 | 413 | 458 | 445 | ||||||||||||||||||
|
TOTAL HELD TO MATURITY PORTFOLIO
|
9,946 | 9,189 | 5,437 | 5,493 | 5,282 | 5,221 | ||||||||||||||||||
|
TOTAL DEBT SECURITIES
|
61,983 | 60,064 | 61,882 | 62,564 | 45,133 | 45,051 | ||||||||||||||||||
53
Table of Contents
| (1) | Fair values for listed securities are determined on the basis of their quoted values at the end of the period. Appraised values are used for unlisted securities based on our estimate and valuation techniques see Note 8 to the Consolidated Financial Statements. | |
| (*) | Includes Mexico. As of December 31, 2010 the total fair value of Mexican debt securities amounted to €10,547 million of which Mexican Government and other government agency debt securities amounted to € 9,858 million and credit institutions amounted to €579 million. | |
| (**) | Consists mainly of securities held by our subsidiaries issued by the Governments of the countries where they operate. As of December 31, 2010 the fair value of Securities of other foreign Governments included €9,858 million of Mexican Government and other government agency debt securities. |
As of December 31, 2010 the carrying amount of the debt
securities classified within the available for sale portfolio
and the held to maturity portfolio by rating categories, were as
follows:
| As of Diciembre 31, 2010 | ||||||||||||||||
| Debt Securities Available for Sale | Debt Securities Held to Maturity | |||||||||||||||
| Carrying Amount | % | Carrying Amount | % | |||||||||||||
| (Millions of euros) | (Millions of euros) | |||||||||||||||
|
AAA
|
11,638 | 22.9 | % | 1,908 | 19.2 | % | ||||||||||
|
AA+
|
12,210 | 24.0 | % | 6,703 | 67.4 | % | ||||||||||
|
AA
|
5,022 | 9.9 | % | — | — | |||||||||||
|
AA−
|
2,523 | 5.0 | % | 1,222 | 12.3 | % | ||||||||||
|
A+
|
1,651 | 3.2 | % | 76 | 0.8 | % | ||||||||||
|
A
|
8,661 | 17.0 | % | — | — | |||||||||||
|
A−
|
574 | 1.1 | % | — | — | |||||||||||
|
With rating BBB+ or below
|
3,761 | 7.4 | % | 37 | 0.3 | % | ||||||||||
|
Non-rated
|
4,835 | 9.5 | % | — | — | |||||||||||
|
TOTAL
|
50,875 | 100.0 | % | 9,946 | 100.0 | % | ||||||||||
54
Table of Contents
The following table analyzes the carrying amount and market
value of our ownership of equity securities as of
December 31, 2010, 2009 and 2008, respectively. Trading
portfolio and investments in affiliated companies consolidated
under the equity method are not included in the tables below
because the amortized costs and fair values of these items are
the same. See Note 10 to the Consolidated Financial
Statements.
| December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||
|
Amortized
|
Fair
|
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||||||||
| Cost | Value(1) | Cost | Value(1) | Cost | Value(1) | |||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||
|
EQUITY SECURITIES —
|
||||||||||||||||||||||||
|
AVAILABLE FOR SALE PORTFOLIO
|
||||||||||||||||||||||||
|
Domestic
|
3,403 | 4,608 | 3,683 | 5,409 | 3,582 | 4,675 | ||||||||||||||||||
|
Equity listed
|
3,378 | 4,583 | 3,657 | 5,383 | 3,545 | 4,639 | ||||||||||||||||||
|
Equity unlisted
|
25 | 25 | 26 | 26 | 37 | 36 | ||||||||||||||||||
|
International
|
927 | 973 | 948 | 1,041 | 3,408 | 3,275 | ||||||||||||||||||
|
United States
|
605 | 662 | 641 | 737 | 665 | 654 | ||||||||||||||||||
|
Equity listed
|
11 | 13 | 16 | 8 | 39 | 28 | ||||||||||||||||||
|
Equity unlisted
|
594 | 649 | 625 | 729 | 626 | 626 | ||||||||||||||||||
|
Other countries
|
322 | 311 | 307 | 304 | 2,743 | 2,621 | ||||||||||||||||||
|
Equity listed
|
258 | 240 | 250 | 242 | 2,545 | 2,416 | ||||||||||||||||||
|
Equity unlisted
|
64 | 71 | 57 | 62 | 198 | 205 | ||||||||||||||||||
|
TOTAL AVAILABLE FOR SALE PORTFOLIO
|
4,330 | 5,581 | 4,631 | 6,450 | 6,990 | 7,950 | ||||||||||||||||||
|
TOTAL EQUITY SECURITIES
|
4,330 | 5,581 | 4,631 | 6,450 | 6,990 | 7,950 | ||||||||||||||||||
|
TOTAL INVESTMENT SECURITIES
|
66,313 | 65,645 | 66,513 | 69,014 | 52,123 | 53,001 | ||||||||||||||||||
| (1) | Fair values for listed securities are determined on the basis of their quoted values at the end of the year. Appraised values are used for unlisted securities based on our estimate or on unaudited financial statements, when available. |
55
Table of Contents
The following table analyzes the maturities of our debt
investment and fixed income securities, excluding trading
portfolio, by type and geographical area as of December 31,
2010.
|
Maturity at One
|
Maturity After One
|
Maturity After Five
|
Maturity After Ten
|
|||||||||||||||||||||||||||||||||
| Year or Less | Year to Five Years | Years to 10 Years | Years |
Total
|
||||||||||||||||||||||||||||||||
| Amount | Yield % | Amount | Yield % | Amount | Yield % | Amount | Yield % | Amount | ||||||||||||||||||||||||||||
| (Millions of euros, except percentages) | ||||||||||||||||||||||||||||||||||||
|
DEBT SECURITIES
|
||||||||||||||||||||||||||||||||||||
|
AVAILABLE-FOR-SALE
PORTFOLIO
|
||||||||||||||||||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||||||||||||||||||
|
Spanish government and other spanish government securities
|
982 | 4.32 | 8,651 | 3.32 | 3,197 | 4.05 | 2,507 | 5.88 | 15,337 | |||||||||||||||||||||||||||
|
Other debt securities
|
1,303 | 3.92 | 2,612 | 3.47 | 438 | 2.51 | 876 | 3.09 | 5,229 | |||||||||||||||||||||||||||
|
Total Domestic
|
2,285 | 4.09 | 11,263 | 3.36 | 3,635 | 3.84 | 3,383 | 4.96 | 20,566 | |||||||||||||||||||||||||||
|
International
|
||||||||||||||||||||||||||||||||||||
|
United States
|
526 | 4.44 | 2,971 | 3.92 | 2,340 | 3.39 | 995 | 4.39 | 6,832 | |||||||||||||||||||||||||||
|
U.S. Treasury and other U.S. government agencies
|
108 | 1.92 | 195 | 3.55 | 65 | 4.73 | 210 | 4.20 | 578 | |||||||||||||||||||||||||||
|
States and political subdivisions
|
29 | 6.28 | 93 | 6.38 | 59 | 6.54 | 12 | 6.57 | 193 | |||||||||||||||||||||||||||
|
Other U.S. securities
|
389 | 5.03 | 2,683 | 3.86 | 2,216 | 3.25 | 773 | 4.41 | 6,061 | |||||||||||||||||||||||||||
|
Other countries
|
3,075 | 3.82 | 11,436 | 5.84 | 3,571 | 5.42 | 5,395 | 5.09 | 23,477 | |||||||||||||||||||||||||||
|
Securities of other foreign governments
|
690 | 5.62 | 9,156 | 6.58 | 2,547 | 6.58 | 3,565 | 5.92 | 15,958 | |||||||||||||||||||||||||||
|
Other debt securities of other countries
|
2,385 | 3.24 | 2,280 | 3.00 | 1,024 | 2.76 | 1,830 | 4.45 | 7,519 | |||||||||||||||||||||||||||
|
Total International
|
3,601 | 3.93 | 14,407 | 5.44 | 5,911 | 4.57 | 6,390 | 4.92 | 30,309 | |||||||||||||||||||||||||||
|
TOTAL
AVAILABLE-FOR-SALE
|
5,886 | 4.00 | 25,670 | 4.48 | 9,546 | 4.26 | 9,773 | 4.94 | 50,875 | |||||||||||||||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||||||||||||||||||
|
Spanish government
|
76 | 5.35 | 98 | 4.70 | 3,107 | 3.90 | 3,330 | 4.95 | 6,611 | |||||||||||||||||||||||||||
|
Other debt securities
|
37 | 3.66 | 645 | 4.05 | 210 | 4.02 | — | — | 892 | |||||||||||||||||||||||||||
|
Total Domestic
|
113 | 4.79 | 743 | 4.14 | 3,317 | 3.91 | 3,330 | 4.95 | 7,503 | |||||||||||||||||||||||||||
|
Total International
|
616 | 3.37 | 1,392 | 4.23 | 209 | 4.50 | 226 | 3.75 | 2,443 | |||||||||||||||||||||||||||
|
TOTAL held-to-maturity
|
729 | 3.59 | 2,135 | 4.20 | 3,526 | 3.94 | 3,556 | 4.86 | 9,946 | |||||||||||||||||||||||||||
|
TOTAL DEBT SECURITIES
|
6,615 | 3.95 | 27,805 | 4.46 | 13,072 | 4.18 | 13,329 | 4.92 | 60,821 | |||||||||||||||||||||||||||
| (1) | Rates have been presented on a non-taxable equivalent basis. | |
| (*) | Securities of other foreign Governments mainly include investments made by our subsidiaries in securities issued by the Governments of the countries where they operate. |
Loans
and Advances to Credit Institutions
As of December 31, 2010, our total loans and advances to
credit institutions amounted to €23,604 million, or
4.27% of total assets. Net of our valuation adjustments, loans
and advances to credit institutions amounted to
€23,637 million as of December 31, 2010, or 4.28%
of our total assets.
Loans
and Advances to Customers
As of December 31, 2010, our total loans and leases
amounted to €347,210 million, or 62.82% of total
assets. Net of our valuation adjustments, loans and leases
amounted to €338,857 million as of December 31,
2010, or
56
Table of Contents
61.31% of our total assets. As of December 31, 2010 our
loans in Spain amounted to €210,102 million. Our
foreign loans amounted to €137,108 million as of
December 31, 2010. For a discussion of certain mandatory
ratios relating to our loan portfolio, see
“— Supervision and Regulation —
Liquidity Ratio” and “— Investment
Ratio”.
Loans by
Geographic Area
The following table analyzes, by domicile of the customer, our
net loans and leases as of December 31, 2010, 2009 and 2008:
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Domestic
|
210,102 | 203,529 | 208,474 | |||||||||
|
Foreign
|
||||||||||||
|
Western Europe
|
23,139 | 23,333 | 28,546 | |||||||||
|
Latin America
|
70,497 | 61,298 | 61,978 | |||||||||
|
United States
|
38,649 | 37,688 | 35,498 | |||||||||
|
Other
|
4,823 | 5,239 | 6,826 | |||||||||
|
Total foreign
|
137,108 | 127,558 | 132,848 | |||||||||
|
Total loans and leases
|
347,210 | 331,087 | 341,322 | |||||||||
|
Valuation adjustments
|
(8,353 | ) | (7,645 | ) | (6,062 | ) | ||||||
|
Total net lending
|
338,857 | 323,442 | 335,260 | |||||||||
57
Table of Contents
Loans by
Type of Customer
The following table analyzes by domicile and type of customer
our net loans and leases for each of the years indicated. The
analyses by type of customer are based principally on the
requirements of the regulatory authorities in each country.
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Domestic
|
||||||||||||
|
Government
|
23,542 | 20,559 | 17,436 | |||||||||
|
Agriculture
|
1,619 | 1,722 | 1,898 | |||||||||
|
Industrial
|
17,452 | 16,805 | 17,976 | |||||||||
|
Real estate and construction
|
29,944 | 36,584 | 38,632 | |||||||||
|
Commercial and financial
|
23,409 | 17,404 | 17,165 | |||||||||
|
Loans to individuals
|
91,730 | 87,948 | 88,712 | |||||||||
|
Lease financing
|
5,893 | 6,547 | 7,702 | |||||||||
|
Other
|
16,513 | 15,960 | 18,954 | |||||||||
|
Total domestic
|
210,102 | 203,529 | 208,475 | |||||||||
|
Foreign
|
||||||||||||
|
Government
|
7,682 | 5,660 | 5,066 | |||||||||
|
Agriculture
|
2,358 | 2,202 | 2,211 | |||||||||
|
Industrial
|
19,126 | 25,993 | 28,600 | |||||||||
|
Real estate and construction
|
25,910 | 19,183 | 15,890 | |||||||||
|
Commercial and financial
|
22,280 | 23,310 | 27,720 | |||||||||
|
Loans to individuals
|
44,138 | 38,540 | 39,178 | |||||||||
|
Lease financing
|
2,248 | 1,675 | 1,683 | |||||||||
|
Other
|
13,366 | 10,995 | 12,499 | |||||||||
|
Total foreign
|
137,108 | 127,558 | 132,847 | |||||||||
|
Total loans and leases
|
347,210 | 331,087 | 341,322 | |||||||||
|
Valuation adjustments
|
(8,353 | ) | (7,645 | ) | (6,062 | ) | ||||||
|
Total net lending
|
338,857 | 323,442 | 335,260 | |||||||||
The following table sets forth a breakdown, by currency, of our
net loan portfolio for 2010, 2009 and 2008.
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
In euros
|
221,269 | 217,537 | 226,855 | |||||||||
|
In other currencies
|
117,588 | 105,905 | 108,405 | |||||||||
|
Total net lending
|
338,857 | 323,442 | 335,260 | |||||||||
As of December 31, 2010, loans by BBVA and its subsidiaries
to associates and jointly controlled companies amounted to
€457 million, compared to €613 million as of
December 31, 2009. Loans outstanding to the Spanish
government and its agencies amounted to
€23,542 million, or 6.78% of our total loans and
leases as of December 31, 2010, compared to
€20,559 million, or 6.21% of our total loans and
leases as of December 31, 2009. None of our loans to
companies controlled by the Spanish government are guaranteed by
the government and, accordingly, we apply normal credit criteria
in extending credit to such entities. Moreover, we carefully
monitor such loans because governmental policies necessarily
affect such borrowers.
58
Table of Contents
Diversification in our loan portfolio is our principal means of
reducing the risk of loan losses. We also carefully monitor our
loans to borrowers in sectors or countries experiencing
liquidity problems. Our exposure to our two largest borrowers as
of December 31, 2010, excluding government-related loans,
amounted to €13,515 million or approximately 3.89% of
our total outstanding loans and leases. As of December 31,
2010 there did not exist any concentration of loans exceeding
10% of our total outstanding loans and leases, other than by
category as disclosed in the chart above.
Maturity
and Interest Sensitivity
The following table sets forth an analysis by maturity of our
total loans and leases by domicile of the office that issued the
loan and type of customer as of December 31, 2010. The
determination of maturities is based on contract terms.
| Maturity | ||||||||||||||||
|
Due After
|
||||||||||||||||
|
Due in
|
One Year
|
|||||||||||||||
|
One Year
|
through
|
Due After
|
||||||||||||||
| or Less | Five Years | Five Years | Total | |||||||||||||
| (In millions of euros) | ||||||||||||||||
|
Domestic:
|
||||||||||||||||
|
Government
|
9,706 | 6,651 | 7,185 | 23,542 | ||||||||||||
|
Agriculture
|
631 | 594 | 394 | 1,619 | ||||||||||||
|
Industrial
|
13,454 | 2,776 | 1,222 | 17,452 | ||||||||||||
|
Real estate and construction
|
13,184 | 7,323 | 9,437 | 29,944 | ||||||||||||
|
Commercial and financial
|
13,375 | 4,839 | 5,195 | 23,409 | ||||||||||||
|
Loans to individuals
|
10,402 | 17,329 | 63,999 | 91,730 | ||||||||||||
|
Lease financing
|
701 | 2,278 | 2,914 | 5,893 | ||||||||||||
|
Other
|
11,009 | 2,641 | 2,863 | 16,513 | ||||||||||||
|
Total Domestic
|
72,462 | 44,431 | 93,209 | 210,102 | ||||||||||||
|
Foreign:
|
||||||||||||||||
|
Government
|
1,736 | 1,696 | 4,250 | 7,682 | ||||||||||||
|
Agriculture
|
997 | 1,130 | 231 | 2,358 | ||||||||||||
|
Industrial
|
7,431 | 6,303 | 5,393 | 19,126 | ||||||||||||
|
Real estate and construction
|
9,112 | 8,019 | 8,779 | 25,910 | ||||||||||||
|
Commercial and financial
|
13,393 | 6,267 | 2,620 | 22,280 | ||||||||||||
|
Loans to individuals
|
7,735 | 12,032 | 24,371 | 44,138 | ||||||||||||
|
Lease financing
|
808 | 1,147 | 293 | 2,248 | ||||||||||||
|
Other
|
7,018 | 3,812 | 2,535 | 13,366 | ||||||||||||
|
Total Foreign
|
48,230 | 40,406 | 48,472 | 137,108 | ||||||||||||
|
Total Loans and Leases
|
120,692 | 84,837 | 141,681 | 347,210 | ||||||||||||
59
Table of Contents
The following table sets forth a breakdown of our fixed and
variable rate loans which had a maturity of one year or more as
of December 31, 2010.
|
Interest Sensitivity of
|
||||||||||||
|
Outstanding Loans and Leases
|
||||||||||||
| Maturing in More Than One Year | ||||||||||||
| Domestic | Foreign | Total | ||||||||||
| (In millions of euros) | ||||||||||||
|
Fixed rate
|
17,022 | 40,992 | 58,013 | |||||||||
|
Variable rate
|
120,618 | 47,886 | 168,504 | |||||||||
|
Total loans and leases
|
137,640 | 88,878 | 226,518 | |||||||||
Loan
Loss Reserve
For a discussion of loan loss reserves, see “Item 5.
Operating and Financial Review and Prospects —
Critical Accounting Policies — Allowance for loan
losses” and Note 2.2.1.b) to the Consolidated
Financial Statements.
The following table provides information, by domicile of
customer, regarding our loan loss reserve and movements of loan
charge-offs and recoveries for periods indicated.
| As of December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In millions of euros, except percentages) | ||||||||||||||||||||
|
Loan loss reserve at beginning of period:
|
||||||||||||||||||||
|
Domestic
|
4,853 | 3,766 | 3,459 | 3,734 | 3,079 | |||||||||||||||
|
Foreign
|
3,952 | 3,740 | 3,685 | 2,690 | 2,511 | |||||||||||||||
|
Total loan loss reserve at beginning of period
|
8,805 | 7,505 | 7,144 | 6,424 | 5,590 | |||||||||||||||
|
Loans charged off:
|
||||||||||||||||||||
|
Government and other Agencies
|
— | — | — | — | — | |||||||||||||||
|
Real estate and loans to individuals and other
|
(1,719 | ) | (936 | ) | (639 | ) | (361 | ) | (255 | ) | ||||||||||
|
Commercial and financial
|
(56 | ) | (30 | ) | (16 | ) | (7 | ) | (2 | ) | ||||||||||
|
Total domestic
|
(1,774 | ) | (966 | ) | (655 | ) | (368 | ) | (257 | ) | ||||||||||
|
Total foreign(*)
|
(2,628 | ) | (2,876 | ) | (1,296 | ) | (928 | ) | (289 | ) | ||||||||||
|
Total Loans charged off:
|
(4,402 | ) | (3,842 | ) | (1,951 | ) | (1,296 | ) | (546 | ) | ||||||||||
|
Provision for possible loan losses:
|
||||||||||||||||||||
|
Domestic
|
2,038 | 3,079 | 953 | 807 | 883 | |||||||||||||||
|
Foreign
|
2,778 | 2,307 | 2,035 | 1,321 | 778 | |||||||||||||||
|
Total Provision for possible loan losses
|
4,816 | 5,386 | 2,988 | 2,128 | 1,661 | |||||||||||||||
|
Acquisition and disposition of subsidiaries
|
— | — | — | 250 | 69 | |||||||||||||||
|
Effect of foreign currency translation
|
344 | (29 | ) | (487 | ) | (420 | ) | (333 | ) | |||||||||||
|
Other
|
(90 | ) | (216 | ) | (189 | ) | 58 | (17 | ) | |||||||||||
|
Loan loss reserve at end of period:
|
||||||||||||||||||||
|
Domestic
|
4,935 | 4,853 | 3,766 | 3,459 | 3,734 | |||||||||||||||
|
Foreign
|
4,539 | 3,952 | 3,740 | 3,685 | 2,690 | |||||||||||||||
|
Total Loan loss reserve at end of period
|
9,473 | 8,805 | 7,505 | 7,144 | 6,424 | |||||||||||||||
|
Loan loss reserve as a percentage of total loans and
receivables at end of period
|
2.60 | % | 2.54 | % | 2.03 | % | 2.12 | % | 2.30 | % | ||||||||||
|
Net loan charge-offs a a percentage of total loans and
receivables at end of period
|
1.21 | % | 1.11 | % | 0.53 | % | 0.38 | % | 0.20 | % | ||||||||||
| (*) | Includes €5 million related to loans to Government and other Agencies, €1,847 million related to real estate and loans to individuals and other, and €776 million related to commercial and financial. |
60
Table of Contents
When the recovery of any recognized amount is considered to be
remote, this amount is removed from the consolidated balance
sheet, without prejudice to any actions taken by the
consolidated entities in order to collect the amount until their
rights extinguish in full through expiry, forgiveness or for
other reasons.
The loans charged off amounted to €4,402 million as of
December 31, 2010 compared to €3,842 million as
of December 31, 2009. The increase was primarily due to an
increase in loans charged off in Spain, which was primarily
related to the financial condition of certain groups of
customers within a less favorable macroeconomic environment.
Our loan loss reserves as a percentage of total loans and leases
increased to 2.60% as of December 31, 2010 from 2.54% as of
December 31, 2009, principally due to a higher increase in
provisions than in loans and leases.
Substandard
Loans
We classify loans as substandard loans in accordance with the
requirements of EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 in respect of “impaired
loans”. As we described in Note 2.2.1.b) to the
Consolidated Financial Statements, loans are considered to be
impaired loans when there are reasonable doubts that the loans
will be recovered in full
and/or
the
related interest will be collected for the amounts and on the
dates initially agreed upon, taking into account the guarantees
received by the consolidated entities to assure (in part or in
full) the performance of transactions.
Amounts collected in relation to impaired loans and receivables
are used to recognize the related accrued interest and any
excess amount is used to reduce the principal not yet repaid.
The approximate amount of interest income on our substandard
loans which was included in net income attributed to parent
company in 2010, 2009, 2008, 2007 and 2006 under EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004 was €203.5 million, €192.3 million,
€149.7 million, €158.3 million and
€130.7 million, respectively.
The following table provides information regarding our
substandard loans, by domicile and type of customer, for periods
indicated:
| As of December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In millions of euros, except %) | ||||||||||||||||||||
|
Substandard loans
|
||||||||||||||||||||
|
Domestic
|
10,954 | 10,973 | 5,562 | 1,551 | 1,081 | |||||||||||||||
|
Public sector
|
111 | 61 | 79 | 116 | 127 | |||||||||||||||
|
Other resident sector
|
10,843 | 10,912 | 5,483 | 1,435 | 954 | |||||||||||||||
|
Foreign
|
4,518 | 4,338 | 2,979 | 1,814 | 1,418 | |||||||||||||||
|
Public sector
|
12 | 25 | 20 | 57 | 86 | |||||||||||||||
|
Non-resident sector
|
4,506 | 4,313 | 2,959 | 1,757 | 1,332 | |||||||||||||||
|
Total Substandard loans
|
15,472 | 15,311 | 8,541 | 3,366 | 2,499 | |||||||||||||||
|
Total loan loss reserve
|
(9,473 | ) | (8,805 | ) | (7,505 | ) | (7,144 | ) | (6,424 | ) | ||||||||||
|
Substandard loans net of reserves
|
5,999 | 6,506 | 1,036 | (3,778 | ) | (3,925 | ) | |||||||||||||
|
Substandard loans as a percentage of total loans and
receivables (net)
|
4.24 | % | 4.42 | % | 2.31 | % | 1.00 | % | 0.89 | % | ||||||||||
|
Substandard loans (net of reserve) as a percentage of total
loans and receivables (net)
|
1.64 | % | 1.88 | % | 0.28 | % | (1.12 | %) | (1.40 | %) | ||||||||||
Our total substandard loans amounted to
€15,472 million as of December 31, 2010, a 1.05%
increase compared to €15,311 million as of
December 31, 2009.
As mentioned in Note 2.2.1.b) to the Consolidated Financial
Statements, our loan loss reserve include loss reserve for
impaired assets and loss reserve for not impaired assets but
which presents an inherent loss. As of December 31, 2010,
the loss reserve for impaired assets amounted to
€6,753 million, a 14% increase compared to
61
Table of Contents
€5,930 million as of December 31, 2009. As of
December 31, 2010, the loss reserve for not impaired assets
amounted to €2,720 million, a 5% decrease compared to
€2,875 million as of December 31, 2009 due to the
fact that during 2010 the new originated loans had a lower
incurred loss due to better credit quality (lower risk) compared
to the loan portfolio in 2009 and 2008.
The following table provides information, by domicile and type
of customer, regarding our substandard loans and the loan loss
reserves to customers taken for each substandard loan category,
as of December 31, 2010.
|
Substandard
|
||||||||||||
|
Loans as a
|
||||||||||||
|
Loan
|
Percentage
|
|||||||||||
|
Substandard
|
Loss
|
of Loans in
|
||||||||||
| Loans | Reserve | Category | ||||||||||
| (In millions of euros) | ||||||||||||
|
Domestic:
|
||||||||||||
|
Government
|
111 | 25 | 0.47 | % | ||||||||
|
Credit Intitutions
|
— | — | — | |||||||||
|
Other sectors
|
10,841 | 4,529 | 5.81 | % | ||||||||
|
Agriculture
|
96 | 45 | 5.93 | % | ||||||||
|
Industrial
|
700 | 428 | 4.01 | % | ||||||||
|
Real estate and constrution
|
5,038 | 2,053 | 16.82 | % | ||||||||
|
Commercial and other financial
|
1,218 | 696 | 4.16 | % | ||||||||
|
Loans to individuals
|
2,940 | 907 | 3.20 | % | ||||||||
|
Other
|
851 | 399 | 5.15 | % | ||||||||
|
Total Domestic
|
10,954 | 4,554 | 5.05 | % | ||||||||
|
Foreign
|
||||||||||||
|
Government
|
12 | 11 | 0.15 | % | ||||||||
|
Credit Intitutions
|
104 | 64 | 0.62 | % | ||||||||
|
Other sectors
|
4,402 | 2,124 | 3.40 | % | ||||||||
|
Agriculture
|
51 | 69 | 2.18 | % | ||||||||
|
Industrial
|
126 | 70 | 0.66 | % | ||||||||
|
Real estate and constrution
|
1,112 | 487 | 4.29 | % | ||||||||
|
Commercial and other financial
|
1,409 | 592 | 5.75 | % | ||||||||
|
Loans to individuals
|
1,596 | 835 | 3.62 | % | ||||||||
|
Other
|
108 | 71 | 0.81 | % | ||||||||
|
Total Foreign
|
4,518 | 2,199 | 2.94 | % | ||||||||
|
General reserve
|
— | 2,720 | ||||||||||
|
Total substandard loans
|
15,472 | 9,473 | 4.17 | % | ||||||||
Potential
Problem Loans
For a discussion of potential problem loans, as required by the
Bank of Spain to be disclosed, see Note 7.6 to the
Consolidated Financial Statements.
Foreign
Country Outstandings
The following table sets forth, as of the end of the years
indicated, the aggregate amounts of our cross-border
outstandings (which consist of loans, interest-bearing deposits
with other banks, acceptances and other monetary assets
denominated in a currency other than the home-country currency
of the office where the item is booked) where outstandings in
the borrower’s country exceeded 1% of our total assets as
of December 31, 2010, December 31, 2009 and
December 31, 2008. Cross-border outstandings do not include
loans in local currency made by our subsidiary banks to
customers in other countries to the extent that such loans are
funded in the local
62
Table of Contents
currency or hedged. As a result, they do not include the vast
majority of the loans made by our subsidiaries in South America,
Mexico and United States.
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
% of
|
% of
|
% of
|
||||||||||||||||||||||
|
Total
|
Total
|
Total
|
||||||||||||||||||||||
| Amount | Assets | Amount | Assets | Amount | Assets | |||||||||||||||||||
| (In millions of euros, except percentages) | ||||||||||||||||||||||||
|
OECD
|
||||||||||||||||||||||||
|
United Kingdom
|
5,457 | 0.99 | % | 6,619 | 1.24 | % | 7,542 | 1.39 | % | |||||||||||||||
|
Mexico
|
2,175 | 0.39 | % | 3,218 | 0.60 | % | 4,644 | 0.86 | % | |||||||||||||||
|
Other OECD
|
5,674 | 1.03 | % | 5,761 | 1.08 | % | 6,514 | 1.20 | % | |||||||||||||||
|
Total OECD
|
13,306 | 2.41 | % | 15,598 | 2.92 | % | 18,700 | 3.45 | % | |||||||||||||||
|
Central and South America
|
3,074 | 0.56 | % | 3,296 | 0.62 | % | 4,092 | 0.75 | % | |||||||||||||||
|
Other
|
5,411 | 0.98 | % | 4,657 | 0.87 | % | 5,676 | 1.05 | % | |||||||||||||||
|
Total
|
21,791 | 3.94 | % | 23,551 | 4.40 | % | 28,468 | 5.25 | % | |||||||||||||||
The following table sets forth the amounts of our cross-border
outstandings as of December 31 of each year indicated by type of
borrower where outstandings in the borrower’s country
exceeded 1% of our total assets.
|
Banks and
|
||||||||||||||||
|
Other
|
Commercial,
|
|||||||||||||||
|
Financial
|
Industrial and
|
|||||||||||||||
| Governments | Institutions | Other | Total | |||||||||||||
| (In millions of euros) | ||||||||||||||||
|
As of December 31, 2010
|
||||||||||||||||
|
Mexico
|
51 | 1 | 2,123 | 2,175 | ||||||||||||
|
United Kingdom
|
— | 4,078 | 1,379 | 5,457 | ||||||||||||
|
Total
|
51 | 4,079 | 3,502 | 7,632 | ||||||||||||
|
As of December 31, 2009
|
||||||||||||||||
|
Mexico
|
3 | 3 | 3,212 | 3,218 | ||||||||||||
|
United Kingdom
|
— | 4,933 | 1,686 | 6,619 | ||||||||||||
|
Total
|
3 | 4,936 | 4,898 | 9,837 | ||||||||||||
|
As of December 31, 2008
|
||||||||||||||||
|
Mexico
|
4 | 228 | 4,412 | 4,644 | ||||||||||||
|
United Kingdom
|
— | 5,113 | 2,429 | 7,542 | ||||||||||||
|
Total
|
4 | 5,341 | 6,841 | 12,186 | ||||||||||||
The Bank of Spain requires that minimum reserves be maintained
for cross-border risk arising with respect to loans and other
outstandings to countries, or residents of countries, falling
into certain categories established by the Bank of Spain on the
basis of the level of perceived transfer risk. The category that
a country falls into is determined by us, subject to review by
the Bank of Spain.
63
Table of Contents
The following table shows the minimum required reserves with
respect to each category of country for BBVA’s level of
coverage as of December 31, 2010.
|
Minimum Percentage of
|
||||
|
Coverage (Outstandings
|
||||
|
Categories(1)
|
Within Category) | |||
|
Countries belonging to the OECD whose currencies are listed in
the Spanish foreign exchange market
|
0.0 | |||
|
Countries with transitory difficulties(2)
|
10.1 | |||
|
Doubtful countries(2)
|
22.8 | |||
|
Very doubtful countries(2)(3)
|
83.5 | |||
|
Bankrupt countries(4)
|
100.0 | |||
| (1) | Any outstanding which is guaranteed may be treated, for the purposes of the foregoing, as if it were an obligation of the guarantor. | |
| (2) | Coverage for the aggregate of these three categories (countries with transitory difficulties, doubtful countries and very doubtful countries) must equal at least 35% of outstanding loans within the three categories. The Bank of Spain has recommended up to 50% aggregate coverage. | |
| (3) | Outstandings to very doubtful countries are treated as substandard under Bank of Spain regulations. | |
| (4) | Outstandings to bankrupt countries must be charged off immediately. As a result, no such outstandings are reflected on our consolidated balance sheet. Notwithstanding the foregoing minimum required reserves, certain interbank outstandings with an original maturity of three months or less have minimum required reserves of 50%. We met or exceeded the minimum percentage of required coverage with respect to each of the foregoing categories. |
Our exposure to borrowers in countries with difficulties (the
last four categories in the foregoing table), excluding our
exposure to subsidiaries or companies we manage and
trade-related debt, amounted to €311 million,
€321 million and €334 million as of
December 31, 2010, 2009 and 2008, respectively. These
figures do not reflect loan loss reserves of 11.58%, 30.53%, and
14.07% respectively, against the relevant amounts outstanding at
such dates. Deposits with or loans to borrowers in all such
countries as of December 31, 2010 did not in the aggregate
exceed 0.06% of our total assets.
The country-risk exposures described in the preceding paragraph
as of December 31, 2010, 2009 and 2008 do not include
exposures for which insurance policies have been taken out with
third parties that include coverage of the risk of confiscation,
expropriation, nationalization, non-transfer, non-convertibility
and, if appropriate, war and political violence. The sums
insured as of December 31, 2010, 2009 and 2008 amounted to
$44 million, $14 million and $32 million,
respectively (approximately €33 million,
€10 million and €23 million, respectively,
based on a euro/dollar exchange rate on December 31, 2010
of $1.00 = €0.75, on December 31, 2009 of $1.00 =
€0.69, and on December 31, 2008 of $1.00 = €0.72).
64
Table of Contents
LIABILITIES
Deposits
The principal components of our customer deposits are domestic
demand and savings deposits and foreign time deposits. The
following tables provide information regarding our deposits by
principal geographic area for the dates indicated, disregarding
any valuation adjustments.
| As of December 31, 2010 | ||||||||||||||||
|
Bank of Spain and
|
Other
|
|||||||||||||||
|
Customer
|
Other Central
|
Credit
|
||||||||||||||
| Deposits | Banks | Institutions | Total | |||||||||||||
| (In millions of euros) | ||||||||||||||||
|
Total domestic
|
133,033 | 2,779 | 8,867 | 144,679 | ||||||||||||
|
Foreign:
|
||||||||||||||||
|
Western Europe
|
24,120 | 7,205 | 22,626 | 53,951 | ||||||||||||
|
Latin America
|
72,015 | 96 | 14,758 | 86,869 | ||||||||||||
|
United States
|
42,495 | 364 | 6,839 | 49,698 | ||||||||||||
|
Other
|
3,178 | 543 | 3,855 | 7,576 | ||||||||||||
|
Total foreign
|
141,808 | 8,208 | 48,078 | 198,094 | ||||||||||||
|
Total
|
274,841 | 10,987 | 56,945 | 342,773 | ||||||||||||
| As of December 31, 2009 | ||||||||||||||||
|
Bank of Spain and
|
Other
|
|||||||||||||||
|
Customer
|
Other Central
|
Credit
|
||||||||||||||
| Deposits | Banks | Institutions | Total | |||||||||||||
| (In millions of euros) | ||||||||||||||||
|
Total domestic
|
97,023 | 15,352 | 7,692 | 120,067 | ||||||||||||
|
Foreign:
|
||||||||||||||||
|
Western Europe
|
22,199 | 3,945 | 20,472 | 46,616 | ||||||||||||
|
Latin America
|
63,027 | 423 | 11,857 | 75,307 | ||||||||||||
|
United States
|
67,986 | 948 | 6,572 | 75,506 | ||||||||||||
|
Other
|
3,148 | 428 | 2,352 | 5,928 | ||||||||||||
|
Total foreign
|
156,360 | 5,744 | 41,253 | 203,357 | ||||||||||||
|
Total
|
253,383 | 21,096 | 48,945 | 323,424 | ||||||||||||
| As of December 31, 2008 | ||||||||||||||||
|
Bank of Spain and
|
Other
|
|||||||||||||||
|
Customer
|
Other Central
|
Credit
|
||||||||||||||
| Deposits | Banks | Institutions | Total | |||||||||||||
| (In millions of euros) | ||||||||||||||||
|
Total domestic
|
105,146 | 6,132 | 6,220 | 117,498 | ||||||||||||
|
Foreign:
|
||||||||||||||||
|
Western Europe
|
26,341 | 5,524 | 20,293 | 52,158 | ||||||||||||
|
Latin America
|
57,193 | 844 | 10,987 | 69,024 | ||||||||||||
|
United States
|
56,185 | 4,061 | 9,297 | 69,543 | ||||||||||||
|
Other
|
8,860 | 201 | 2,776 | 11,837 | ||||||||||||
|
Total foreign
|
148,579 | 10,630 | 43,353 | 202,562 | ||||||||||||
|
Total
|
253,725 | 16,762 | 49,573 | 320,061 | ||||||||||||
For an analysis of our deposits, including non-interest bearing
demand deposits, interest-bearing demand deposits, saving
deposits and time deposits, see Note 23 to the Consolidated
Financial Statements.
65
Table of Contents
As of December 31, 2010, the maturity of our time deposits
(excluding interbank deposits) in denominations of $100,000
(approximately €75,364 considering the noon buying rate as
of December 31, 2010) or greater was as follows:
| As of December 31, 2010 | ||||||||||||
| Domestic | Foreign | Total | ||||||||||
| (In millions of euros) | ||||||||||||
|
3 months or under
|
6,047 | 37,303 | 43,350 | |||||||||
|
Over 3 to 6 months
|
6,195 | 4,487 | 10,682 | |||||||||
|
Over 6 to 12 months
|
11,137 | 4,636 | 15,771 | |||||||||
|
Over 12 months
|
9,924 | 3,787 | 13,711 | |||||||||
|
Total
|
33,303 | 50,213 | 83,516 | |||||||||
Time deposits from Spanish and foreign financial institutions
amounted to €38,265 million as of December 31,
2010, substantially all of which were in excess of $100,000
(approximately €75,364 considering the noon buying rate as
of December 31, 2010).
Large denomination deposits may be a less stable source of funds
than demand and savings deposits because they are more sensitive
to variations in interest rates. For a breakdown by currency of
customer deposits as of December 31, 2010, 2009 and 2008,
see Note 23 to the Consolidated Financial Statements.
Short-term
Borrowings
Securities sold under agreements to repurchase and promissory
notes issued by us constituted the only categories of short-term
borrowings that equaled or exceeded 30% of stockholders’
equity as of December 31, 2010, 2009 and 2008.
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Average
|
Average
|
Average
|
||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||
| (In millions of euro, except %) | ||||||||||||||||||||||||
|
Securities sold under agreements to repurchase (principally
Spanish Treasury bills):
|
||||||||||||||||||||||||
|
As of December 31
|
39,587 | 2.03 | % | 26,171 | 2.43 | % | 28,206 | 4.66 | % | |||||||||||||||
|
Average during year
|
31,056 | 2.17 | % | 30,811 | 2.71 | % | 34,729 | 5.62 | % | |||||||||||||||
|
Maximum quarter-end balance
|
39,587 | — | 28,849 | — | 34,202 | — | ||||||||||||||||||
|
Bank promissory notes:
|
||||||||||||||||||||||||
|
As of December 31
|
13,215 | 0.91 | % | 29,578 | 0.50 | % | 20,061 | 3.70 | % | |||||||||||||||
|
Average during year
|
24,405 | 0.55 | % | 27,434 | 1.28 | % | 15,661 | 4.57 | % | |||||||||||||||
|
Maximum quarter-end balance
|
28,937 | — | 30,919 | — | 20,061 | — | ||||||||||||||||||
|
Bonds and Subordinated debt:
|
||||||||||||||||||||||||
|
As of December 31
|
11,041 | 2.57 | % | 13,236 | 2.54 | % | 13,565 | 4.66 | % | |||||||||||||||
|
Average during year
|
10,825 | 3.20 | % | 14,820 | 3.20 | % | 12,447 | 5.18 | % | |||||||||||||||
|
Maximum quarter-end balance
|
13,184 | — | 15,609 | — | 15,822 | — | ||||||||||||||||||
|
Total short-term borrowings as of December 31
|
63,844 | 1.89 | % | 68,985 | 1.62 | % | 61,832 | 4.35 | % | |||||||||||||||
66
Table of Contents
Return
on Equity
The following table sets out our return on equity ratios:
|
As of or for the
|
||||||||||||
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in %) | ||||||||||||
|
Return on equity(1)
|
15.8 | 16.0 | 21.5 | |||||||||
|
Return on assets(2)
|
0.89 | 0.85 | 1.04 | |||||||||
|
Dividend pay-out ratio(3)
|
26.9 | 37.4 | 46.0 | |||||||||
|
Equity to assets ratio(4)
|
6.64 | 5.49 | 4.90 | |||||||||
| (1) | Represents net income attributed to parent company for the year as a percentage of average equity for the year. | |
| (2) | Represents net income attributed to parent company as a percentage of average total assets for the year. | |
| (3) | Represents dividends paid as a percentage of net income attributed to parent company. | |
| (4) | Represents total equity over total assets. |
| F. | Competition |
The commercial banking sector in Spain has undergone significant
consolidation. In the majority of the markets where we provide
financial services, the Banco Santander Group is our strongest
competitor, but the restructuring process that it is taking
place is expected to increase the size of savings banks, such as
Bankia (an integration of seven regional saving banks, led by
Caja Madrid and Bancaja) and La Caixa.
We face strong competition in all of our principal areas of
operations. The deregulation of interest rates on deposits in
the past decade led to increased competition for large demand
deposits in Spain and the widespread promotion of
interest-bearing demand deposit accounts and mutual funds.
Spanish savings banks, many of which have received financial or
other support from the Spanish government, and money market
mutual funds provide strong competition for savings deposits,
moreover in the context of increasing interest rates of term
deposits, which form an important part of our deposit base, and,
in the case of savings banks, for other retail banking services.
Credit cooperatives, which are active principally in rural
areas, where they provide savings bank and loan services and
related services such as the financing of agricultural machinery
and supplies, are also a source of competition. In Spain,
competition distortions in the term deposits market have
intensified, and this situation is expected to continue due to
the liquidity needs of some financial institutions, which are
offering high interest rates
The market turmoil triggered by defaults on subprime mortgages
in the United States significantly disrupted first the liquidity
of financial institutions and markets and subsequently, the real
economy. Wholesale and interbank markets are only open to a
limited number of financial institutions, there is no
international demand for securities with public guarantee, and
the spread on Spanish Residential Mortgage-Backed Security
(RMBSs) and sovereign risk remains well above the pre-crisis
levels. In this adverse and uncertain economic environment, the
world economy is facing a lengthy adjustment and de-leveraging
process that will be costly in terms of activity and employment.
The entry of on-line banks into the Spanish banking system has
increased competition, mainly in customer funds businesses such
as deposits. Insurance companies and other financial services
firms also compete for customer funds. Like the commercial
banks, savings banks, insurance companies and other financial
services firms are expanding the services offered to consumers
in Spain. We face competition in mortgage loans from saving
banks and, to a lesser extent, cooperatives.
The EU Directive on Investment Services took effect on
December 31, 1995. The EU Directive permits all brokerage
houses authorized to operate in other member states of the EU to
carry out investment services in Spain. Although the EU
Directive is not specifically addressed to banks, it affects the
activities of banks operating in Spain. Besides, several
initiatives have been implemented recently in order to
facilitate the creation of a Pan-European
67
Table of Contents
financial market. For example, SEPA (Single Euro Payments Area)
is a major project which aims at replacing all existing payment
systems — organized by the Member States with new,
Pan-Euro systems and it is currently being implemented and the
MiFID project (Markets in Financial Instruments Directive) aims
to create a European framework for investment services.
Following the recent financial turmoil, a number of banks have
disappeared or have been absorbed by other banks. The trend
indicates that this will continue in the future, with a number
of mergers and acquisitions between financial entities. The
U.S. government has already facilitated the purchase of
troubled banks by other competitors, and European governments,
including the Spanish government, have expressed their
willingness to facilitate these types of operations.
In the wake of the exceptional circumstances unfolding in the
international financial markets, notably from the second half of
2008, certain European governments committed to taking
appropriate measures to try to resolve the issues confronting
bank funding and the ramifications of constrained funding on the
real economy with a view to safeguarding the stability of the
international financial system. The overriding goals
underpinning these measures were to ensure sufficient liquidity
to enable financial institutions to function correctly, to
facilitate the funding of banks, to provide financial
institutions with additional capital resources where needed so
as to continue to ensure the proper financing of the economy, to
ensure that applicable accounting standards are sufficiently
flexible to take into consideration of current exceptional
market circumstances and to reinforce and improve cooperation
among European nations.
Framed by this general philosophy, the following measures were
passed into law in Spain during 2008, 2009 and 2010:
| • | Royal Decree-Law 6/2008, of October 10, creating the Spanish Financial Asset Acquisition Fund (FAAF), and Order EHA/3118/2008, dated October 31, enacting this Royal Decree. The purpose of the fund, which is managed by Spain’s Economy Ministry and has an initial endowment of €30 billion, which can be increased to €50 billion, is to acquire, with public financing and based on market criteria via auctions, financial instruments issued by Spanish banks and savings banks (cajas de ahorro) and securitization funds containing Spanish assets, secured by loans extended to individuals, companies and non-financial corporations. | |
| • | Royal Decree-Law 7/2008, of October 13, on Emergency Economic Measures in connection with the Concerted Euro Area Action Plan, and Order EHA/3364/2008, dated November 21, enacting article 1 of the aforementioned Royal Decree, including the following measures: |
| • | The extension of state guarantees to secure bills, debentures and bonds issued by credit entities resident in Spain since October 14, 2008. Debt issued which takes advantage of this state guarantee must form part of individual operations or issuance programs; not be subordinated or secured by any other class of guarantee; be traded on official Spanish secondary markets; mature within three months and three years (although this maturity can be extended to five years subject to prior notification to the Bank of Spain); be fixed or floating rate (subject to special conditions for floating-rate debt); be repaid in a single installment at maturity; not have any options or other derivatives attached to them; and have a nominal value of €10 million or more. The deadline for issuing eligible debt for the state guarantee was December 31, 2009 and the total amount of available guarantees was €100 billion. The government extended the time period to use the remaining resources (€64 billion) until June 2010. | |
| • | Authorization until December 31, 2009, for the Spanish Economy Ministry to acquire securities, on an exceptional basis, including preferred shares and other non-voting equity instruments, issued by credit entities resident in Spain which needed to reinforce their capital structured and submitted the relevant request to the relevant authorities. | |
| • | Royal Decree-Law 09/2009, of June 26, creating the Fondo de Reestructuración Ordenada Bancaria (FROB). FROB was created under the management of the Bank of Spain. It has two functions: the management of credit institutions’ restructuring processes and the strengthening of capital in certain merger processes. On 28 January 2010, the European Commission approved the FROB. Since then, aid from the FROB has been requested in connection with eight integration processes totaling €11.17 billion, and additional FROB funds for €392 billion were granted for the restructuring of Cajasur. |
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In the second half of 2010 an important reduction of the number
of savings banks has taken place in Spain, with a reduction from
45 to 17 as of the date of this Annual Report. The restructuring
process will shape a different financial system in Spain and
will result in a more concentrated financial sector, with a
lower number of incumbent institutions which will be more
competitive, in a context of slow economic recovery.
Additionally at the end of January 2011, the government has
issued new solvency requirements, in order to dissipate the
doubts about the financial institutions. The new core capital
minimum has been set at 8% (or higher for institutions that
fulfill certain requirements). Although the general assessment
is positive, as the restructuring plan provides a clear roadmap
for the continuation of the financial system restructuring and
fosters the participation of private capital in the
recapitalization process, some uncertainties remain. Some of
them are the fact that there is no provision of cleaning the
balance-sheets and that the inclusion of such sudden and
permanent high capital requirement (stricter and prompter than
Basel III) could distort competition with foreign peers and
could negatively affect the supply of credit.
As of the date of this Annual Report, we have not requested
access to these facilities. We could be adversely affected if
one or more of our direct competitors are beneficiaries of
selective governmental interventions or assistance and we do not
receive comparable assistance.
In the United States, where we operate through BBVA Compass, the
competitive landscape has also been significantly affected by
the financial crisis. The U.S. banking industry has
experienced significant impairment on its assets in 2009, which
will result in continuing losses in select product categories
and slow loan growth in 2010. Data published by the FDIC in the
fourth quarter of 2009 suggested that banking industry
write-offs increased by $52.1 billion
quarter-on-quarter
from $131 billion in the third quarter of 2009 to
$183.8 billion in the fourth quarter of 2009 and the total
number of problem list institutions rose to 702. Mortgage
delinquency rates, which advanced to 10.3% in the fourth quarter
of 2009 have begun to decline to 9.9% in the fourth quarter of
2010, but continue to present challenges to the banking industry
nearly two years after the height of the financial crisis.
Domestic loan levels at commercial banks generally declined as
banks continued to progress in deleveraging. Certain types of
loans, such as commercial and industrial and commercial real
estate, grew at rapid rates in the pre-crisis years and now must
readjust to a new economic environment. In particular, the level
of outstanding residential construction loans declined by
roughly half between the second quarter of 2008 and the fourth
quarter of 2009. The correction is most striking in commercial
and industrial loans, which showed
year-on-year
growth of 20% at the end of 2007 but declined by 18.3% at the
end of 2009 compared to 2008. Commercial real estate loans
similarly grew at double digit rates in the years prior to 2008
and now are undergoing a lengthy loan balance decline.
Commercial real estate loans similarly grew at double digit
rates in the years prior to 2008 and now are undergoing a
lengthy loan balance decline.
In Mexico, where we operate through BBVA Bancomer, the banking
industry remained solvent throughout the financial crisis,
although loan delinquency rates increased during 2009 and the
first semester of 2010, especially those related consumer
finance and mortgages. The relative strength of the Mexican
banking industry can be tied to several factors. In general,
banks in Mexico did not invest heavily in assets linked to the
U.S. mortgage market; maintained high capitalization
levels, coming from maximum levels observed between 2005 and
2007; generally funded themselves through internal sources in
local currency; and were subjected to prudent supervision and
regulation by the banks’ supervisor (
Comisión
Nacional Bancaria y de Valores, CNBV
) who maintained capital
ratio requirements above international standards and increased
loan loss provisions for consumer credit and mortgages. However,
past-due payment rates increased in 2009 and up to the second
quarter of 2010. Delinquency rates reached 4.0% in the second
quarter of 2010 for the industry as a whole and higher rates
were reached for consumer finance and mortgages. In April of
2010, loan demand started to recover and delinquency rates
started ameliorating. At the end of 2010, banking credit to the
private sector increased by 3.9% in real terms from
December 31, 2009 and the delinquency rate was 2.8%.
In Mexico, changes in banking regulation could have a
significant potential impact on profits. Authorities have
closely followed international trends and during 2009 they
mandated increased loan loss provisions for consumer loans, and
stricter loss provisions for housing loans have been enacted
during 2010. Rules to limit loans to firms within a certain
financial group (
préstamos relacionados
) were
adopted in March 2011. Such limits will impact some small banks
of the system with strong connections with retail stores (for
example, Inbursa and Banco Azteca). In addition, authorities
have strengthened the measures to improve transparency and
information about financial
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services by enacting new legislation that gives more powers to
the central bank (
Banco de México
) to regulate
interest rates and bank fees. It also gives more powers to the
financial services consumer protection agency (
Comisión
Nacional para la Defensa de los Usuarios de los Servicios
Financieros, Condusef
) to set information requirements for
bank account statements, product publicity, and contracts, and
to improve financial education. The consolidation and
restructuring of some non banking financial intermediaries
(
Sofoles
) will imply that some of them will go out of
business or be acquired. Along these lines, the mortgage arm of
BBVA-Bancomer (
Hipotecaria Nacional
) acquired the
portfolio of certain
Sofoles
last year.
| ITEM 4A. | UNRESOLVED STAFF COMMENTS |
Not Applicable.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
Overview
In 2010 the world economy started to recover from the major
slump in 2009. Global GDP picked up from a fall of 0.6% to a
rise of nearly 5% in 2010. This figure is in line with those in
the years immediately before the start of the crisis in the
summer of 2007. However, the economic recovery is not evenly
spread across regions. Throughout the year it became clear that
the emerging economies, particularly in emerging Asia and Latin
America, showed stronger growth and are contributing to global
growth, while in advanced economies, and particularly in some
European economies, recovery continues to be sluggish.
In the last quarter of 2010, uncertainty and risks in the global
economy increased due to renewed financial turmoil, particularly
in Europe as a result of the doubts regarding the fiscal
consolidation process in some countries. This led to the
activation of the rescue plans for Ireland.
After a relatively good performance in the subprime and
liquidity crises in 2009, the Spanish economy has suffered the
consequences of the peripheral sovereign crisis in 2010. The
Greek and Irish rescue programs and the possibility of a
Portuguese rescue program have spread doubts about the Spanish
economy. Financial stress in Europe has increased the cost of
financing of governments and financial institutions which, in
some cases, have lost the access to international funding. As a
result of this continued contraction, economic conditions and
employment in Spain could deteriorate further in 2011. Our
Economic Research Department estimates that the Spanish economy
will not recover a strong path of growth in terms of gross
domestic product in 2011, growing at an estimated pace of 0.9%.
Growth forecasts for the Spanish economy could be further
revised downwards if the recent surge in oil prices becomes
permanent and passes through to non-energy prices. This downward
risk could slow the pace of both domestic and external demand.
In Europe, the economy slowed gradually in line with
expectations, although some countries such as Germany maintain
their strength. Tension has also returned to the debt markets,
particularly in peripheral countries, and above all in Ireland
and Portugal. Nevertheless, 2010 closed with growth of nearly 2%.
In the United States cyclical concerns continue, derived from
the weakness shown by private demand since some of the fiscal
stimulus programs began to expire. Thus throughout 2010 there
has been a loss of strength in the real estate market, weakness
in the labor market and a deleveraging process in households.
Given this situation, the Federal Reserve has begun a new
monetary expansion program. At least initially, this has led to
downward pressure on short-term interest rates and a
depreciation of the U.S. dollar. Even so, although toward
the end of 2010 the U.S. economy has slowed, the year as a
whole closed with average growth close to 3%.
The Mexican economy has throughout the second half of 2010 shown
resistance to the loss of strength in foreign demand. This is
reflected in a less notable slowdown of its growth rates than
expected, with GDP up in 2010 by around 5%. Inflation closed at
a historically low level of 4.4% as a result of the appreciation
of the Mexican peso over the year, moderate international prices
and the lack of pressure from domestic demand. The monetary
pause is expected to remain in place, at least throughout 2011.
Finally growth in emerging economies continues to ease to more
sustainable levels, thus limiting the risk of overheating. In
South America, private demand is replacing the economic policy
stimuli adopted as the main source
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of recovery. Although the trend for inflation is rising, it is
still not a problem, and the major capital inflows in the region
have led some countries to implement control mechanisms. In
China, the latest economic indicators point to the existence of
a renewed boost to growth and increased inflation, which is
forcing the authorities to take further adjustment measures,
including a recent rise in interest rates. Despite this, GDP
growth in 2010 was 10.3%. In Turkey, the economy recovered in
2010, with a growth of 7.6% and inflation slightly below the
Central Bank’s target. At the same time, public debt has
fallen steeply. Given this situation, the Central Bank has
lowered the official interest rate and controlled credit with
increases in bank short-term reserve requirements.
Critical
Accounting Policies
The Consolidated Financial Statements as of and for the years
ended December 31, 2010, 2009 and 2008 were prepared by the
Bank’s directors in accordance with EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004 and by
applying the basis of consolidation, accounting policies and
measurement bases described in Note 2 to the Consolidated
Financial Statements, so that they present fairly the
Group’s equity and financial position as of and for the
years ended December 31, 2010, 2009 and 2008, and the
results of its operations and the consolidated cash flows in
2010, 2009 and 2008. The Consolidated Financial Statements were
prepared on the basis of the accounting records kept by the Bank
and by each of the other Group companies and include the
adjustments and reclassifications required to unify the
accounting policies and measurement bases used by the Group.
(See Note 2.2 to the Consolidated Financial Statements).
The Consolidated Financial Statements are presented in
accordance with the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004.
In preparing the Consolidated Financial Statements estimates
were made by the Group and the consolidated companies in order
to quantify certain of the assets, liabilities, income, expenses
and commitments reported herein. These estimates relate mainly
to the following:
| • | The impairment on certain assets. | |
| • | The assumptions used to quantify other provisions and for the actuarial calculation of the post-employment benefit liabilities and commitments. | |
| • | The useful life and impairment losses of tangible and intangible assets. | |
| • | The measurement of goodwill arising on consolidation. | |
| • | The fair value of certain unlisted financial assets and liabilities. |
Although these estimates were made on the basis of the best
information available as of December 31, 2010, 2009 and
2008, respectively, on the events analyzed, events that take
place in the future might make it necessary to revise these
estimates (upwards or downwards) in coming years.
The presentation format used under the EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004 vary in
certain respects from the presentation format and accounting
rules required to be applied under U.S. GAAP and other
rules that are applicable to U.S. banks. The tables
included in Note 60 to our Consolidated Financial
Statements give the effect that application of U.S. GAAP
would have on net income attributed to parent company and
shareholders’ equity as reported under EU-IFRS required to
be applied under the Bank of Spain’s Circular 4/2004.
Note 2 to the Consolidated Financial Statements contains a
summary of our significant accounting policies. We consider
certain of these policies to be particularly important due to
their effect on the financial reporting of our financial
condition and because they require management to make difficult,
complex or subjective judgments, some of which may relate to
matters that are inherently uncertain. Our reported financial
condition and results of operations are sensitive to accounting
methods, assumptions and estimates that underlie the preparation
of the Consolidated Financial Statements. The nature of critical
accounting policies, the judgments and other uncertainties
affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are
factors to be considered when reviewing our Consolidated
Financial Statements and the discussion below. We have
identified the following accounting policies as critical to the
understanding of our results of
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Table of Contents
operations, since the application of these policies requires
significant management assumptions and estimates that could
result in materially different amounts to be reported if
conditions or underlying circumstances were to change.
Fair
value of financial instruments
The fair value of an asset or a liability on a given date is
taken to be the amount for which it could be exchanged or
settled, respectively, between two knowledgeable, willing
parties in an arm’s length transaction. The most objective
and common reference for the fair value of an asset or a
liability is the price that would be paid for it on an
organized, transparent and deep market (“quoted price”
or “market price”).
If there is no market price for a given asset or liability, its
fair value is estimated on the basis of the price established in
recent transactions involving similar instruments and, in the
absence thereof, by using mathematical measurement models
sufficiently tried and trusted by the international financial
community. Such estimates would take into consideration the
specific features of the asset or liability to be measured and,
in particular, the various types of risk associated with the
asset or liability. However, the limitations inherent to the
measurement models developed and the possible inaccuracies of
the assumptions required by these models may signify that the
fair value of an asset or liability thus estimated does not
coincide exactly with the price for which the asset or liability
could be purchased or sold on the date of its measurement.
See Note 2.2.1 to the Consolidated Financial Statements,
which contains a summary of our significant accounting policies.
Derivatives
and other future transactions
These instruments include outstanding foreign currency purchase
and sale transactions, outstanding securities purchase and sale
transactions, futures transactions relating to securities,
exchange rates or interest rates, forward interest rate
agreements, options relating to exchange rates, securities or
interest rates and various types of financial swaps.
All derivatives are recognized on the balance sheet at fair
value from the date of arrangement. If the fair value of a
derivative is positive, it is recorded as an asset and if it is
negative, it is recorded as a liability. Unless there is
evidence to the contrary, it is understood that on the date of
arrangement the fair value of the derivatives is equal to the
transaction price. Changes in the fair value of derivatives
after the date of arrangement are recognized with a balancing
entry under the heading “Gains or Losses on Financial
Assets and Liabilities” in the consolidated income
statement.
Specifically, the fair value of the standard financial
derivatives included in the held for trading portfolios is equal
to their daily quoted price. If, under exceptional
circumstances, their quoted price cannot be established on a
given date, these derivatives are measured using methods similar
to those used to measure
over-the-counter
(“OTC”) derivatives.
The fair value of OTC derivatives is equal to the sum of the
future cash flows arising from the instruments discounted at the
measurement date (“present value” or “theoretical
value”). These derivatives are measured using methods
recognized by the financial markets, including the net present
value (“NPV”) method and option price calculation
models.
Financial derivatives that have as their underlying equity
instruments, whose fair value cannot be determined in a
sufficiently objective manner and are settled by delivery of
those instruments, are measured at cost.
Financial derivatives designated as hedging items are included
in the heading of the balance sheet “Hedging
derivatives”. These financial derivatives are valued at
fair value.
See Note 2.2.1 to the Consolidated Financial Statements,
which contains a summary of our significant accounting policies
with respect to these instruments.
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Goodwill
in consolidation
Pursuant to the new IFRS 3, the positive difference on the date
of a business combination between the sum of the fair value of
the price paid, the amount of all the non-controlling interests
and the fair value of stock previously held in the acquired
entity, on one hand,and the fair value of the assets acquired
and liabilities assumed, on the other hand, is recorded as
goodwill on the asset side of the balance sheet. Goodwill
represents the future economic benefits from assets that cannot
be individually identified and separately recognized. Goodwill
is not amortized and is subject periodically to an impairment
analysis. Any impaired goodwill is written off.
Goodwill is allocated to one or more cash-generating units, or
CGUs, expected to benefit from the synergies arising from
business combinations. The CGUs units represent the Group’s
smallest identifiable business
and/or
geographical segments as managed internally by its directors
within the Group.
The CGUs to which goodwill has been allocated are tested for
impairment based on the carrying amount of the unit including
the allocated goodwill. Such testing is performed at least
annually and whenever there is an indication of impairment.
For the purpose of determining the impairment of a CGU to which
a part or all of goodwill has been allocated, the carrying
amount of that unit, adjusted by the theoretical amount of the
goodwill attributable to the non-controlling interest, shall be
compared to its recoverable amount. The resulting loss shall be
apportioned by reducing, firstly, the carrying amount of the
goodwill allocated to that unit and, secondly, if there are
still impairment losses remaining to be recognized, the carrying
amount of the rest of the assets. This shall be done by
allocating the remaining loss in proportion to the carrying
amount of each of the assets in the unit. In any case,
impairment losses on goodwill can never be reversed.
See Note 2.2.8 to the Consolidated Financial Statements,
which contains a summary of our significant accounting policies
related to goodwill.
As mentioned in Note 20.1 to the Consolidated Financial
Statements, the Group has performed the goodwill impairment test
as of December 31, 2010, 2009 and 2010.
The results from each of these tests on the dates mentioned were
as follows:
As of December 31, 2010, there were no impairment losses on
the goodwill recognized in the Group’s cash-generating
units (CGUs), except for an insignificant impairment on the
goodwill of the Spain and Portugal CGU, related to the
impairment on the investments in Rentrucks, Alquiler y Servicios
de Transportes, S.A. and in BBVA Finanzia SpA (of
€9 million and €4 million, respectively).
The most significant goodwill corresponds to the United States
CGU. The recoverable amount of this CGU is equal to its value in
use. This is calculated as the discounted value of the cash flow
projections estimated by our management based on the latest
budgets available for the next five years. As of
December 31, 2010, the Group used an estimated sustainable
growth rate of 4.2% (4.3% as of December 31, 2009) to
extrapolate the cash flows in perpetuity based on the
U.S. real GDP growth rate. The discount rate used to
discount the cash flows was the cost of capital of the CGU,
which stood at 11.4% as of December 31, 2010 (11.2% as of
December 31, 2009), consisting of the free risk rate plus a
risk premium.
As of December 31, 2009, impairment losses of
€1,097 million were estimated in the United States CGU
which were recognized under “Impairment losses on other
assets (net) — Goodwill and other intangible
assets” in the accompanying consolidated income statement
for 2009 (see Note 50 to the Consolidated Financial
Statements). The impairment loss of this unit was attributed to
the significant decline in economic and credit conditions in the
states in which the Group operates in the United States. The
valuations were verified by an independent expert, not related
to the Group’s external auditor.
Both the U.S. CGU’s fair values and the fair values
assigned to its assets and liabilities were based on the
estimates and assumptions that the Group’s management
deemed most likely given the circumstances. However, some
changes to the valuation assumptions used could result in
differences in the impairment test result. As of
December 31, 2009, if the discount rate had increased or
decreased by 50 basis points, the difference between the
carrying amount and its recoverable amount would have increased
or decreased by up to €573 million and
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€664 million, respectively. If the growth rate had
increased or decreased by 50 basis points, the difference
between the carrying amount and its recoverable amount would
have increased or decreased by €555 million and
€480 million, respectively.
As of December 31, 2008, there were no impairment losses on
the goodwill recognized in the Group’s CGUs.
Post-employment
benefits and other long term commitments to
employees
Pension and post-retirement benefit costs and credits are based
on actuarial calculations. Inherent in these calculations are
assumptions including discount rates, rate of salary increase
and expected return on plan assets. Changes in pension and
post-retirement costs may occur in the future as a consequence
of changes in interest rates, expected return on assets or other
assumptions. See Note 2.2.12 to the Consolidated Financial
Statements, which contains a summary of our significant
accounting policies about pension and post-retirement benefit
costs and credits.
Allowance
for loan losses
As we describe in Note 2.2.1.b to the Consolidated
Financial Statements, a loan is considered to be an impaired
loan and, therefore, its carrying amount is adjusted to reflect
the effect of its impairment when there is objective evidence
that events have occurred which, in the case of loans, give rise
to a negative impact on the future cash flows that were
estimated at the time the transaction was arranged. The
potential impairment of these assets is determined individually
or collectively.
The quantification of losses inherent in deterioration is
calculated collectively, both in the case of assets classified
as impaired and for the portfolio of current assets that are not
currently impaired but for which an imminent loss is expected.
Inherent loss, calculated using statistical procedures, is
deemed equivalent to the portion of losses incurred on the date
that the accompanying consolidated financial statements are
prepared that has yet to be allocated to specific transactions.
The Group estimates collective inherent loss of credit risk
corresponding to operations realized by Spanish financial
entities of the Group (approximately 68.7% of the loans and
receivables of the Group as of December 31,
2010) using the parameters set by Annex IX of the Bank
of Spain’s Circular 4/2004 on the basis of its experience
and the Spanish banking sector information regarding the
quantification of impairment losses and provisions for
insolvencies for credit risk.
Notwithstanding the above, the Group has historic statistical
data which it used in its internal ratings models
(“IRBs”) that were approved by the Bank of Spain for
some portfolios in 2009, albeit only for the purpose of
estimating regulatory capital under the new Basel Accord (BIS
II). It uses these internal models to calculate the economic
capital required in its activities and uses the expected loss
concept to quantify the cost of credit risk for incorporation in
its calculation of the risk-adjusted return on capital of its
operations.
To estimate the collective loss of credit risk corresponding to
operations with non-Spanish residents registered in foreign
subsidiaries of the Group, the Group applies similar methods and
criteria, using the Bank of Spain’s parameters but adapting
the default calendars to the particular circumstances of the
country. Additionally, in Mexico for consumer loans, credit
cards and mortgages portfolios, as well as for credit investment
maintained by the Group in the United States (which in the
aggregate represent approximately 13.9% of the loans and
receivables of the Group as of December 31, 2010), internal
models are used to calculate impairment losses based on the
historical experience of the Group. In both of these cases, the
provisions required under the Bank of Spain’s Circular
4/2004 standards fall within the range of provisions calculated
using the Group’s internal ratings models.
For the years ended December 31, 2010, 2009 and 2008, there
are no substantial differences in the calculations made under
both EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 and U.S. GAAP because the
allowance for loan losses for such years calculated under
EU-IFRS required to be applied under the Bank of Spain’s
Circular 4/2004 are similar to the best estimates of allowance
for loan losses under U.S. GAAP, which is the central
scenario determined using internal risk models based on our
historical experience. We included
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an adjustment in the reconciliation of net income for the year
2008 in order to make the allowance for loan losses under
U.S. GAAP comparable to the allowance for loan losses
calculated under the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004.
The estimates of the portfolio’s inherent risks and overall
recovery vary with changes in the economy, individual
industries, countries and individual borrowers’ or
counterparties’ ability and willingness to repay their
obligations. The degree to which any particular assumption
affects the allowance for credit losses depends on the severity
of the change and its relationship to the other assumptions.
Key judgments used in determining the allowance for loan losses
include: (i) risk ratings for pools of commercial loans and
leases; (ii) market and collateral values and discount
rates for individually evaluated loans; (iii) product type
classifications for consumer and commercial loans and leases;
(iv) loss rates used for consumer and commercial loans and
leases; (v) adjustments made to assess current events and
conditions; (vi) considerations regarding domestic, global
and individual countries economic uncertainty; and
(vii) overall credit conditions.
Higher-risk
loans
Exposure
to subprime credit risk and structured credit
instruments
The application of prudent risk policies in the BBVA Group has
resulted in a very limited exposure to subprime credit risk in
the United States, as well as to structured credit products. As
of December 31, 2010, 2009 and 2008 the amount of
operations related to such assets was not significant.
| A. | Operating Results |
Factors
Affecting the Comparability of our Results of Operations and
Financial Condition
We are exposed to foreign exchange rate risk in that our
reporting currency is the euro, whereas certain of our
subsidiaries keep their accounts in other currencies,
principally Mexican pesos, U.S. dollars, Argentine pesos,
Chilean pesos, Colombian pesos, Venezuelan bolivars fuerte and
New Peruvian Soles. For example, if Latin American currencies
and the U.S. dollar depreciate against the euro, when the
results of operations of our subsidiaries in the countries using
these currencies are included in our consolidated financial
statements, the euro value of their results declines, even if,
in local currency terms, their results of operations and
financial condition have remained the same or improved relative
to the prior period. Accordingly, declining exchange rates may
limit the ability of our results of operations, stated in euro,
to fully describe the performance in local currency terms of our
subsidiaries. By contrast, the appreciation of Latin American
currencies and the U.S. dollar against the euro would have
a positive impact on the results of operations of our
subsidiaries in the countries using these currencies when their
results of operations are included in our consolidated financial
statements.
The assets and liabilities of our subsidiaries which maintain
their accounts in currencies other than the euro have been
converted to the euro at the period-end exchange rates for
inclusion in our Consolidated Financial Statements. Income
statement items have been converted at the average exchange
rates for the period. The following table sets forth the
exchange rates of several Latin American currencies and the
U.S. dollar against the euro, expressed in local currency
per €1.00 for 2010, 2009 and 2008 and as of
December 31, 2010, 2009 and 2008 according to the European
Central Bank (“ECB”).
| Average Exchange Rates | Period-end Exchange Rates | |||||||||||||||||||||||
|
Year Ended
|
Year Ended
|
Year Ended
|
As of
|
As of
|
As of
|
|||||||||||||||||||
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
|||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
|
Mexican peso
|
16.75 | 18.80 | 16.29 | 16.55 | 18.92 | 19.23 | ||||||||||||||||||
|
U.S.dollar
|
1.33 | 1.39 | 1.47 | 1.34 | 1.44 | 1.39 | ||||||||||||||||||
|
Argentine peso
|
5.19 | 5.26 | 4.71 | 5.49 | 5.56 | 4.92 | ||||||||||||||||||
|
Chilean peso
|
675.92 | 777.60 | 762.78 | 625.39 | 730.46 | 885.74 | ||||||||||||||||||
|
Colombian peso
|
2,517.50 | 2,976.19 | 2,857.14 | 2,557.54 | 2,941.18 | 3,125.00 | ||||||||||||||||||
|
Peruvian new sol
|
3.75 | 4.19 | 4.29 | 3.75 | 4.16 | 4.37 | ||||||||||||||||||
|
Venezuelan bolivar
|
5.63 | 3.00 | 3.16 | 5.74 | 3.09 | 2.99 | ||||||||||||||||||
75
Table of Contents
During 2010, there has been a general appreciation of all the
currencies that affect the Group’s financial statements
against the euro (except the Venezuelan Bolivar fuerte, which
was devalued at the beginning of 2010 and the average exchange
rate of the Argentine peso). The effect of the exchange rates on
the
year-on-year
comparison of the Group’s income statements and balance
sheet is positive.
In January 2010, the Venezuelan authorities announced the
devaluation of the Venezuelan Bolivar fuerte against the main
foreign currencies among other economic measures. The effects of
this devaluation in the consolidated income statement for the
year ended December 31, 2010 and on the consolidated equity
as of December 31, 2010 were not significant.
76
Table of Contents
BBVA
Group Results of Operations for 2010 Compared to
2009
The changes in the Group’s consolidated income statements
for 2010 and 2009 were as follows:
EU-IFRS(*)
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (In %) | |||||||||||
|
Interest and similar income
|
21,134 | 23,775 | (11.1 | ) | ||||||||
|
Interest expense and similar charges
|
(7,814 | ) | (9,893 | ) | (21.0 | ) | ||||||
|
Net interest income
|
13,320 | 13,882 | (4.0 | ) | ||||||||
|
Dividend income
|
529 | 443 | 19.3 | |||||||||
|
Share of profit or loss of entities accounted for using the
equity method
|
335 | 120 | 180.1 | |||||||||
|
Fee and commission income
|
5,382 | 5,305 | 1.5 | |||||||||
|
Fee and commission expenses
|
(845 | ) | (875 | ) | (3.4 | ) | ||||||
|
Net gains (losses) on financial assets and liabilities
|
1,441 | 892 | 61.4 | |||||||||
|
Net exchange differences
|
453 | 652 | (30.6 | ) | ||||||||
|
Other operating income
|
3,543 | 3,400 | 4.2 | |||||||||
|
Other operating expenses
|
(3,248 | ) | (3,153 | ) | 3.0 | |||||||
|
Gross income
|
20,910 | 20,666 | 1.2 | |||||||||
|
Administration costs
|
(8,207 | ) | (7,662 | ) | 7.1 | |||||||
|
Personnel expenses
|
(4,814 | ) | (4,651 | ) | 3.5 | |||||||
|
General and administrative expenses
|
(3,392 | ) | (3,011 | ) | 12.7 | |||||||
|
Depreciation and amortization
|
(761 | ) | (697 | ) | 9.2 | |||||||
|
Provisions (net)
|
(482 | ) | (458 | ) | 5.4 | |||||||
|
Impairment losses on financial assets (net)
|
(4,718 | ) | (5,473 | ) | (13.8 | ) | ||||||
|
Net operating income
|
6,742 | 6,376 | 5.7 | |||||||||
|
Impairment losses on other assets (net)
|
(489 | ) | (1,618 | ) | (69.8 | ) | ||||||
|
Gains (losses) on derecognized assets not classified as
non-current assets held for sale
|
41 | 20 | 106.4 | |||||||||
|
Negative goodwill
|
1 | 99 | n.m. | |||||||||
|
Gains (losses) in non-current assets held for sale not
classified as discontinued operations
|
127 | 859 | (85.2 | ) | ||||||||
|
Income before tax
|
6,422 | 5,736 | 12.0 | |||||||||
|
Income tax
|
(1,427 | ) | (1,141 | ) | 25.1 | |||||||
|
Income from continuing transactions
|
4,995 | 4,595 | 8.7 | |||||||||
|
Income from discontinued transactions (net)
|
— | — | n.m. | |||||||||
|
Net income
|
4,995 | 4,595 | 8.7 | |||||||||
|
Net income attributed to parent company
|
4,606 | 4,210 | 9.4 | |||||||||
|
Net income attributed to non-controlling interests
|
389 | 385 | 1.1 | |||||||||
| (*) | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. | |
| (1) | Not meaningful |
77
Table of Contents
The changes in our consolidated income statements for 2010 and
2009 were as follows:
Net
interest income
The following table summarizes the principal components of net
interest income for 2010 compared to 2009.
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Interest income
|
21,134 | 23,775 | (11.1 | ) | ||||||||
|
Interest expense
|
(7,814 | ) | (9,893 | ) | (21.0 | ) | ||||||
|
Net interest income
|
13,320 | 13,882 | (4.0 | ) | ||||||||
Net interest income decreased 4.0% to €13,320 million
for the year ended December 31, 2010 from
€13,882 million for the year ended December 31,
2009, due to the decrease in yield on assets and the increase in
the cost of liabilities. The decrease in yield on assets was due
primarily to the fact that the decrease in market interest rates
during 2009 was gradually reflected in the yield of variable
rate mortgage loans during 2009, whereas in 2010 this decrease
was largely completed at the beginning of the year, and affected
most of 2010. Additionally, the Group made continued efforts to
gradually increase the relative weight of lower risk and
therefore lower yield, loans in its loan portfolio, including
primarily private mortgages in all geographical areas in which
BBVA operates and corporate and business loans, particularly in
Mexico and the United States. On the other hand, the decrease in
yield on assets was partially offset by the active management of
our investments in debt instruments (adjusting the duration of
debt portfolios and increasing debt portfolio income in net
interest income). The increase in cost of liabilities was due
primarily to the increase in volume of customer deposits and a
higher cost of liabilities, given the competitive environment in
Spain, where fierce competition resulted in higher rates being
paid by banks (including BBVA) in order to attract deposits.
Finally, an upward curve in interest rates in the euro area has
had a faster impact in the cost of liabilities than in the yield
of assets.
Dividend
income
Dividend income increased 19.3% to €529 million for
the year ended December 31, 2010 from
€443 million for the year ended December 31,
2009, due primarily to dividends from Telefónica, S.A.
which increased from €1.0 to €1.3 per share.
Share of
profit or loss of entities accounted for using the equity
method
Share of profit or loss of entities accounted for using the
equity method increased to €335 million for the year
ended December 31, 2010 from €120 million for the
year ended December 31, 2009 due to the increase in our
share of profits of China Citic Bank (“
CNCB
”)
following our exercise in April 2010 of a purchase option to
increase our holding of CNCB from 10% to 15%, and to a lesser
extent, the increase of profit of CNCB.
78
Table of Contents
Fee and
commission income
The breakdown of fee and commission income for 2010 and 2009 is
as follows:
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Commitment fees
|
133 | 97 | 37.1 | |||||||||
|
Contingent liabilities
|
282 | 260 | 8.5 | |||||||||
|
Documentary credits
|
45 | 42 | 7.1 | |||||||||
|
Bank and other guarantees
|
237 | 218 | 8.7 | |||||||||
|
Arising from exchange of foreign currencies and banknotes
|
19 | 14 | 35.7 | |||||||||
|
Collection and payment services
|
2,500 | 2,573 | (2.8 | ) | ||||||||
|
Securities services
|
1,651 | 1,636 | 0.9 | |||||||||
|
Counseling on and management of one-off transactions
|
11 | 7 | 57.1 | |||||||||
|
Financial and similar counseling services
|
60 | 43 | 39.5 | |||||||||
|
Factoring transactions
|
29 | 27 | 7.4 | |||||||||
|
Non-banking financial products sales
|
102 | 83 | 22.9 | |||||||||
|
Other fees and commissions
|
595 | 565 | 5.3 | |||||||||
|
Fee and commission income
|
5,382 | 5,305 | 1.5 | |||||||||
Fee and commission income increased 1.5% to
€5,382 million for the year ended December 31,
2010 from €5,305 million for the year ended
December 31, 2009 due principally to the increase of fees
linked to banking services, specifically account maintenance and
management and contingent liabilities.
Fee and
commission expenses
The breakdown of fee and commission expenses for 2010 and 2009
is as follows:
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Brokerage fees on lending and deposit transactions
|
5 | 7 | (28.6 | ) | ||||||||
|
Fees and commissions assigned to third parties
|
578 | 610 | (5.2 | ) | ||||||||
|
Other fees and commissions
|
262 | 258 | 1.6 | |||||||||
|
Fee and commission expenses
|
845 | 875 | (3.4 | ) | ||||||||
Fee and commission expenses decreased 3.4% to
€845 million for the year ended December 31, 2010
from €875 million for the year ended December 31,
2009, primarily due to the decrease in fees and commissions
assigned to third parties, which mainly related to our pensions
business in Chile.
Net gains
(losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities increased
61.4% to €1,441 million for the year ended
December 31, 2010 from €892 for the year ended
December 31, 2009, primarily due to a general recovery in
market activity, and the sale of financial instruments to adjust
portfolio durations. In addition, we have profited from high
price volatility in sovereign debt markets rotating the
durations of the portfolios, which generated income without
consuming the unrealized capital gains present in certain
portfolios as of December 31, 2010.
Net exchange differences decreased 30.6% to
€453 million for the year ended December 31, 2010
from €652 million for the year ended December 31,
2009 due primarily to the devaluation of the Venezuelan Bolivar
fuerte and losses in foreign currency trading.
79
Table of Contents
Other
operating income and expenses
Other operating income amounted to €3,543 million for
the year ended December 31, 2010 a 4.2% increase compared
to €3,400 million for the year ended December 31,
2009, due primarily to the increase of non-banking product
sales, primarily real estate inventories sales and a greater
contribution of the insurance business.
Other operating expenses for the year ended December 31,
2010, amounted to €3,248 million, a 3.0% increase
compared to the €3,153 million recorded for the year
ended December 31, 2009 due to the adjustment for the
hyperinflation in Venezuela, the cost of sales, primarily real
estate inventories sales, and a higher contribution to deposit
guarantee funds in the countries in which we operate.
Gross
income
As a result of the foregoing, gross income for the year ended
December 31, 2010 was €20,910 million, a 1.2%
increase over the €20,666 million recorded for the
year ended December 31, 2009.
Administration
costs
Administration costs for the year ended December 31, 2010
were €8,207 million, a 7.1% increase from the
€7,662 million recorded for the year ended
December 31, 2009, due primarily to an increase in rent
expenses related to the sale and leaseback of certain properties
located in Spain during the third quarter of 2009, an increase
in costs associated with image and brand identity (including new
sponsorship arrangements with the U.S. National Basketball
Association) and an increase related to growth plans in
practically all the geographical areas in which the Group
operates. This investment process is accompanied by a gradual
increase of the Group’s workforce in almost all of its
areas, which has resulted in an increase of personnel expenses
by 3.5% to €4,814 million for 2010 from
€4,651 million for 2009. The table below provides a
breakdown of personnel expenses for 2010 and 2009.
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Wages and salaries
|
3,740 | 3,607 | 3.7 | |||||||||
|
Social security costs
|
567 | 531 | 6.8 | |||||||||
|
Transfers to internal pension provisions
|
37 | 44 | (15.9 | ) | ||||||||
|
Contributions to external pension funds
|
84 | 68 | 23.5 | |||||||||
|
Other personnel expenses
|
386 | 401 | (3.7 | ) | ||||||||
|
Personnel expenses
|
4,814 | 4,651 | 3.5 | |||||||||
The table below provides a breakdown of general and
administrative expenses for 2010 and 2009.
|
Year Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Technology and systems
|
563 | 577 | (2.4 | ) | ||||||||
|
Communications
|
284 | 254 | 11.8 | |||||||||
|
Advertising
|
345 | 262 | 31.7 | |||||||||
|
Property, fixtures and materials
|
750 | 643 | 16.6 | |||||||||
|
Of which:
|
||||||||||||
|
Rents expenses
|
397 | 304 | 30.6 | |||||||||
|
Taxes other than income tax
|
322 | 266 | 21.1 | |||||||||
|
Other expenses
|
1,129 | 1,009 | 11.9 | |||||||||
|
Other administrative expenses
|
3,393 | 3,011 | 12.7 | |||||||||
80
Table of Contents
Depreciation
and amortization
Depreciation and amortization for the year ended
December 31, 2010 amounted to €761 million a 9.2%
increase compared to €697 million recorded for the
year ended December 31, 2009, due primarily to the
amortization of software and tangible assets for own use.
Provisions
(net)
Provisions (net) for the year ended December 31, 2010
amounted to €482 million, a 5.4% increase compared to
€458 million recorded for the year ended
December 31, 2009, primarily due to a significant increase
in the provisions for substandard contingent liabilities
primarily related to guarantees given on behalf of our clients.
In addition, provisions (net) for year ended December 31,
2009 were positively impacted by higher provision recoveries.
Impairment
on financial assets (net)
Impairment on financial assets (net) for the year ended
December 31, 2010 amounted to €4,718 million, a
13.8% decrease compared to the €5,473 million recorded
for the year ended December 31, 2009. Impairment on
financial assets (net) was negatively affected in 2009 in Spain
and Portugal and in the United States by the significant
increase in substandard loans from €8,540 million as
of December 31, 2008 to €15,312 million as of
December 31, 2009, mainly as a result of the deterioration
of the economic environment. Impairment on financial assets
(net) in 2010 continues to be impacted in Spain and Portugal and
in the United States by the challenging economic environment.
The Group’s non-performing assets ratio was 4.1% as of
December 31, 2010 compared to 4.3% as of December 31,
2009.
Net
operating income
Net operating income for the year ended December 31, 2010
amounted to €6,742 million, a 5.7% increase over the
€6,376 million recorded for the year ended
December 31, 2009.
Impairment
on other assets (net)
Impairment on other assets (net) for the year ended
December 31, 2010 amounted to €489 million, a
69.8% decrease from the €1,618 million recorded for
the year ended December 31, 2009. Impairment on other
assets (net) for 2009 include impairment changes for goodwill of
€1,097 million attributed to the significant decline
in economic and credit conditions in the states in which the
Group operates in the United States, whereas 2010 did not
include any significant goodwill impairment changes. On the
other hand, loan-loss provisions for foreclosures and real
estate assets were increased to maintain the coverage of these
assets at levels above 30% following the deterioration of the
real estate business.
Gains
(losses) on derecognized assets not classified as non-current
assets held for sale
Gains (losses) on derecognized assets not classified as
non-current assets held for sale for the year ended
December 31, 2010 amounted to a gain of
€41 million, an increase from the
€20 million gain recorded for the year ended
December 31, 2009.
Negative
goodwill
Negative goodwill for the year ended December 31, 2010
amounted to a gain of €1 million compared to a gain of
€99 million for the year ended December 31, 2009.
Negative goodwill for 2009 was due to the acquisition of certain
assets and liabilities of Guaranty.
81
Table of Contents
Gains
(losses) in non-current assets held for sale not classified as
discontinued operations
Gains (losses) in non-current assets held for sale not
classified as discontinued operations for the year ended
December 31, 2010, was €127 million, a decrease
of 85.2% million compared to €859 million for the year
ended December 31, 2009. In 2010 and 2009 there were
capital gains of €273 million and
€914 million, respectively, generated by the sale of
164 and 971 fixed assets, respectively (mainly branch offices
and various individual properties) to a third-party real estate
investor. At the same time, BBVA signed a sale and leaseback
long-term contract with such investor, which includes an option
to repurchase the properties at fair values, exercisable by the
Group on the agreed dates (in most cases, the termination date
of each lease agreement).
Income
before tax
As a result of the foregoing, income before tax operations for
the year ended December 31, 2010 was
€6,422 million, a 12.0% increase from the
€5,736 million recorded for the year ended
December 31, 2009.
Income
tax
Income tax for the year ended December 31, 2010 amounted to
€1,427 million, a 25.1% increase from the
€1,141 million recorded for the year ended
December 31, 2009, due to higher income before tax and
higher expenses tax.
Net
income
As a result of the foregoing, net income for the year ended
December 31, 2010 was €4,995 million, an 8.7%
increase from the €4,595 million recorded for the year
ended December 31, 2009.
Net
income attributed to non-controlling interest
Net income attributed to non-controlling interest for the year
ended December 31, 2010 was €389 million, a 1.1%
increase over the €385 million recorded for the year
ended December 31, 2009, principally due to exchange rate
impacts.
Net
income attributed to parent company
Net income attributed to parent company for the year ended
December 31, 2010 was €4,606 million, a 9.4%
increase from the €4,210 million recorded for the year
ended December 31, 2009.
82
Table of Contents
BBVA
Group Results of Operations for 2009 Compared to 2008
The changes in the Group’s consolidated income statements
for 2009 and 2008 were as follows:
EU-IFRS
(*)
|
For the Year Ended
|
||||||||||||
| December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | % | |||||||||||
|
Interest and similar income
|
23,775 | 30,404 | (21.8 | ) | ||||||||
|
Interest expense and similar charges
|
(9,893 | ) | (18,718 | ) | (47.1 | ) | ||||||
|
Net interest income
|
13,882 | 11,686 | 18.8 | |||||||||
|
Dividend income
|
443 | 447 | (0.9 | ) | ||||||||
|
Share of profit or loss of entities accounted for using the
equity method
|
120 | 293 | (59.1 | ) | ||||||||
|
Fee and commission income
|
5,305 | 5,539 | (4.2 | ) | ||||||||
|
Fee and commission expenses
|
(875 | ) | (1,012 | ) | (13.6 | ) | ||||||
|
Net gains (losses) on financial assets and liabilities
|
892 | 1,328 | (32.8 | ) | ||||||||
|
Net exchange differences
|
652 | 231 | 182.5 | |||||||||
|
Other operating income
|
3,400 | 3,559 | (4.5 | ) | ||||||||
|
Other operating expenses
|
(3,153 | ) | (3,093 | ) | 1.9 | |||||||
|
Gross income
|
20,666 | 18,978 | 8.9 | |||||||||
|
Administration costs
|
(7,662 | ) | (7,756 | ) | (1.2 | ) | ||||||
|
Personnel expenses
|
(4,651 | ) | (4,716 | ) | (1.4 | ) | ||||||
|
General and administrative expenses
|
(3,011 | ) | (3,040 | ) | (1.0 | ) | ||||||
|
Depreciation and amortization
|
(697 | ) | (699 | ) | (0.3 | ) | ||||||
|
Provisions (net)
|
(458 | ) | (1,431 | ) | (68.0 | ) | ||||||
|
Impairment on financial assets (net)
|
(5,473 | ) | (2,941 | ) | 86.1 | |||||||
|
Net operating income
|
6,376 | 6,151 | 3.7 | |||||||||
|
Impairment on other assets (net)
|
(1,618 | ) | (45 | ) | n.m.(1 | ) | ||||||
|
Gains (losses) on derecognized assets not classified as
non-current assets held for sale
|
20 | 72 | (72.2 | ) | ||||||||
|
Negative goodwill
|
99 | — | n.m.(1 | ) | ||||||||
|
Gains (losses) in non-current assets held for sale not
classified as discontinued operations
|
859 | 748 | 14.8 | |||||||||
|
Income before tax
|
5,736 | 6,926 | (17.2 | ) | ||||||||
|
Income tax
|
(1,141 | ) | (1,541 | ) | (26.0 | ) | ||||||
|
Net income
|
4,595 | 5,385 | (14.7 | ) | ||||||||
|
Net income attributed to parent company
|
4,210 | 5,020 | (16.1 | ) | ||||||||
|
Net income attributed to non-controlling interest
|
385 | 365 | 5.2 | |||||||||
| (*) | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. | |
| (1) | Not meaningful |
83
Table of Contents
The changes in our consolidated income statements for 2009 and
2008 were as follows:
Net
interest income
The following table summarizes the principal components of net
interest income for 2009 compared to 2008.
|
For the Year Ended
|
||||||||||||
| December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (Millions of euros) | (%) | |||||||||||
|
Interest and similar income
|
23,775 | 30,404 | (21.8 | ) | ||||||||
|
Interest expense and similar charges
|
(9,893 | ) | (18,718 | ) | (47.1 | ) | ||||||
|
Net interest income
|
13,882 | 11,686 | 18.8 | |||||||||
Net interest income rose 18.8% to €13,882 million for
2009 from €11,686 million for 2008 due to our customer
deposits and debt certificates repricing faster than loans in
the context of a slowdown in business. In our business with
customers in the euro zone the sharp decline in interest rates
initially had a positive effect because assets were repriced
more slowly than liabilities. However, for 2009, the reduction
in the yield on loans (down 181 basis points from
December 31, 2008 to 4.17% as of December 31,
2009) is similar to the decline in the cost of funds (down
180 basis points from December 31, 2008 to 1.14% as of
December 31, 2009). Consequently the average customer
spread for 2009 at 3.03% was relatively stable compared to the
average customer spread for 2008, returning to the level prior
to the drastic decline in interest rates. Nevertheless, the risk
profile is now lower because assets, such as the consumer
finance portfolio, have shrunk and liabilities, in the form of
liquid funds, have expanded.
In Mexico, interbank rates sank for the first half of 2008, but
it was steady for the second half of the year, with the average
Interbank Equilibrium Interest Rate (TIIE) for 2009 standing at
5.9%, as opposed to the figure of 8.3% for 2008. The customer
spread remained stable throughout the year, at 11.4% as of
December 31, 2009, compared to 12.4% as of
December 31, 2007, due to a larger decline in yield on
loans than in cost of deposits.
Dividend
income
Dividend income decreased to €443 million for 2009,
compared to €447 million for 2008.
Share
of profit or loss of entities accounted for using the equity
method
Share of profit or loss of entities accounted for using the
equity method decreased to €120 million for 2009. This
is significantly lower than €293 million for 2008,
which included €212 million on sales from the
industrial holdings portfolio, principally our interest in
Gamesa Corporación Tecnológica, S.A.
84
Table of Contents
Fee
and commission income
The breakdown of fee and commission income for 2009 and 2008 is
as follows:
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (Millions of euros) | (%) | |||||||||||
|
Commitment fees
|
97 | 62 | 56.8 | |||||||||
|
Contingent Liabilities
|
260 | 243 | 7.2 | |||||||||
|
Documentary credits
|
42 | 45 | (6.5 | ) | ||||||||
|
Bank and other guarantees
|
218 | 198 | 10.3 | |||||||||
|
Arising from exchange of foreign currencies and banknotes
|
14 | 24 | (41.0 | ) | ||||||||
|
Collection and payment services
|
2,573 | 2,655 | (3.1 | ) | ||||||||
|
Securities services
|
1,636 | 1,895 | (13.7 | ) | ||||||||
|
Counseling on and management of one-off transactions
|
7 | 9 | (22.9 | ) | ||||||||
|
Financial and similar counseling services
|
43 | 24 | 80.8 | |||||||||
|
Factoring transactions
|
27 | 28 | (4.0 | ) | ||||||||
|
Non-banking financial products sales
|
83 | 96 | (13.2 | ) | ||||||||
|
Other fees and commissions
|
565 | 503 | 12.4 | |||||||||
|
Fee and commission income
|
5,305 | 5,539 | (4.2 | ) | ||||||||
Fee and commission income for 2009 amounted to
€5,305 million, a 4.2% decrease from
€5,539 million for 2008, due mainly to the decrease of
18.3% in fee and commission income from mutual funds. Fee and
commission income from mutual funds, are recorded under the
heading “Securities services” and decreased primarily
as a result of the transfer of customer funds out of mutual
funds into time deposits.
Fee
and commission expenses
The breakdown of fee and commission expenses for 2009 and 2008
is as follows:
| Year Ended December 31, |
Change
|
|||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (Millions of euros) | (%) | |||||||||||
|
Brokerage fees on lending and deposit transactions
|
7 | 8 | (12.6 | ) | ||||||||
|
Fees and commissions assigned to third parties
|
610 | 728 | (16.2 | ) | ||||||||
|
Other fees and commissions
|
258 | 276 | (6.6 | ) | ||||||||
|
Fee and commission expenses
|
875 | 1,012 | (13.6 | ) | ||||||||
Fee and commission expenses for 2009 amounted to
€875 million, a 13.6% decrease from
€1,012 million for 2008, mainly due to a 16.2%
decrease to €610 million for 2009 from
€728 million for 2008 in fees and commissions assigned
to third parties, which are primarily related to our pension
business in Chile.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities for 2009
amounted to €892 million, a 32.8% decrease from
€1,328 million for 2008, due primarily to the lower
results generated as a result of lower activity given market
volatility. In addition, net gains (losses) on financial assets
and liabilities for 2008 included non-recurring gains of
€232 million related to our sale of shares in the
initial public offering of Visa, Inc.
Net exchange differences amounted to €652 million for
2009, an increase of 182.5% from €231 million for 2008
due primarily to gains in currency trading.
85
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Other
operating income and expenses
Other operating income amounted to €3,400 million for
2009 a 4.5% decrease compared to €3,559 million for
2008, primarily due to the lower volume of insurance policies
written.
Other operating expenses for 2009, amounted to
€3,153 million, a 1.9% increase compared to the
€3,093 million recorded for 2008, primarily due to
higher contributions to deposit guarantee funds in the countries
where we operate. As a result of the fact that other operating
income decreased at a faster pace than other operating expenses,
the net variation in operating income and expenses was a 46.9%
decrease with respect to 2008.
Gross
income
As a result of the foregoing, gross income for 2009, was
€20,666 million, an 8.9% increase over the
€18,978 million recorded for 2008.
Administration
costs
Administration costs for 2009 were €7,662 million, a
1.2% decrease from the €7,756 million recorded for
2008, due primarily to cost savings derived from the
transformation and restructuring plans initiated in 2006, which
resulted in the number of employees of the Group declining to
103,721 as of December 31, 2009 from 108,972 as of
December 31, 2008.
The table below provides a breakdown of personnel expenses for
2009 and 2008.
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (Millions of euros) | (%) | |||||||||||
|
Wages and salaries
|
3,607 | 3,593 | 0.4 | |||||||||
|
Social security costs
|
531 | 566 | (6.2 | ) | ||||||||
|
Transfers to internal pension provisions
|
44 | 56 | (21.5 | ) | ||||||||
|
Contributions to external pension funds
|
68 | 71 | (3.9 | ) | ||||||||
|
Other personnel expenses
|
401 | 430 | (6.8 | ) | ||||||||
|
Personnel expenses
|
4,651 | 4,716 | (1.4 | ) | ||||||||
The table below provides a breakdown of general and
administrative expenses for 2009 and 2008.
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (Millions of euros) | (%) | |||||||||||
|
Technology and systems
|
577 | 598 | (3.5 | ) | ||||||||
|
Communications
|
254 | 260 | (2.1 | ) | ||||||||
|
Advertising
|
262 | 273 | (4.2 | ) | ||||||||
|
Property, fixtures and materials
|
643 | 617 | 4.2 | |||||||||
|
Of which:
|
||||||||||||
|
Rents expenses
|
304 | 268 | 13.5 | |||||||||
|
Taxes other than income tax
|
266 | 295 | (9.7 | ) | ||||||||
|
Other expenses
|
1,009 | 997 | 1.2 | |||||||||
|
General and administrative expenses
|
3,011 | 3,040 | (1.0 | ) | ||||||||
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Table of Contents
Depreciation
and amortization
Depreciation and amortization for 2009 amounted to
€697 million compared to the €699 million
recorded for 2008, due primarily to the amortization of software
and properties.
Provisions
(net)
Provisions (net) for 2009 were €458 million, with an
important decrease compared to the €1,431 million
recorded for 2008, primarily due to the larger provisions for
early retirements (€860 million) and the Madoff fraud
(€431 million) recorded in 2008.
Impairment
on financial assets (net)
Impairment on financial assets (net) was
€5,473 million for 2009, an 86.1% increase over the
€2,941 million recorded for 2008, due primarily to an
increase in provisions in connection with the significant
increase in substandard loans from €8,540 million as
of December 31, 2008 to €15,311 million as of
December 31, 2009, due primarily to the deterioration of
the economic environment in Spain and in the United States. The
Group’s non-performing assets ratio increased substantially
to 4.3% as of December 31, 2009 from 2.3% as of
December 31, 2008.
Net
operating income
As a result of the foregoing, net operating income for 2009, was
€6,376 million, a 3.7% increase over the
€6,151 million recorded for 2008.
Impairment
on other assets (net)
Impairment on other assets (net) for 2009 amounted to
€1,618 million, a significant increase from the
€45 million recorded for 2008, due primarily to
impairment charges for goodwill of €1,097 million
attributed to the significant decline in economic and credit
conditions in the states in which the Group operates in the
United States. The remainder of the increase was attributed to
write-downs on real-estate investments.
Gains
(losses) in written off assets not classified as non-current
assets held for sale
Gains (losses) in written off assets not classified as
non-current assets held for sale for 2009 amounted to a gain of
€20 million, a 72.2% decrease from the
€72 million gain recorded for 2008.
Negative
goodwill
Negative goodwill for 2009 amounted to a gain of
€99 million due to the acquisition of certain assets
and liabilities of Guaranty.
Gains
(losses) in non-current assets held for sale not classified as
discontinued operations
Gains (losses) in non-current assets held for sale not
classified as discontinued operations for 2009, was
€859 million, an increase of 14.8% million compared to
€748 million for 2008. The €859 million for
2009 included capital gains of €830 million generated
by the sale on September 25, 2009 of 948 fixed assets
(mainly branch offices and various individual properties) to a
third-party real estate investor. At the same time, BBVA signed
a sale and leaseback long-term contract with such investor,
which includes an option to repurchase the properties at fair
values, exercisable by the Group on the agreed dates (in most
cases, the termination date of each lease agreement). For 2008
the gains (losses) in non-current assets held for sale not
classified as discontinued operations, was primarily affected by
a gross gain of €727 million from the sale of our
stake in
Bradesco
.
Income
before tax
As a result of the foregoing, income before tax for 2009 was
€5,736 million, a 17.2% decrease from the
€6,926 million recorded for 2008.
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Table of Contents
Income
tax
Income tax for 2009 amounted to €1,141 million, a
26.0% decrease from the €1,541 million recorded for
2008, due to lower income before tax and higher income exempt
from tax.
Net
income
As a result of the foregoing, net income for 2009 was
€4,595 million, a 14.7% decrease from the
€5,385 million recorded for 2008.
Net
income attributed to non-controlling interest
Net income attributed to non-controlling interest for 2009 was
€385 million, a 5.2% increase over the
€365 million recorded for 2008, due primarily to
greater profits obtained by certain of our Latin American
subsidiaries, primarily in Venezuela, Peru and Chile, which have
minority shareholders.
Net
income attributed to parent company
Net income attributed to parent company for 2009 was
€4,210 million, a 16.1% decrease from the
€5,020 million recorded for 2008.
Results
of Operations by Business Areas for 2010 Compared to
2009
Spain
and Portugal
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
4,675 | 4,910 | (4.8 | ) | ||||||||
|
Net fees and commissions
|
1,388 | 1,482 | (6.4 | ) | ||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
198 | 187 | 6.0 | |||||||||
|
Other operating income and expenses (net)
|
368 | 436 | (15.7 | ) | ||||||||
|
Gross income
|
6,629 | 7,015 | (5.5 | ) | ||||||||
|
Administrative costs
|
(2,481 | ) | (2,515 | ) | (1.4 | ) | ||||||
|
Depreciation and amortization
|
(103 | ) | (105 | ) | (1.9 | ) | ||||||
|
Impairment on financial assets (net)
|
(1,335 | ) | (1,931 | ) | (30.9 | ) | ||||||
|
Provisions (net) and other gains (losses)
|
238 | 776 | (69.4 | ) | ||||||||
|
Income before tax
|
2,948 | 3,240 | (9.0 | ) | ||||||||
|
Income tax
|
(878 | ) | (965 | ) | (9.0 | ) | ||||||
|
Net income
|
2,070 | 2,275 | (9.0 | ) | ||||||||
|
Net income attributed to non-controlling interests
|
— | — | — | |||||||||
|
Net income attributed to parent company
|
2,070 | 2,275 | (9.0 | ) | ||||||||
Net
interest income
Net interest income of this business area for 2010 was
€4,675 million, a 4.8% decrease compared to the
€4,910 million recorded for 2009, primarily due to the
decrease in yield on assets, whereas the cost of liabilities
increased.
The decrease in yield on assets was due primarily to the fact
that the decrease in market interest rates during 2009 was
gradually reflected in the yield of variable mortgage loans
during the year 2009, whereas at the beginning
88
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of 2010 this decrease was largely completed and affected most of
2010. Additionally, this business area has made continued
efforts to gradually increase the relative weight of loan
portfolios with lower risk and, therefore, lower spread (for
example, mortgage loans) instead of loan portfolios with higher
risk (for example, customer loans). The increase in cost of
liabilities was due primarily to the increase in volume of
customer deposits and the higher cost of liabilities given the
competitive environment in Spain where fierce competition
resulted in higher rates being paid by banks (including BBVA) in
order to attract deposits. Finally, the upward curve in interest
rates in the euro area has had a faster impact in the cost of
liabilities than in the yield on assets.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€1,388 million for 2010, a 6.4% decrease from the
€1,482 million recorded for 2009, primarily due to the
loyalty-based reductions applied to a growing number of
customers and the fall in the volume of managed mutual funds.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains and financial assets and liabilities and exchanges
differences of this business area for 2010 was
€198 million, a 6.0% increase from the
€187 million recorded for 2009, primarily due to the
general recovery in markets conditions during 2010.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2010 was €368 million, a 15.7% decrease from the
€436 million recorded for 2009, primarily due to the
lower earnings of our insurance activity.
Gross
income
As a result of the foregoing, gross income of this business area
for 2010 was €6,629 million, a 5.5% decrease from the
€7,015 million recorded for 2009.
Administrative
costs
Administrative costs of this business area for 2010 was
€2,481 million, a 1.4% decrease over the
€2,515 million recorded for 2009, primarily due to the
decline in general and administrative expenses, principally
through continued streamlining of the branch network, and the
Group’s transformation plan, which helped to reduce wages
and salaries.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2010
was €1,335 million, a 30.9% decrease from the
€1,931 million recorded for 2009. Impairment on
financial assets (net) was negatively affected in 2009 by the
sharp increase in non-performing loans during 2009. This
business area’s non-performing assets ratio decreased to
5.0% as of December 31, 2010 from 5.1% as of
December 31, 2009. As the non-performing assets ratio
remained relatively stable during 2010, the amount of Impairment
on financial assets (net) of this business area declined during
2010.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2010 was €2,948 million, a 9.0% decrease from
the €3,240 million recorded in 2009.
Income
tax
Income tax of this business area for 2010 was
€878 million, a 9.0% decrease from the
€965 million recorded in 2009, primarily as result of
the decrease in income before tax.
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Table of Contents
Net
income attributed to parent company
As a result of the foregoing, net income attributed to parent
company of this business area for 2010 was
€2,070 million, a 9.0% decrease from the
€2,275 million recorded in 2009.
Mexico
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
3,688 | 3,307 | 11.5 | |||||||||
|
Net fees and commissions
|
1,233 | 1,077 | 14.5 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
395 | 370 | 6.6 | |||||||||
|
Other operating income and expenses (net)
|
179 | 116 | 54.8 | |||||||||
|
Gross income
|
5,496 | 4,870 | 12.8 | |||||||||
|
Administrative costs
|
(1,813 | ) | (1,489 | ) | 21.8 | |||||||
|
Depreciation and amortization
|
(86 | ) | (65 | ) | 32.5 | |||||||
|
Impairment on financial assets (net)
|
(1,229 | ) | (1,525 | ) | (19.4 | ) | ||||||
|
Provisions (net) and other gains (losses)
|
(87 | ) | (21 | ) | n.m (1 | ) | ||||||
|
Income before tax
|
2,281 | 1,770 | 28.8 | |||||||||
|
Income tax
|
(570 | ) | (411 | ) | 38.8 | |||||||
|
Net income
|
1,711 | 1,360 | 25.8 | |||||||||
|
Net income attributed to non-controlling interests
|
(4 | ) | (2 | ) | 89.5 | |||||||
|
Net income attributed to parent company
|
1,707 | 1,357 | 25.7 | |||||||||
| (1) | Not meaningful. |
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, in 2010 the average Mexican peso to euro
exchange rate decreased compared to the average exchange rate in
2009 resulting in a positive exchange rate effect on the income
statement for 2010.
Net
interest income
Net interest income of this business area for 2010 was
€3,688 million, a 11.5% increase from the
€3,307 million recorded for 2009, due primarily to the
exchange-rate effect (assuming constant exchange rates, there
would have been a 0.7% decrease due to the decrease in market
interest rates).
Net
fees and commissions
Net fees and commissions of this business area amounted to
€1,233 million for 2010, a 14.5% increase from the
€1,077 million recorded 2009 primarily as a result of
the exchange-rate effect (assuming constant exchange rates there
would have been a 1.9% increase, due primarily to the increased
transactional services fees and to greater fees related to
securities and our pension fund administration business, Afore
BBVA Bancomer).
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains on financial assets and liabilities and exchange
differences of this business area for 2010 amounted to
€395 million, a 6.6% increase from the
€370 million for 2009, primarily as a result of the
exchange-rate effect (assuming constant exchange rates, there
would have been a 5.1% decrease, principally due to market
volatility).
90
Table of Contents
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2010, was €179 million, a 54.8% increase from the
€116 million recorded for 2009, principally due to
growth in the insurance business.
Gross
income
As a result of the foregoing, gross income of this business area
for 2010, was €5,496 million, a 12.8% increase from
the €4,870 million recorded for 2009 (assuming
constant exchange rates, there would have been a 0.5% increase).
Administrative
costs
Administrative costs of this business area for 2010 amounted to
€1,813 million, a 21.8% increase from the
€1,489 million recorded for 2009 (assuming constant
exchange rates, there would have been an 8.4% increase),
primarily due to a three-year expansion and transformation plan
implemented by BBVA Bancomer to take advantage of the long-term
growth opportunities offered by the Mexican market.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2010
was €1,229 million, a 19.4% decrease from the
€1,525 million recorded for 2009, primarily due to the
recovery in economic conditions in Mexico. The business
area’s non-performing assets ratio decreased to 3.2% as of
December 31, 2010 from 4.3% as of December 31, 2009.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2010 was €2,281 million, a 28.8% increase from the
€1,770 million recorded for 2009.
Income
tax
Income tax of this business area for 2010 was
€570 million, a 38.8% increase from the
€411 million recorded for 2009, principally due to an
increase in the tax rate in Mexico as of January 1, 2010.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2010 was €1,707 million, a 25.7% increase from the
€1,357 million recorded for 2009, primarily due to the
exchange-rate effect (assuming constant exchange rates, the
increase would have been 11.9%).
91
Table of Contents
South
America
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
2,495 | 2,566 | (2.8 | ) | ||||||||
|
Net fees and commissions
|
957 | 908 | 5.4 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
514 | 405 | 26.7 | |||||||||
|
Other operating income and expenses (net)
|
(168 | ) | (242 | ) | (30.7 | ) | ||||||
|
Gross income
|
3,797 | 3,637 | 4.4 | |||||||||
|
Administrative costs
|
(1,537 | ) | (1,464 | ) | 5.0 | |||||||
|
Depreciation and amortization
|
(131 | ) | (115 | ) | 14.1 | |||||||
|
Impairment on financial assets (net)
|
(419 | ) | (431 | ) | (2.8 | ) | ||||||
|
Provisions (net) and other gains (losses)
|
(40 | ) | (52 | ) | (22.1 | ) | ||||||
|
Income before tax
|
1,670 | 1,575 | 6.0 | |||||||||
|
Income tax
|
(397 | ) | (404 | ) | (1.7 | ) | ||||||
|
Net income
|
1,273 | 1,172 | 8.6 | |||||||||
|
Net income attributed to non-controlling interests
|
(383 | ) | (392 | ) | (2.1 | ) | ||||||
|
Net income attributed to parent company
|
889 | 780 | 14.0 | |||||||||
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, the appreciation in 2010 of all the currencies
in the countries in which we operate in South America against
the euro (except for the Venezuelan Bolivar fuerte, which was
devalued at the beginning of 2010, and the average exchange rate
of the Argentine peso) positively affected the results of
operations of certain of our Latin American subsidiaries in euro
terms. However, the impact of the devaluation of Venezuelan
Bolivar fuerte is higher than the positive effect of the
appreciation of most of the rest of the currencies and,
therefore, movements in exchange rates had a negative overall
impact on this business area’s volume of business, balance
sheet and, to a lesser extent, earnings in 2010.
Net
interest income
Net interest income in 2010 was €2,495 million, a 2.8%
decrease from the €2,566 million recorded in 2009.
This decrease was primarily due to the exchange-rate effect
(assuming constant exchange rates, there would have been an
11.1% increase), which offset an increase of interest income
mainly due to the increase in volume of customer loans during
the period in all geographical regions of this business area.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€957 million in 2010, a 5.4% increase from the
€908 million recorded in 2009, primarily due to the
decrease in fees and commissions paid to third parties mainly
related to our pensions business in Chile.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains on financial assets and liabilities and exchange
differences of this business area in 2010 were
€514 million, a 26.7% increase from the
€405 million recorded in 2009, primarily as a result
of the valuation of U.S. dollar positions in Venezuela due
to the devaluation of the Venezuelan Bolivar fuerte and the
appreciation of the U.S. dollar against the euro.
92
Table of Contents
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2010, was a loss of €168 million, a 30.7% decrease
from the loss of €242 million recorded for 2009,
principally due to the devaluation of the Venezuelan Bolivar
peso fuerte and to the impact of Venezuela as a
hyperinflationary economy since 2009.
Gross
income
As a result of the foregoing, the gross income of this business
area in 2010 was €3,797 million, a 4.4% increase from
the €3,637 million recorded in 2009.
Administrative
costs
Administrative costs of this business area in 2010 were
€1,537 million, a 5.0% increase from the
€1,464 million recorded in 2009, primarily due to the
implementation of growth plans partially offset by the negative
effect of the exchange rate.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business in 2010
was €419 million, a 2.8% decrease from the
€431 million recorded in 2009. The business
area’s non-performing assets ratio decreased to 2.5% as of
December 31, 2010 from 2.7% as of December 31, 2009.
Income
before tax
As a result of the foregoing, income before tax of this business
area in 2010 amounted to €1,670 million, a 6.0%
increase compared to the €1,575 million recorded in
2009 (assuming constant exchange rates, there would have been an
11.3% increase).
Income
tax
Income tax of this business area in 2010 was
€397 million, a 1.7% decrease from the
€404 million recorded in 2009 (assuming constant
exchange rates, there would have been a 2.0% increase).
Net
income attributed to parent company
Net income attributed to parent company of this business area in
2010 was €889 million, a 14.0% increase from the
€780 million recorded in 2009 (assuming constant
exchange rates, there would have been a 16.5% increase).
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The
United States
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
1,794 | 1,679 | 6.8 | |||||||||
|
Net fees and commissions
|
646 | 610 | 5.8 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
156 | 156 | 0.1 | |||||||||
|
Other operating income and expenses (net)
|
(49 | ) | (33 | ) | 49.4 | |||||||
|
Gross income
|
2,546 | 2,413 | 5.5 | |||||||||
|
Administrative costs
|
(1,318 | ) | (1,159 | ) | 13.7 | |||||||
|
Depreciation and amortization
|
(199 | ) | (205 | ) | (3.1 | ) | ||||||
|
Impairment on financial assets (net)
|
(703 | ) | (1,420 | ) | (50.5 | ) | ||||||
|
Provisions (net) and other gains (losses)
|
(22 | ) | (1,056 | ) | (97.9 | ) | ||||||
|
Income before tax
|
304 | (1,428 | ) | n.m | (1) | |||||||
|
Income tax
|
(68 | ) | 478 | n.m | (1) | |||||||
|
Net income
|
236 | (950 | ) | n.m | (1) | |||||||
|
Net income attributed to non-controlling interests
|
— | — | — | |||||||||
|
Net income attributed to parent company
|
236 | (950 | ) | n.m | (1) | |||||||
| (1) | Not meaningful |
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, the average U.S. dollar to euro exchange
rate in 2010 increased compared to the average exchange rate in
2009, resulting in a positive exchange rate effect on the income
statement in 2010.
In addition, as explained in the “Item 4. Information
on the Company — History and Development of the
Company — Capital Expenditures” on
August 21, 2009, BBVA Compass acquired certain assets and
liabilities of Guaranty Bank (“
Guaranty
”) from
the FDIC through a public auction for qualified investors. This
acquisition affects the comparability of the figures in 2010
since these assets and liabilities were included in our balance
sheet, and therefore generated interest income and expenses, for
the twelve months ended December 31, 2010 compared to only
approximately four months (from the August 21 acquisition date
to December 31, 2009) in 2009.
Net
interest income
Net interest income in 2010 was €1,794 million, a 6.8%
increase from the €1,679 million recorded in 2009,
primarily due to the impact of the acquisition of Guaranty
referred to above and the exchange rate effect (assuming
constant exchange rates, there would have been a 1.3% increase).
Net
fees and commissions
Net fees and commissions of this business area in 2010 were
€646 million, a 5.8% increase from the
€610 million recorded in 2009, due primarily to the
integration of Guaranty and the exchange-rate effect (assuming
constant exchange rates, there would have been a 0.3% increase).
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities and
exchange differences of this business area in 2010 were
€156 million, a 0.1% increase compared to those
recorded in 2009.
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Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
in 2010 were a loss of €49 million, compared to a loss
of €33 million recorded in 2009 mainly due to higher
contributions to the deposit guarantee fund.
Gross
income
As a result of the foregoing, gross income of this business area
in 2010 was €2,546 million, a 5.5% increase from the
€2,413 million recorded in 2009.
Administrative
costs
Administrative costs of this business area in 2010 were
€1,318 million, a 13.7% increase from the
€1,159 million recorded in 2009, primarily due to the
integration of Guaranty and the exchange-rate effect (assuming
constant exchange rates, there would have been an 8.0% increase).
Depreciation
and amortization
Depreciation and amortization of this business area for 2010 was
€199 million, a 3.1% decrease from
€205 million in 2009.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2010
was €703 million, a 50.5% decrease from the
€1,420 million recorded for 2009, primarily due to the
fact that Impairment on financial assets (net) was negatively
affected in 2009 by the write-off of impaired assets as a result
of the significant deterioration of economic and credit
conditions in the states in which the area operates in the
United States. The value of the collateral was lower than the
commercial real-estate loan portfolio value and, as a
consequence, a write-off for the difference and additional
provisions were set aside in 2009 to maintain the coverage ratio
comparable to the prior year. The non-performing assets ratio of
this business area as of December 31, 2010 increased to
4.4% from 4.2% as of December 31, 2009.
Provisions
(net) and other gains (losses)
Provisions (net) and other gains (losses) for 2010 reflected
losses of €22 million, compared to the
€1,056 million losses recorded for 2009. This item was
negatively affected in 2009 due primarily to impairment losses
for goodwill (€1,097 million) attributed to the
significant deterioration in economic and credit conditions in
the states in which the area operates in the United States.
Income
before tax
As a result of the foregoing, the income before tax of this
business area for 2010 was €304 million, compared to a
loss of €1,428 million recorded in 2009.
Income
tax
Income before tax of this business area for 2010 was a loss of
€68 million compared to a gain of
€478 million recorded in 2009 due to the loss before
tax referred to above.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2010 was €236 million, compared to a loss of
€950 recorded in 2009.
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Wholesale
Banking and Asset Management
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
831 | 982 | (15.4 | ) | ||||||||
|
Net fees and commissions
|
492 | 461 | 6.8 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
(66 | ) | (59 | ) | 13.1 | |||||||
|
Other operating income and expenses (net)
|
500 | 314 | 59.2 | |||||||||
|
Gross income
|
1,758 | 1,699 | 3.4 | |||||||||
|
Administrative costs
|
(492 | ) | (476 | ) | 3.5 | |||||||
|
Depreciation and amortization
|
(9 | ) | (10 | ) | (7.6 | ) | ||||||
|
Impairment on financial assets (net)
|
(116 | ) | (60 | ) | 92.9 | |||||||
|
Provisions (net) and other gains (losses)
|
2 | (4 | ) | n.m | (1) | |||||||
|
Income before tax
|
1,143 | 1,150 | (0.6 | ) | ||||||||
|
Income tax
|
(192 | ) | (294 | ) | (34.8 | ) | ||||||
|
Net income
|
951 | 856 | 11.2 | |||||||||
|
Net income attributed to non-controlling interests
|
(2 | ) | (3 | ) | (53.2 | ) | ||||||
|
Net income attributed to parent company
|
950 | 852 | 11.4 | |||||||||
| (1) | Not meaningful. |
Net
interest income and Net gains (losses) on financial assets and
liabilities and exchange differences
For internal management purposes, “Net interest
income” and “Net gains (losses) on financial assets
and liabilities and exchange differences” for this business
area are analyzed together. Net interest income includes the
cost of funding of the market operations whose revenues are
accounted for in the heading “Net gains (losses) on
financial assets and liabilities and exchange differences”.
Net interest income for 2010 was €831 million, a 15.4%
decrease compared to the €982 million recorded for
2009. Net gains (losses) on financial assets and liabilities and
exchange differences amounted to losses of
€66 million, compared to losses of
€59 million for 2009. The sum of these headings for
2010 was €765 million, a 17.2% decrease compared to
the €924 million recorded for 2009. This decrease is
mainly due to the high market volatility, which negatively
affected trading income as credit spreads widened in the south
of Europe, despite the good performance of commercial activity
with customers in the Corporate & Investment Banking
business unit.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€492 million for 2010, a 6.8% increase from the
€461 million recorded for 2009, primarily due to
increased business activity with customers with a high business
potential in the Corporate & Investment Banking
business unit.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2010 was €500 million, a 59.2% increase from the
€314 million recorded for 2009, primarily due to the
increase of the share of profit of entities accounted for using
the equity method, which mainly related to our holding in CNCB.
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Gross
income
As a result of the foregoing, gross income of this business area
for 2010 was €1,758 million, a 3.4% increase over the
€1,699 million recorded in 2009.
Administrative
costs
Administrative costs of this business area for 2010 were
€492 million, a 3.5% increase over the
€476 million recorded in 2009, due to investment in
systems and the various growth plans implemented in the area.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2010
was €116 million, compared to €60 million in
2009, primarily due to an increase in this business area’s
impaired assets. However, the non-performing assets ratio of
this business area remained stable (1.2% as of December 31,
2010 and 2009).
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2010 was €1,143 million, a 0.6% decrease from
the €1,150 million for 2009.
Income
tax
Income tax of this business area in 2010 was
€192 million, a 34.8% decrease from the
€294 million recorded in 2009, due to the favorable
tax effect from the result of entities accounted for using the
equity method.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2010 was €950 million, an 11.4% increase over the
€852 million recorded in 2009.
Corporate
Activities
| Year Ended December 31, | Change | |||||||||||
| 2010 | 2009 | 2010/2009 | ||||||||||
| (in millions of euros) | (in %) | |||||||||||
|
Net interest income
|
(163 | ) | 437 | n.m | (1) | |||||||
|
Net fees and commissions
|
(179 | ) | (108 | ) | 65.4 | |||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
698 | 484 | 44.2 | |||||||||
|
Other operating income and expenses (net)
|
329 | 219 | 50.0 | |||||||||
|
Gross income
|
684 | 1,031 | (33.7 | ) | ||||||||
|
Administrative costs
|
(566 | ) | (559 | ) | 1.3 | |||||||
|
Depreciation and amortization
|
(232 | ) | (197 | ) | 18.1 | |||||||
|
Impairment on financial assets (net)
|
(916 | ) | (107 | ) | n.m | (1) | ||||||
|
Provisions (net) and other gains (losses)
|
(893 | ) | (741 | ) | 20.5 | |||||||
|
Income before tax
|
(1,924 | ) | (572 | ) | 236.3 | |||||||
|
Income tax
|
678 | 454 | 49.3 | |||||||||
|
Net income
|
(1,246 | ) | (118 | ) | n.m | (1) | ||||||
|
Net income attributed to non-controlling interests
|
0 | 13 | (97.8 | ) | ||||||||
|
Net income attributed to parent company
|
(1,245 | ) | (105 | ) | n.m | (1) | ||||||
| (1) | Not meaningful. |
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Net
interest income
Net interest income of this business area for 2010 was a loss of
€163 million compared to a gain of
€437 million recorded in 2009. Net interest income has
been negatively affected by the end of the recovery in mortgage
lending following the fall in interest rates in 2009, and by the
recent upward in the interest-rate curve in the euro zone.
Net
fees and commissions
Net fees and commissions of this business area amounted to a
loss of €179 million for 2010, a 65.4% increase from
the €108 million loss recorded for 2009, primarily due
to an increase of fees paid to underwriters in the issues of the
Group.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities and
exchange differences of this business area for 2010 were a gain
of €698 million, a 44.2% increase over the
€484 million gain recorded in 2009, primarily due to
an increase in sales of financial assets from the ALCO
portfolio, which has generated significant capital gains by
taking advantage of price volatility in the sovereign bond
markets during the first half of 2010.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2010 was a gain of €329 million, a 50.0% increase
from the €219 million gain recorded in 2009. Its main
component is the dividends from Telefónica, which increased
from €1.0 to €1.3 per share.
Gross
income
As a result of the foregoing, gross income of this business area
for 2010 was a gain of €684 million, a 33.7% decrease
from the €1,031 million gain recorded in 2009.
Administrative
costs
Administrative costs of this business area for 2010 were
€566 million, a 1.3% increase from the
€559 million recorded in 2009, primarily due to the
increase in costs associated with certain investments that are
currently being carried out including upgrading of systems and
image and brand identity (including new sponsorship arrangements
with the U.S. National Basketball Association).
Depreciation
and amortization
Depreciation and amortization of this business area for 2010 was
€232 million, an 18.1% increase from the
€197 million recorded in 2009.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2010
was €916 million compared to €107 million
recorded for 2009, principally due to continuing provisions for
loan losses designed to increase the Group coverage ratio from
57% in 2009 to 62% in 2010 in light of economic conditions.
Provisions
(net) and other gains (losses)
Provisions (net) and other gains (losses) for 2010 was a loss of
€893 million, a 20.5% increase from a loss of
€741 million for 2009, primarily due to an increase in
provisions for foreclosed assets and real estate assets designed
to maintain coverage at an adequate level.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2010 was a loss of €1,924 million, compared
to a loss of €572 million recorded in 2009.
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Income
tax
Income tax of this business area for 2010 was
€678 million in income, a 49.3% increase from
€454 million in income recorded for 2009.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2010 was a loss of €1,245 million, compared to a
loss of €105 million in 2009.
Results
of Operations by Business Areas for 2009 Compared to
2008
Spain
and Portugal
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (in millions of euros) | (in %) | |||||||||||
|
Net interest income
|
4,910 | 4,784 | 2.6 | |||||||||
|
Net fees and commissions
|
1,482 | 1,636 | (9.4 | ) | ||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
187 | 231 | (18.9 | ) | ||||||||
|
Other operating income and expenses (net)
|
436 | 430 | 1.4 | |||||||||
|
Gross income
|
7,015 | 7,081 | (0.9 | ) | ||||||||
|
Administrative costs
|
(2,515 | ) | (2,622 | ) | (4.1 | ) | ||||||
|
Depreciation and amortization
|
(105 | ) | (104 | ) | 1.1 | |||||||
|
Impairment on financial assets (net)
|
(1,931 | ) | (809 | ) | 138.7 | |||||||
|
Provisions (net) and other gains (losses)
|
776 | 5 | n.m. | (1) | ||||||||
|
Income before tax
|
3,240 | 3,553 | (8.8 | ) | ||||||||
|
Income tax
|
(965 | ) | (1,080 | ) | (10.7 | ) | ||||||
|
Net income
|
2,275 | 2,473 | (8.0 | ) | ||||||||
|
Net income attributed to non-controlling interests
|
— | — | — | |||||||||
|
Net income attributed to parent company
|
2,275 | 2,473 | (8.0 | ) | ||||||||
| (1) | Not meaningful |
Net
interest income
Net interest income of this business area for 2009, was
€4,910 million, a 2.6% increase over the
€4,784 million recorded for 2008, due to the pricing
policy and a change in the deposit mix (with current and savings
accounts playing a bigger role than time deposits).
Net
fees and commissions
Net fees and commissions of this business area amounted to
€1,482 million for 2009, a 9.4% decrease from the
€1,636 million recorded for 2008, due primarily to the
decrease in fees income from mutual and pension funds and other
market-related products.
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Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains on financial assets and liabilities and exchange
differences of this business area for 2009 was
€187 million, a 18.9% decrease from the net gains of
€231 million for 2008, due primarily to the result of
lower activity given market volatility.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009 was €436 million, a 1.4% increase over the
€430 million recorded for 2008.
Gross
income
As a result of the foregoing, gross income of this business area
for 2009 was €7,015 million, a 0.9% decrease compared
to the €7,081 million recorded for 2008.
Administrative
costs
Administrative costs of this business area for 2009 was
€2,515 million, a 4.1% decrease from the
€2,622 million recorded for 2008, due primarily to the
Group’s transformation plan, which helped to reduce wages
and salaries, and through continued streamlining of the branch
network.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €1,931 million, a 138.7% increase over the
€809 million recorded for 2008, due primarily to the
significant increase in non-performing assets as a result of the
economic downturn. The business area’s non-performing
assets ratio increased significantly to 5.1% as of
December 31, 2009 from 2.6% as of December 31, 2008.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2009 was €3,240 million, an 8.8% decrease
from the €3,553 million recorded in 2008.
Income
tax
Income tax of this business area for 2009 was
€965 million, a 10.7% decrease from the
€1,080 million recorded in 2008, primarily as a result
of the decrease in income before tax.
Net
income attributed to parent company
As a result of the foregoing, net income attributed to parent
company of this business area for 2009 was
€2,275 million, an 8.0% decrease from the
€2,473 million recorded in 2008.
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Mexico
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
3,307 | 3,707 | (10.8 | ) | ||||||||
|
Net fees and commissions
|
1,077 | 1,189 | (9.4 | ) | ||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
370 | 375 | (1.3 | ) | ||||||||
|
Other operating income and expenses (net)
|
116 | 155 | (25.5 | ) | ||||||||
|
Gross income
|
4,870 | 5,426 | (10.2 | ) | ||||||||
|
Administrative costs
|
(1,489 | ) | (1,730 | ) | (14.0 | ) | ||||||
|
Depreciation and amortization
|
(65 | ) | (73 | ) | (10.6 | ) | ||||||
|
Impairment on financial assets (net)
|
(1,525 | ) | (1,110 | ) | 37.4 | |||||||
|
Provisions (net) and other gains (losses)
|
(21 | ) | (24 | ) | (11.6 | ) | ||||||
|
Income before tax
|
1,770 | 2,488 | (28.9 | ) | ||||||||
|
Income tax
|
(411 | ) | (557 | ) | (26.3 | ) | ||||||
|
Net income
|
1,360 | 1,931 | (29.6 | ) | ||||||||
|
Net income attributed to non-controlling interests
|
(2 | ) | (1 | ) | 45.1 | |||||||
|
Net income attributed to parent company
|
1,357 | 1,930 | (29.7 | ) | ||||||||
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, in 2009, the depreciation of the Mexican peso
against the euro negatively affected the results of operations
of our Mexican subsidiaries in euro terms. The average Mexican
peso to euro exchange rate for 2009, decreased by 13.3% compared
to the average exchange rate for 2008.
Net
interest income
Net interest income of this business area for 2009 was
€3,307 million, an 11.0% decrease from the
€3,707 million recorded for 2008, due primarily to the
depreciation of Mexican peso compared to euro, partially offset
by larger business volumes, as well as an active pricing policy.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€1,077 million for 2009, a 9.4% decrease from the
€1,189 million recorded 2008, due to the depreciation
of Mexican peso compared to euro, partially offset by a positive
performance on banking services and pension fund management.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains on financial assets and liabilities and exchange
differences of this business area for 2009 amounted to
€370 million, a 1.3% decrease from the net gains of
€375 million for 2008. Net gains (losses) on financial
assets and liabilities and exchange differences for 2008
included non-recurring gains from the sales of shares in the
initial public offering of Visa Inc. and there was no comparable
transaction in 2009.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009, was €116 million, a 25.5% decrease from the
€155 million recorded for 2008, due to the
depreciation of Mexican peso compared to euro, partially offset
by an increase in income from the pension and insurance
businesses.
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Gross
income
As a result of the foregoing, gross income of this business area
for 2009, was €4,870 million, a 10.2% decrease from
the €5,426 million recorded for 2008.
Administrative
costs
Administrative costs of this business area for 2009 amounted to
€1,489 million, a 14.0% decrease from the
€1,730 million recorded for 2008. In the latter part
of 2008 we instituted certain cost-control programs to limit the
rate of local currency growth in administrative costs in this
business area, the effects of which began to be felt in 2009.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €1,525 million, a 37.4% increase over the
€1,110 million recorded for 2008, due primarily to
increases from the consumer loan and credit card segments due to
a general deterioration in economic conditions. The business
area’s non-performing assets ratio increased to 4.3% as of
December 31, 2009 from 3.1% as of December 31, 2008.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2009 was €1,770 million, a 28.9% decrease
from the €2,488 million recorded for 2008.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2009 was €1,357 million, a 29.7% decrease from the
€1,930 million recorded in 2008.
South
America
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
2,566 | 2,149 | 19.4 | |||||||||
|
Net fees and commissions
|
908 | 775 | 17.1 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
405 | 253 | 60.4 | |||||||||
|
Other operating income and expenses (net)
|
(242 | ) | 15 | n.m. | (1) | |||||||
|
Gross income
|
3,637 | 3,192 | 14.0 | |||||||||
|
Administrative costs
|
(1,464 | ) | (1,314 | ) | 11.4 | |||||||
|
Depreciation and amortization
|
(115 | ) | (107 | ) | 7.8 | |||||||
|
Impairment on financial assets (net)
|
(431 | ) | (358 | ) | 20.4 | |||||||
|
Provisions (net) and other gains (losses)
|
(52 | ) | (17 | ) | n.m. | (1) | ||||||
|
Income before tax
|
1,575 | 1,396 | 12.9 | |||||||||
|
Income tax
|
(404 | ) | (318 | ) | 27.0 | |||||||
|
Net income
|
1,172 | 1,078 | 8.7 | |||||||||
|
Net income attributed to non-controlling interests
|
(392 | ) | (351 | ) | 11.6 | |||||||
|
Net income attributed to parent company
|
780 | 727 | 7.3 | |||||||||
| (1) | Not meaningful. |
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Table of Contents
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, in 2009, the depreciation of certain of the
currencies in the countries in which we operate in South America
against the euro slightly negatively affected the results of
operations of our foreign subsidiaries in euro terms.
Net
interest income
Net interest income for 2009, was €2,566 million, a
19.4% increase over the €2,149 million recorded for
2008, due to larger business volumes and more favorable customer
spreads.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€908 million for 2009, a 17.1% increase from the
€775 million recorded for 2008, mainly due to an
increase in banking and mutual fund commissions due primarily to
larger business volumes.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains on financial assets and liabilities and exchange
differences of this business area for 2009 was
€405 million, a 60.4% increase from the net gains of
€253 million for 2008, due to recovery in the
financial markets, which enabled some entities to realize
capital gains on their fixed income portfolios as well as higher
returns on proprietary trading positions held by the pension
fund managers and insurance providers.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009 was a loss of €242 million compared to a gain
of €15 million recorded in 2008, due mainly to the
impact in the consolidated financial statements of the treatment
of Venezuela as a hyperinflationary economy in 2009.
Gross
income
As a result of the foregoing, the gross income of this business
area for 2009 was €3,637 million, a 14.0% increase
over the €3,192 million recorded in 2008.
Administrative
costs
Administrative costs of this business area for 2009 were
€1,464 million, an 11.4% increase from the
€1,315 million recorded for 2008, due primarily to
growth in salaries that were lower than average inflation in the
region.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €431 million a 20.4% increase from the
€358 million recorded for 2008, due to generic
provisions attributable to the rise in lending volume as under
Bank of Spain rules recently-made loans require higher generic
provisions than older loans in our portfolio. The business
area’s non-performing assets ratio increased to 2.7% as of
December 31, 2009 from 2.1% as of December 31, 2008.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2009 was €1,575 million, a 12.9% increase
over the €1,396 million recorded in 2008.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2009 was €780 million, a 7.3% increase over the
€727 million in 2008.
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The
United States
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
1,679 | 1,471 | 14.2 | |||||||||
|
Net fees and commissions
|
610 | 584 | 4.4 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
156 | 149 | 4.6 | |||||||||
|
Other operating income and expenses (net)
|
(33 | ) | 23 | n.m. | (1) | |||||||
|
Gross income
|
2,413 | 2,227 | 8.3 | |||||||||
|
Administrative costs
|
(1,159 | ) | (1,140 | ) | 1.7 | |||||||
|
Depreciation and amortization
|
(205 | ) | (244 | ) | (15.9 | ) | ||||||
|
Impairment on financial assets (net)
|
(1,420 | ) | (379 | ) | n.m. | (1) | ||||||
|
Provisions (net) and other gains (losses)
|
(1,056 | ) | (17 | ) | n.m. | (1) | ||||||
|
Income before tax
|
(1,428 | ) | 447 | n.m. | (1) | |||||||
|
Income tax
|
478 | (139 | ) | n.m. | (1) | |||||||
|
Net income
|
(950 | ) | 308 | n.m. | (1) | |||||||
|
Net income attributed to non-controlling interests
|
— | — | — | |||||||||
|
Net income attributed to parent company
|
(950 | ) | 308 | n.m. | (1) | |||||||
| (1) | Not meaningful. |
As discussed above under “— Factors Affecting the
Comparability of our Results of Operations and Financial
Condition”, in 2009, the depreciation of the euro against
the dollar positively affected the results of operations of our
foreign subsidiaries in euro terms. The average dollar to euro
exchange rate for 2009 increased by 5.4% compared to the average
exchange rate for 2008.
In addition, on August 21, 2009, BBVA Compass acquired
certain assets and liabilities of Guaranty from the FDIC through
a public auction for qualified investors. BBVA Compass acquired
assets, mostly loans, for $11,441 million (approximately
€8,016 million) and assumed liabilities, mostly
customer deposits, for $12,854 million (approximately
€9,006 million). These acquired assets and liabilities
represented 1.5% and 1.8% of our total assets and liabilities on
the acquisition date. The agreement with the FDIC limits the
credit risk associated with the acquisition. The purchase
included a loss-sharing agreement with the FDIC under which the
latter undertook to assume 80% of the losses on up to the first
$2,285 million of the loans purchased by us and up to 95%
of the losses, if any, on the loans exceeding this amount. This
commitment has a maximum term of either five or ten years,
depending on the category of loan portfolio. This investment,
which included 164 branches and 300,000 customers in Texas and
California, offers us an opportunity to strengthen our United
States’ banking franchise in the retail market, while
limiting our investment risk.
Net
interest income
Net interest income for 2009 was €1,679 million, a
14.2% increase over the €1,471 million recorded for
2008, due mainly to increased volumes of activity primarily as a
result of the incorporation of the deposits and liabilities
acquired from Guaranty, a lower average dollar to euro exchange
rate and our active pricing policy.
Net
fees and commissions
Net fees and commissions of this business area for 2009 was
€610 million, a 4.4% increase over the
€584 million recorded in 2008.
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Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities and
exchange differences of this business area for 2009 were
€156 million, a 4.6% increase over the
€149 million recorded in 2008.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009 was a loss of €33 million compared to a gain
of €23 million recorded for 2008, due primarily to
higher contributions to the deposit guarantee fund, as a result
of the $28 million contribution made during the second
quarter of 2009 to the FDIC.
Gross
income
As a result of the foregoing, gross income of this business area
for 2009 was €2,413 million, an 8.3% increase over the
€2,227 million recorded in 2008.
Administrative
costs
Administrative costs of this business area for 2009 were
€1,159 million, a 1.7% increase over the
€1,140 million recorded for 2008, primarily as a
result of the exchange rate effects described above.
Depreciation
and amortization
Depreciation and amortization of this business area for 2009 was
€205 million, a 15.9% decrease from
€244 million in 2008, due primarily to the lower
amortization of intangible assets related to the acquisition of
the banks comprising this business area.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €1,420 million compared to €379 million
recorded for 2008, due to the write off of impaired assets
attributed to the significant decline in economic and credit
conditions in the states in which the area operates in the
United States. The value of the collateral against which the
commercial real-estate loan portfolio was re-assessed, resulting
a write-off for the difference, and additional provisions were
set aside to maintain the coverage ratio comparable to year end
2008. The business area’s non-performing assets ratio
increased to 4.2% as of December 31, 2009 from 2.5% as of
December 31, 2008. The non-performing assets ratio as of
December 31, 2009 was positively affected by incorporation
of performing assets from Guaranty in the third quarter of 2009.
The business’ coverage ratio remained at 58% as of
December 31, 2009 mainly due to the above-mentioned
provisions.
Provisions
(net) and other gains (losses)
Provisions (net) and other gains (losses) for 2009 reflected
losses of €1,056 million, compared to the
€17 million losses recorded for 2008, due primarily to
impairment losses for goodwill attributed to the significant
decline in economic and credit conditions in the states in which
the area operates in the United States.
Income
before tax
As a result of the foregoing, the income before tax of this
business area for 2009 was a loss amounted to
€1,428 million compared to the income amounted to
€447 million recorded in 2008.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2009 was a loss amounted to €950 million compared
to the income amounted to €308 million recorded in
2008.
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Wholesale
Banking and Asset Management
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
982 | 618 | 59.1 | |||||||||
|
Net fees and commissions
|
461 | 375 | 22.8 | |||||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
(59 | ) | 114 | n.m. | (1) | |||||||
|
Other operating income and expenses (net)
|
314 | 406 | (22.6 | ) | ||||||||
|
Gross income
|
1,699 | 1,513 | 12.3 | |||||||||
|
Administrative costs
|
(475 | ) | (449 | ) | 5.9 | |||||||
|
Depreciation and amortization
|
(10 | ) | (8 | ) | 17.0 | |||||||
|
Impairment on financial assets (net)
|
(60 | ) | (171 | ) | (65.0 | ) | ||||||
|
Provisions (net) and other gains (losses)
|
(4 | ) | 4 | n.m. | (1) | |||||||
|
Income before tax
|
1,150 | 888 | 29.5 | |||||||||
|
Income tax
|
(294 | ) | (160 | ) | 84.0 | |||||||
|
Net income
|
856 | 728 | 17.5 | |||||||||
|
Net income attributed to non-controlling interests
|
(3 | ) | (6 | ) | (44.9 | ) | ||||||
|
Net income attributed to parent company
|
852 | 722 | 18.0 | |||||||||
| (1) | Not meaningful. |
The preceding table and descriptions below do not take into
account the impact of the Madoff fraud in 2008, which, due to
its unique nature, is included in the area of Corporate
Activities.
Net
interest income and Net gains (losses) on financial assets and
liabilities and exchange differences
For internal management purposes, “net interest
income” and “net gains (losses) on financial assets
and liabilities and exchange differences” for this business
area are analyzed together. Net interest income includes the
cost of funding of the market operations whose revenues are
accounted for in the heading “Net gains (losses) on
financial assets and liabilities and exchange differences”.
Net interest income for 2009 was €982 million, a 53.1%
increase over the €618 million recorded for 2008. Net
gains (losses) on financial assets and liabilities and exchange
differences amounted to losses of €59 million,
compared to gains of €114 million for 2008. The sum of
these headings for 2009 was €924 million, a 26.3%
increase over the €731 million recorded for 2008, due
primarily to active price management and an increase in the
number of customer transactions.
Net
fees and commissions
Net fees and commissions of this business area amounted to
€461 million for 2009, a 22.8% increase from the
€375 million recorded for 2008, due to increased
business volumes as a result of the area’s increased
strategic focus on customers with the potential to generate high
business volumes.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009 was €314 million, a 22.6% decrease from the
€406 million recorded for 2008, primarily reflecting
the non-recurrence in 2009 of gains recognized on the sale of
ownership interests in Gamesa in 2008.
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Table of Contents
Gross
income
As a result of the foregoing, gross income of this business area
for 2009 was €1,699 million, a 12.3% increase over the
€1,513 million recorded in 2008.
Administrative
costs
Administrative costs of this business area for 2009 were
€476 million, a 5.9% increase over the
€449 million recorded in 2008, due primarily to an
increase in employees in connection with growth of the business
in Corporate and Investment Banking unit.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €60 million, a 65.0% decrease from the
€171 million recorded for 2008, due to the decline of
the loan portfolio and to the focus on customers with better
credit (which is also boosting transactional business). The
business area’s non-performing assets ratio increased to
1.2% as of December 31, 2009 from 0.2% as of
December 31, 2008.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2009 was €1,150 million, a 29.5% increase
over the €888 million recorded in 2008.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2009 was €852 million, an 18.0% increase over the
€722 million recorded in 2008.
Corporate
Activities
| Year Ended December 31, | Change | |||||||||||
| 2009 | 2008 | 2009/2008 | ||||||||||
| (In millions of euros) | (in %) | |||||||||||
|
Net interest income
|
437 | (1,043 | ) | n.m. | (1) | |||||||
|
Net fees and commissions
|
(108 | ) | (33 | ) | n.m. | (1) | ||||||
|
Net gains (losses) on financial assets and liabilities and
exchange differences
|
484 | 437 | 10.8 | |||||||||
|
Other operating income and expenses (net)
|
219 | 177 | 24.0 | |||||||||
|
Gross income
|
1,031 | (462 | ) | n.m. | (1) | |||||||
|
Administrative costs
|
(559 | ) | (500 | ) | 11.7 | |||||||
|
Depreciation and amortization
|
(197 | ) | (163 | ) | 20.6 | |||||||
|
Impairment on financial assets (net)
|
(107 | ) | (113 | ) | n.m. | (1) | ||||||
|
Provisions (net) and other gains (losses)
|
(741 | ) | (608 | ) | 21.9 | |||||||
|
Income before tax
|
(572 | ) | (1,847 | ) | (69.0 | ) | ||||||
|
Income tax
|
454 | 713 | (36.3 | ) | ||||||||
|
Net income
|
(118 | ) | (1,134 | ) | n.m. | (1) | ||||||
|
Net income attributed to non-controlling interests
|
13 | (7 | ) | n.m. | (1) | |||||||
|
Net income attributed to parent company
|
(105 | ) | (1,140 | ) | n.m. | (1) | ||||||
| (1) | Not meaningful. |
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Table of Contents
Net
interest income
Net interest income of this business area for 2009 was a gain of
€437 million compared to the loss of
€1,043 million recorded in 2008, due primarily to the
favorable impact of lower interest rates and our strong balance
sheet management of the euro balance sheet and the positive
contribution of interest rate economic hedges.
Net
gains (losses) on financial assets and liabilities and exchange
differences
Net gains (losses) on financial assets and liabilities and
exchange differences of this business area for 2009 were
€484 million, a 10.8% increase over the
€437 million recorded in 2008.
Other
operating income and expenses (net)
Other operating income and expenses (net) of this business area
for 2009 was €219 million compared to a gain of
€177 million recorded in 2008.
Gross
income
As a result of the foregoing, gross income of this business area
for 2009 was a gain of €1,031 million, compared to a
loss of €462 million recorded in 2008.
Administrative
costs
Administrative costs of this business area for 2009 were
€559 million, an 11.7% increase from the
€500 million recorded in 2008.
Depreciation
and amortization
Depreciation and amortization of this business area for 2009 was
€197 million, a 20.6% increase over the
€163 million recorded in 2008.
Impairment
on financial assets (net)
Impairment on financial assets (net) of this business for 2009
was €107 million compared to €113 million
recorded for 2008.
Provisions
(net) and other gains (losses)
Provisions (net) and other gains (losses) for 2009 was a loss of
€741 million, compared to a loss of
€608 million for 2008. This increased loss was
primarily due to impairment charges for investments in tangible
assets and inventories from our real estate businesses during
the year ended December 31, 2009. The year ended
December 31, 2008 included the gross gain of
€727 million from the sale of our stake in Bradesco,
which was offset in part by a charge of €470 million
related to early retirements.
Income
before tax
As a result of the foregoing, income before tax of this business
area for 2009 was a loss of €572 million, compared to
a loss of €1,847 million recorded in 2008.
Net
income attributed to parent company
Net income attributed to parent company of this business area
for 2009 was a loss of €105 million, compared to
€1,140 million in 2008, due primarily to the
aforementioned items.
Reconciliation
to U.S. GAAP
As of December 31, 2010, 2009 and 2008, shareholders’
equity under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 was €35,919 million,
€29,300 million and €25,656 million,
respectively.
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Table of Contents
As of December 31, 2010, 2009 and 2008, shareholders’
equity under U.S. GAAP was €42,813 million,
€36,172 million and € 32,744 million,
respectively.
The increase in stockholders’ equity under U.S. GAAP
as of December 31, 2010, 2009 and 2008 as compared to
stockholders’ equity under EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004 at each of those
dates is principally due to the goodwill that arose from the
business combinations with Argentaria (2000) and Bancomer
(2004).
For the years ended December 31, 2010, 2009 and 2008, net
income attributed to parent company under the EU-IFRS required
to be applied under the Bank of Spain’s Circular 4/2004 was
€4,606 million, €4,210 million and
€5,020 million, respectively.
For the years ended December 31, 2010, 2009 and
2008 net income attributed to parent company under
U.S. GAAP was €4,299 million,
€3,825 million and €4,070 million,
respectively.
The differences in net income in 2010 and 2009 under
U.S. GAAP as compared to net income attributed to parent
company for the years 2010 and 2009 under EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004 are
principally due to the reconciliation item “valuation of
assets”.
See Note 60 to our Consolidated Financial Statements for a
quantitative reconciliation of net income and stockholders’
equity from EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 to U.S. GAAP.
| B. | Liquidity and Capital Resources |
Our principal source of funds is our customer deposit base,
which consists primarily of demand, savings and time deposits.
In addition to relying on our customer deposits, we also access
the interbank market (overnight and time deposits) and domestic
and international capital markets for our additional liquidity
requirements. To access the capital markets, we have in place a
series of domestic and international programs for the issuance
of commercial paper and medium- and long-term debt. We also
generally maintain a diversified portfolio of liquid assets and
securitized assets. Another source of liquidity is our
generation of cash flow. Finally, we supplement our funding
requirements, to a very limited extent, with borrowings from the
Bank of Spain, mostly short-term and at market interest rates,
which is a common practice in Spain.
Liquidity risk management and controls are explained in
Note 7.3 to the Consolidated Financial Statements. In
addition, information on outstanding contractual maturities of
assets and liabilities is provided in Note 7.5 to the
Consolidated Financial Statements. For information concerning
our short-term borrowing, see “Item 4. Information on
the Company — Selected Statistical
Information — LIABILITIES — Short-term
Borrowings”.
The following table shows the balances as of December 31,
2010, 2009 and 2008 of our principal sources of funds (including
accrued interest, hedge transactions and issue expenses):
|
As of December 31,
|
As of December 31,
|
As of December 31,
|
||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Customer deposits
|
275,789 | 254,183 | 255,236 | |||||||||
|
Due to credit entities
|
68,180 | 70,312 | 66,805 | |||||||||
|
Debt securities in issue
|
102,599 | 117,817 | 121,134 | |||||||||
|
Other financial liabilities
|
6,596 | 5,624 | 7,420 | |||||||||
|
Total
|
453,164 | 447,936 | 450,595 | |||||||||
Customer
deposits
Customer deposits amounted to €275,789 million as of
December 31, 2010, compared to €254,183 million
as of December 31, 2009 and €255,236 million as
of December 31, 2008. The increase from December 31,
2009 to December 31, 2010 was primarily caused by an
increase in time deposits in the domestic sector and low-cost
funds in the non-domestic sector.
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Table of Contents
Our customer deposits, excluding assets sold under repurchase
agreements amounted to €251,780 million as of
December 31, 2010 compared to €242,194 million as
of December 31, 2009 and €238,589 million as of
December 31, 2008.
Due to
credit entities
Amounts due to credit entities amounted to
€68,180 million as of December 31, 2010, compared
to €70,312 million as of December 31, 2009 and
€66,805 million as of December 31, 2008. The
decrease as of December 31, 2010 compared to
December 31, 2009, was primarily a result of a reduction in
the amount borrowed from the European Central Bank in 2010.
Capital
markets
We have continued making debt issuances in the domestic and
international capital markets in order to finance our activities
and as of December 31, 2010 we had
€85,179 million of senior debt outstanding, comprising
€71,964 million in bonds and debentures and
€13,215 million in promissory notes and other
securities, compared to €99,939 million,
€70,357 million and €29,582 million
outstanding as of December 31, 2009,respectively
(€104,157 million, €84,172 million and
€19,985 million outstanding, respectively, as of
December 31, 2008). See Note 23.4 to the Consolidated
Financial Statements.
In addition, we had a total of €11,569 million in
Subordinated Debt including convertible subordinated obligations
in an aggregated principal amount of €2,000 million
issued in September 2009 and €5,202 million in
Preferred Securities outstanding as of December 31, 2010,
and included in the total of debt securities in issue, compared
to €12,117 million and €5,188 million
outstanding as of December 31, 2009,
respectively,(€10,785 million and
€5,464 million outstanding as of December 31,
2008, respectively). The breakdown of the outstanding
Subordinated Debt and Preferred Securities by entity issuer,
maturity, interest rate and currency is disclosed in
Appendix VIII of the Consolidated Financial Statements.
The average maturity of our outstanding Debt Certificates and
Subordinated Debt as of December 31, 2010, was the
following:
|
Senior Debt
|
2.9 years | |||
|
Subordinated Debt (excluding Preference Securities)
|
8.5 years |
Generation
of Cash Flow
We operate in Spain, Mexico, the United States and over 30 other
countries, mainly in Europe and Latin America. Our banking
subsidiaries around the world, including BBVA Compass, are
subject to supervision and regulation by a variety of regulatory
bodies relating to, among other things, the satisfaction of
minimum capital requirements. The obligation to satisfy such
capital requirements may affect the ability of our banking
subsidiaries, including BBVA Compass, to transfer funds to us in
the form of cash dividends, loans or advances. In addition,
under the laws of the various jurisdictions where our
subsidiaries, including BBVA Compass, are incorporated,
dividends may only be paid out of funds legally available
therefor. For example, BBVA Compass is incorporated in Alabama
and under Alabama law it is not able to pay any dividends
without the prior approval of the Superintendent of Banking of
Alabama if the dividend would exceed the total net earnings for
the year combined with the bank’s retained net earnings of
the preceding two years.
Even where minimum capital requirements are met and funds are
legally available therefore, the relevant regulator could advise
against the transfer of funds to us in the form of cash
dividends, loans or advances, for prudence reasons or otherwise.
There is no assurance that in the future other similar
restrictions will not be adopted or that, if adopted, they will
not negatively affect our liquidity. The geographic
diversification of our businesses, however, could help to limit
the effect on the Group any restrictions that could be adopted
in any given country.
We believe that our working capital is sufficient for our
present requirements and to pursue our planned business
strategies.
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Table of Contents
See Note 53 of the Consolidated Financial Statements for
additional information on our Consolidated Statements of Cash
Flows.
Capital
Under the Bank of Spain’s capital adequacy regulations, as
of December 31, 2010, 2009 and 2008, we were required to
have a ratio of consolidated stockholders’ equity to
risk-weighted assets and off-balance sheet items (net of certain
amounts) of not less than 8%. As of December 31, 2010, this
ratio was 11.9%, down from 12.9% as of December 31, 2009,
and our stockholders’ equity exceeded the minimum level
required by 48.5%, up from 37.9% at the prior year end. As of
December 31, 2008, this ratio was 11.2% and our
stockholders’ equity exceeded the minimum level required by
28.6%.
Based on the framework of the Basel II and using such
additional assumptions as we consider appropriate, we have
estimated that as of December 31, 2010, 2009 and 2008 our
consolidated Tier I risk-based capital ratio was 10.5%,
9.4% and 7.9%, respectively, and our consolidated total
risk-based capital ratio (consisting of both Tier I capital
and Tier II capital) was 13.7%, 13.6% and 12.2%,
respectively. The Basel II recommends that these ratios be
at least 4% and 8%, respectively.
For qualitative and quantitative information on the principal
risks we face, including market, credit, and liquidity risks as
well as information on funding and treasury policies and
exchange rate risk, see “Item 11. Quantitative and
Qualitative Disclosures About Market Risk”.
Stress
Test and Sovereign Debt Exposure
In July 2010, the Committee of European Banking Supervisors
(CEBS), published the results of the stress tests performed in
conjunction with national financial supervisors. The overall
objective of this exercise was to provide policy information for
assessing the resilience of the EU banking system to possible
adverse economic developments and to assess the ability of banks
to absorb possible shocks in credit and market risks, including
potential sovereign defaults by European governments.
This stress test exercise was conducted on a sample of 91
European banks that represented 65% of the total assets of the
EU banking sector as a whole. The commitment made at the
European level was that participating institutions of each
country should represent 50% of the banking sector. The Bank of
Spain conducted the stress test for all saving banks and for
almost all commercial banks, including all listed banks, which
together represented 95% of the total assets of the Spanish
banking sector.
The stress test focused mainly on credit and market risks,
including the exposures to European sovereign debt. The focus of
the stress test was on capital adequacy; liquidity risks were
not directly stress tested. The exercise was carried out on the
basis of the consolidated year-end 2009 figures and the
scenarios have been applied over a period of two
years — 2010 and 2011. The aggregate Tier I
capital ratio was used as a common measure of banks resilience
to shocks.
For the purpose of stress testing the credit risk and simulating
profit and losses, two sets of macro-economic scenarios, namely
benchmark and adverse, including sovereign shock, were used.
The adverse scenario incorporates in the case of Spain a high
degree of stress that translates into a decline in GDP in
2010-2011
of
2.6%, a decline in housing prices and other assumptions for the
evolution of net operational income. The benchmark ratio was
established as a ratio of Tier 1 capital to total risk
weighted assets (RWA) of 6%. This is not a legal requirement.
In the worst case scenario prescribed under such tests for 2011,
BBVA would maintain approximately the same Tier 1 capital
ratio (9.3%) that it had at the end of 2009 (9.4%).
New stress tests in the euro area are expected to be published
in June 2011.
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Table of Contents
We present in the following table a detail of BBVA’s global
exposure to European and non-European sovereign debt as of
December 31, 2010:
| (In millions of euros) | % | |||||||
|
Rating
|
||||||||
|
Higher than AA
|
35,293 | 56.23 | % | |||||
|
Of which:
|
||||||||
|
Spain
|
31,212 | 49.72 | % | |||||
|
AA or below
|
27,475 | 43.77 | % | |||||
|
Of which:
|
||||||||
|
Mexico
|
17,665 | 28.14 | % | |||||
|
Italy
|
4,229 | 6.74 | % | |||||
|
Portugal
|
58 | 0.09 | % | |||||
|
Ireland
|
— | — | ||||||
|
Greece
|
107 | 0.17 | % | |||||
|
Total
|
62,768 | 100 | % | |||||
| C. | Research and Development, Patents and Licenses, etc. |
In 2010, we continued to foster the use of new technologies as a
key component of our global development strategy. We explored
new business and growth opportunities, focusing on three major
areas: emerging technologies; asset capture/exploitation; and
the customer as the focal point of its banking business.
The BBVA Group is not materially dependent on the issuance of
patents, licenses and industrial, mercantile or financial
contracts or on new manufacturing processes in carrying out its
business purpose.
| D. | Trend Information |
The European financial services sector is likely to remain
competitive. Further consolidation in the sector (through
mergers, acquisitions or alliances) is likely as the other major
banks look to increase their market share or combine with
complementary businesses or via acquisition of distressed
entities. It is foreseeable that regulatory changes will take
place in the future that will diminish barriers to such
consolidation transactions. However, some of the hurdles that
should be dealt with are the result of local preferences, such
as consumer protection rules. If there are clear local consumer
preferences, leading to specific local consumer protection
rules, the same products cannot be sold across all the
jurisdictions in which the Group operates, which reduces
potential synergies. Certain challenges, such as the Value Added
Tax regime for banks, do not however, relate to the interest or
preferences of consumers.
The following are the most important trends, uncertainties and
events that are reasonably likely to have a material adverse
effect on us or that would cause the financial information
disclosed herein not to be indicative of our future operating
results or financial condition:
| • | the prolonged downturn in the Spanish economy and sustained unemployment above historical averages; | |
| • | the restructuring of the Spanish banking sector, specially with concentration in savings banks; | |
| • | doubts about European peripheral economies will probably continue in 2011, so financial markets will remain closed; | |
| • | uncertainties relating to the sustainability of any recovery in economic growth and interest rate cycles, especially in the United States, where the high current account deficit of the U.S. economy may translate into an upward adjustment of risk premium and higher global interest rates; | |
| • | the fragility of the recovery from the financial crisis triggered by defaults on subprime mortgages and related asset-backed securities in the United States which has significantly disrupted the liquidity of financial institutions and markets; |
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| • | the fragility of the Greek, Portuguese and Irish economies, which could affect the funding costs of Spanish financial institutions and of the Government; | |
| • | the effects of the withdrawal of significant monetary and fiscal stimulus programs and uncertainty over government responses to growing public deficits; | |
| • | uncertainty over regulation of the financial industry, including the potential limitation on the size or scope of the activities of certain financial institutions or additional capital requirements, coming both from the Bank of Spain or globally; | |
| • | uncertainty over the minimum solvency levels to be required to the financial institutions by the Spanish government; | |
| • | the continued downward adjustment in the housing sector in Spain, which could further negatively affect credit demand and household wealth, disposable income and consumer confidence. The existence of a significant over supply in the housing market in Spain and the pessimistic expectations about house price increases are likely to postpone investment decisions, therefore negatively affecting mortgage growth rates; | |
| • | continued volatility in capital markets or a downturn in investor confidence, linked to factors such as geopolitical risk, particularly given the environment in the Middle East. Continued or new crises in the region could cause an increase in oil prices, generating inflationary pressures that will have a negative effect on interest rates and economic growth; | |
| • | the effect that an economic slowdown may have over Latin American markets and fluctuations in local interest and exchange rates; and | |
| • | although it is foreseeable that entry barriers to domestic markets in Europe will be lowered, our plans for expansion into other European markets could be affected by entry barriers in such countries and by protectionist policies of national governments, which are generally higher in times of crisis. |
| E. | Off-Balance Sheet Arrangements |
In addition to loans, we had outstanding the following
contingent liabilities and commitments at the dates indicated:
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Contingent liabilities:
|
||||||||||||
|
Rediscounts, endorsements and acceptances
|
49 | 45 | 81 | |||||||||
|
Guarantees and other sureties
|
28,092 | 26,266 | 27,649 | |||||||||
|
Other contingent liabilities
|
8,300 | 6,874 | 8,222 | |||||||||
|
Total contingent liabilities
|
36,441 | 33,185 | 35,952 | |||||||||
|
Commitments:
|
||||||||||||
|
Balances drawable by third parties:
|
||||||||||||
|
Credit entities
|
2,303 | 2,257 | 2,021 | |||||||||
|
Public authorities
|
4,135 | 4,567 | 4,221 | |||||||||
|
Other domestic customers
|
27,201 | 29,604 | 37,529 | |||||||||
|
Foreign customers
|
53,151 | 48,497 | 48,892 | |||||||||
|
Total balances drawable by third parties
|
86,790 | 84,925 | 92,663 | |||||||||
|
Other commitments
|
3,784 | 7,398 | 6,234 | |||||||||
|
Total commitments
|
90,574 | 92,323 | 98,897 | |||||||||
|
Total contingent liabilities and commitments
|
127,015 | 125,508 | 134,849 | |||||||||
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In addition to the contingent liabilities and commitments
described above, the following table provides information
regarding off-balance-sheet funds managed by us as of
December 31, 2010, 2009 and 2008:
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Mutual funds
|
41,006 | 39,849 | 37,076 | |||||||||
|
Pension funds
|
72,598 | 57,264 | 42,701 | |||||||||
|
Other managed assets
|
25,435 | 26,501 | 24,582 | |||||||||
|
Total
|
139,039 | 123,614 | 104,359 | |||||||||
See Note 38 to the Consolidated Financial Statements for
additional information with respect to our off-balance sheet
arrangements.
| F. | Tabular Disclosure of Contractual Obligations |
Our consolidated contractual obligations as of December 31,
2010 based on when they are due, were as follows:
|
Less Than One
|
One to Three
|
Three to Five
|
Over Five
|
|||||||||||||||||
| Year | Years | Years | Years | Total | ||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||
|
Senior debt
|
23,462 | 8,938 | 33,969 | 15,843 | 82,212 | |||||||||||||||
|
Subordinated debt
|
788 | 948 | 1,784 | 13,251 | 16,771 | |||||||||||||||
|
Capital lease obligations
|
— | — | — | — | ||||||||||||||||
|
Operating lease obligations
|
144 | 71 | 29 | 89 | 332 | |||||||||||||||
|
Purchase obligations
|
26 | — | — | 26 | ||||||||||||||||
|
Total(*)
|
24,420 | 9,956 | 35,782 | 29,183 | 99,341 | |||||||||||||||
| (*) | Interest to be paid is not included. The majority of the senior and subordinated debt was issued at variable rates. The financial cost of such issuances for 2010, 2009 and 2008 is detailed in Note 39.2 to the Consolidated Financial Statements. Commitments with personnel for 2010, 2009 and 2008 are detailed in Note 26 to the Consolidated Financial Statements. The breakdown by maturities of customer deposits for 2010, 2009 and 2008 is provided in Note 7 to the Consolidated Financial Statements. |
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Our Board of Directors is committed to a good corporate
governance system in the design and operation of our corporate
bodies in the best interests of the Company and our shareholders.
Our Board of Directors is subject to Board regulations that
reflect and implement the principles and elements of BBVA’s
concept of corporate governance. These Board regulations
comprise standards for the internal management and operation of
the Board and its committees, as well as the rights and
obligations of directors in pursuit of their duties, which are
contained in the directors’ charter. Shareholders and
investors may find these on our website (www.bbva.com).
The Annual General Meeting (“AGM”) has its own set of
regulations on issues such as how it operates and what rights
shareholders enjoy regarding AGMs. These establish the
possibility of exercising or delegating votes over remote
communication media.
Our Board of Directors has also approved a report on corporate
governance for 2010, according to the guidelines set forth under
Spanish regulation for listed companies. It can be found on our
website (www.bbva.com).
Our website was created as an instrument to facilitate
information and communication with shareholders. It provides
special direct access to all information considered relevant to
BBVA’s corporate governance system in a user-friendly
manner.
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| A. | Directors and Senior Management |
We are managed by a Board of Directors that currently has 12
members. Pursuant to article one of the Board regulations,
independent directors are those external directors who have been
appointed in view of their personal and professional
qualifications and can carry out their duties without being
compromised by their relationships with us, our significant
shareholders or our senior managements. Independent directors
may not:
a) Have been employees or executive directors in Group
companies, unless three or five years, respectively, have passed
since they ceased to be so.
b) Receive any amount or benefit from the Company or its
Group companies for any reason other than remuneration of their
directorship, unless it is insignificant.
Neither dividends nor supplementary pension payments that the
director may receive from earlier professional or employment
relationships shall be taken into account for the purposes of
this section, provided they are not subject to conditions and
the company paying them may not at its own discretion suspend,
alter or revoke their accrual without breaching its obligations.
c) Be or have been a partner in the external auditors’
firm or in charge of the auditor’s report with respect to
the Company or any other Group company during the last three
years.
d) Be executive director or senior manager in any other
company on which a Company executive director or senior manager
is external director.
e) Maintain or have maintained during the past year an
important business relationship with the Company or any of its
Group companies, either on
his/her
own
behalf or as relevant shareholder, director or senior manager of
a company that maintains or has maintained such relationship.
Business relationships shall mean relationships as provider of
goods
and/or
services, including financial, advisory
and/or
consultancy services.
f) Be significant shareholders, executive directors or
senior managers of any organization that receives or has
received significant donations from the Company or its Group
during the last three years.
Those who are merely trustees on a foundation receiving
donations shall not be ineligible under this letter.
g) Be married to or linked by equivalent emotional
relationship, or related by up to second-degree family ties to
an executive director or senior manager of the Company.
h) Have not been proposed by the Appointments Committee for
appointment or renewal.
i) Fall within the cases described under letters a), e),
f) or g) above, with respect to any significant
shareholder or shareholder represented on the Board. In cases of
family relationships described under letter g), the limitation
shall not only apply to the shareholder, but also to the
directors it nominates for the Company’s Board.
Directors owning shares in the Company may be independent
providing they comply with the above conditions and their
shareholding is not legally considered as significant.
According to recommendations on corporate governance, the Board
has established a limit on how long a director may remain
independent. Directors may not remain on the Board as
independent directors after having sat on it as such for more
than twelve years running.
Regulations
of the Board of Directors
The principles and elements comprising our corporate governance
are set forth in our Board regulations, which govern the
internal procedures and the operation of the Board and its
committees and directors’ rights and duties as described in
their charter. Originally approved in 2004, these regulations
have been amended in May 2010 to reflect the creation of two new
committees: one in charge of Appointments and another one in
charge of Compensation, which replace the previous
Appointments & Compensation Committee in order to keep
the Bank’s corporate governance system at the forefront of
governance practices and enhance the role of each committee by
achieving
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greater specialization in each separate matter. Furthermore, our
Board regulations have also been amended in February 2011 in
order to adapt them to the amendments to the Spanish Companies
Act (currently the Capital Companies Act), and the Spanish
Auditing Law entered into force in 2010 as mentioned under
Item 4 of this Annual Report.
The following provides a brief description of several
significant matters covered in the regulations of the Board of
Directors.
Appointment
and Re-election of Directors
The proposals that the Board submits to the Company’s AGM
for the appointment or re-election of directors and the
resolutions to appoint directors made by the Board of Directors
shall be approved at the proposal of the Appointments Committee
in the case of independent directors and on the basis of a
report from said committee in the case of all other directors.
To such end, the committee assesses the skills, knowledge and
experience required on the Board and the capacities the
candidates must offer to cover any vacant seats. It evaluates
how much time and work members may need to carry out their
duties properly as a function of the needs that the
Company’s governing bodies may have at any time.
Term of
Directorships and Director Age Limit
Directors shall stay in office for the term defined by our
bylaws (three years). If a director has been appointed to finish
the unexpired term of another director, he or she shall work out
the term of office remaining of the director whose vacancy he or
she covered through appointment, unless a proposal is put to the
AGM to appoint him or her for the term of office established
under our bylaws.
BBVA’s corporate governance system establishes an age limit
for sitting on the Bank’s Board. Directors must present
their resignation at the first Board meeting after the AGM
approving the accounts of the year in which they reach the age
of seventy.
Performance
of Directors’ Duties
Board members must comply with their duties as defined by
legislation and by the bylaws in a manner that is faithful to
the interests of the Company.
They shall participate in the deliberations, discussions and
debates arising on matters put to their consideration and shall
have sufficient information to be able to form a sound opinion
on the questions corresponding to our governing bodies. They may
request additional information and advice if they so require in
order to perform their duties. Their participation in the
Board’s meetings and deliberations shall be encouraged.
The directors may also request help from external experts with
respect to business submitted to their consideration whose
complexity or special importance makes it advisable.
Conflicts
of interest
The rules comprising the BBVA directors’ charter detail
different situations in which conflicts of interest could arise
between directors, their family members
and/or
organizations with which they are linked, and the BBVA Group.
They establish procedures for such cases, in order to avoid
conduct contrary to our best interests.
These rules help ensure directors’ conduct reflects
stringent ethical codes, in keeping with applicable standards
and according to core values of the BBVA Group.
Incompatibilities
Directors are also subject to a regime of incompatibilities,
which places strict constraints on holding posts on governing
bodies of Group companies or companies in which the Group has a
holding. Non-executive directors may
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not sit on the boards of subsidiaries or related companies
because of the Group’s holding in them, whilst executive
directors may only do so if they have express authority.
In the performance of their duties, directors will be subject to
the rules on incompatibility established under prevailing
legislation at any time and in particular under Act 31/1968,
27th July, on senior-management incompatibilities in the
private-sector banking industry.
Directors may not, on their own behalf or on behalf of a third
party, engage in an activity that is identical, similar or
supplementary to that which constitutes the Company’s
corporate purpose, unless it is with the express authorization
of the Company, by resolution of the AGM, for the purpose of
which they must inform the Board of Directors of that fact.
Moreover, directors who cease to be members of the Bank’s
Board may not offer their services to any other financial
institution competing with the Bank or of its subsidiaries for
two years after leaving, unless expressly authorized by the
Board. Such authorization may be denied on the grounds of
corporate interest.
Directors’
Resignation and Dismissal
Furthermore, in the following circumstances, reflected in the
Board regulations, directors must tender their resignation to
the Board and accept its decision regarding their continuity in
office (formalizing said resignation when the Board so resolves):
| • | When barred (on grounds of incompatibility or other) under prevailing legal regulations, under the bylaws or under the directors’ charter. | |
| • | When significant changes occur in their professional situation or that may affect the condition by virtue of which they were appointed to the Board. | |
| • | When they are in serious dereliction of their duties as directors. | |
| • | When the director, acting as such, has caused severe damage to the Company’s assets or its reputation or credit, and/or no longer displays the commercial and professional honor required to hold a Bank directorship. |
The
Board of Directors
Our Board of Directors is currently comprised of 12 members, as
in the meeting held on March 29, 2011 the Board accepted
the resignation of Mr. Rafael Bermejo Blanco as member of
the Board due to the fact that he had reached the age limit
provided in the regulations of the Board.
Our Board of Directors has also agreed the appointment of
Mr. José Luis Palao García-Suelto as member and
chairman of the Audit and Compliance Committee.
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The following table sets forth the names of the members of the
Board of Directors as of that date of this Annual Report on
Form 20-F,
their date of appointment and, if applicable, reelection, their
current positions and their present principal outside occupation
and employment history.
|
Present Principal
|
||||||||||||||
|
Outside Occupation
|
||||||||||||||
|
Date
|
and Employment
|
|||||||||||||
|
Name
|
Birth Year | Current Position | Date Nominated | Re-elected | History(*) | |||||||||
|
Francisco González Rodríguez(1)
|
1944 | Chairman and Chief Executive Officer | January 28, 2000 | March 12, 2010 | Chairman and CEO of BBVA, since January 2000. Director of Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer S.A. | |||||||||
|
Angel Cano Fernández(1)
|
1961 | President and Chief Operating Officer | September 29, 2009 | March 12, 2010 | President and Chief Operating Officer, BBVA, since 2009. Substitute director of Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. de C.V. Citic Bank board member. BBVA Director of Resources and Means from 2005 to 2009. | |||||||||
|
Tomás Alfaro Drake(2)(3)
|
1951 | Independent Director | March 18, 2006 | March 11, 2011 | Chairman of the Appointments Committee of BBVA since May 25, 2010. Director of Business Management and Administration and Business Sciences programs at Universidad Francisco de Vitoria since 1998. | |||||||||
|
Juan Carlos Álvarez Mezquíriz(1)(4)
|
1959 | Independent Director | January 28, 2000 | March 11, 2011 | Managing Director of Grupo El Enebro, S.A. Former Manager Director of Grupo Eulen. S.A. until 2010. | |||||||||
|
Ramón Bustamante y de la Mora(2)(5)
|
1948 | Independent Director | January 28, 2000 | March 12, 2010 | Was Director and General Manager and Non-Executive Vice-President of Argentaria and Chairman of Unitaria (1997). | |||||||||
|
José Antonio Fernández Rivero(3)(5)
|
1949 | Independent Director | February 28, 2004 | March 13, 2009 | Chairman of Risk Committee since March 30, 2004; On 2001 was appointed Group General Manager, until January 2003. Has been director representing BBVA on the Boards of Telefónica, Iberdrola, and of Banco de Crédito Local, and Chairman of Adquira. | |||||||||
|
Ignacio Ferrero Jordi(1)(4)
|
1945 | Independent Director | January 28, 2000 | March 12, 2010 | Chief Operating Officer of Nutrexpa, S.A. and La Piara, S.A. Chairman of Aneto Natural. | |||||||||
|
Carlos Loring Martínez de Irujo(2)(4)
|
1947 | Independent Director | February 28, 2004 | March 11, 2011 | Chairman of the Compensation Committee of BBVA since May 2010 (former Chairman of the Appointments and Compensation Committee since April 2006). Was Partner of J&A Garrigues, from 1977 until 2004. | |||||||||
|
José Maldonado Ramos (3)(4)(5)
|
1952 | External Director | January 28, 2000 | March 13, 2009 | Was appointed Director and General Secretary of BBVA, in January 2000. Took early retirement as Bank executive in December 2009. | |||||||||
|
Enrique Medina Fernández(1)(5)
|
1942 | Independent Director | January 28, 2000 | March 13, 2009 | State Attorney on Sabbatical. Deputy Chairman of Gines Navarro Construcciones until it merged to become Grupo ACS. | |||||||||
|
José Luis Palao García-Suelto(2)
|
1944 | Independent Director | February 1, 2011 | March 11, 2011 | Chairman of the Audit and Compliance Committee of BBVA since March 29, 2011. Senior Partner of the Financial Division in Spain at Arthur Andersen, from 1979 until 2002. Freelance consultant, from 2002 to 2010. | |||||||||
|
Susana Rodríguez Vidarte(2)(3)(4)
|
1955 | Independent Director | May 28, 2002 | March 11, 2011 | Was Dean of Deusto “La Comercial” University 1996-2009. Member of the accounts auditing institute. | |||||||||
| (*) | Where no date is provided, the position is currently held. |
| (1) | Member of the Executive Committee. | |
| (2) | Member of the Audit and Compliance Committee. | |
| (3) | Member of the Appointments Committee. | |
| (4) | Member of the Compensation Committee. | |
| (5) | Member of the Risk Committee. |
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Table of Contents
Executive
Officers or Management Committee (Comité de
Dirección)
Our executive officers were each appointed for an indefinite
term. Their positions as of the date of this Annual Report on
Form 20-F
are as follows:
|
Present Principal Outside Occupation and
|
||||
|
Name
|
Current Position
|
Employment History(*) | ||
|
Francisco González Rodríguez
|
Chairman and Chief Executive Officer | Chairman, BBVA, since January 2000. Director of Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer, S.A. | ||
|
Ángel Cano Fernández
|
President and Chief Operating Officer | Substitute director, Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. de CV | ||
|
Eduardo Arbizu Lostao
|
Head of Legal, Tax, Audit and Compliance department | Head of Legal department of BBVA, since 2002; Chief Executive Officer, Barclays Bank Spain, 1997 to 2002. | ||
|
Manuel González Cid
|
Head of Finance Division | Deputy General Manager, BBVA — Head of the Merger Office, 1999 to 2001. Head of Corporate Development, BBVA, 2001 to 2002. Director and Vice president of Repsol YPF, S.A. 2003-2005. | ||
|
José María García Meyer-Dohner
|
Head of Global Retail Business Banking | BBVA Business Management and Coordination Manager for Mexico, 2000-2001. Commercial Banking Manager for BBVA Bancomer, 2001-2004. From 2004 Head of USA, Country Manager and Chairman of BBVA Compass. Global Retail Business Banking since 2010. | ||
|
Ignacio Deschamps González
|
Head of Mexico | Commercial Banking Director for BBVA Bancomer to 2006. General Director of BBVA Bancomer since December 2006. | ||
|
Juan Asúa Madariaga
|
Head of Corporate and Business -Spain and Portugal | Global Corporate Banking Director, BBVA, 2000. E-Commerce Director, BBVA, 2000-2001. Corporate Global Banking Director, BBVA, 2001-2005. | ||
|
Jose Barreiro Hernández
|
Head of Wholesale Banking and Asset Management | Spanish Markets Director, BBVA, 2000-2001. Head of Global Markets and Distribution, Trading and Equity, BBVA, 2001-2005. | ||
|
Vicente Rodero Rodero
|
Head of South America | BBVA Corporate Banking Director for Mexico, 1995-1999. BBVA Personal Banking Director, 1999-2003. BBVA Regional Director for Madrid, 2003-2004. BBVA Commercial Banking Director for Spain, 2004-2006. | ||
|
Carlos Torres Vila
|
Head of Strategy & Development | BBVA Corporate Strategy & Development Director since January 2009. He entered in BBVA on September 2008. Before he worked five years in Endesa as Strategy Corporate Director. | ||
|
Gregorio Panadero Illera
|
Head of Brand and Communication | From April 1, 2009, Head of BBVA Corporate Brand & Communications Department. Director of Communications and Corporate Responsibility at Grupo Ferrovial from 2006 to 2009. | ||
|
Manuel Castro Aladro
|
Head of Risk | Head of BBVA Risk Department since September 2009. Director of Innovation and Business Development from 2005 to 2009. | ||
|
Ramón Monell Valls
|
Head of Innovation & Technology | Head of BBVA Innovation and Technology since September 2009. From 2002-2005 Chief Operating Officer of BBVA in Chile. BBVA Director of Technology & Operations. (2006-2009). | ||
|
Juan Ignacio Apoita Gordo
|
Head of Human Resources & Services | BBVA Head of Human Resources and Services since September 2009 BBVA Head of Human Resources Director from 2006 to 2009. | ||
|
Manuel Sánchez Rodríguez
|
Head of United States | Working at BBVA since 1990. From 2002-2005 Risks Manager at BBVA Bancomer in Mexico. From 2005-2080 Laredo National Bank. CEO of BBVA Compass from 2008 and Country Manager from 2010. |
| (*) | Where no date is provided, positions are currently held. |
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Table of Contents
| B. | Compensation |
The provisions of BBVA’s bylaws that relate to compensation
of directors are in strict accordance with the relevant
provisions of Spanish law. The main provisions of the bylaws
that relate to these matters are those that, in accordance with
applicable Spanish law, allow the members of the Board of
Directors to determine their administration costs or agree on
such additional benefits they consider appropriate or necessary,
up to an amount equivalent to four percent of our
paid-up
capital per year from the net earnings, which may only be paid
after the minimum yearly dividend equivalent to four percent of
the paid-in capital has been paid to our shareholders.
Remuneration
of non-executive Directors
The remuneration paid to individual non-executive members of the
Board of Directors in 2010 is indicated below, broken down by
type of remuneration in thousand of euros:
|
Appointments
|
||||||||||||||||||||||||||||||||
|
Audit and
|
and
|
|||||||||||||||||||||||||||||||
|
Executive
|
Compliance
|
Risk
|
Compensation
|
Appointments
|
Compensation
|
|||||||||||||||||||||||||||
| Board | Committee | Committee | Committee | Committee(4) | Committee(5) | Committee(5) | Total | |||||||||||||||||||||||||
|
Tomás Alfaro Drake
|
129 | — | 71 | — | — | 59 | — | 259 | ||||||||||||||||||||||||
|
Juan Carlos Álvarez Mezquiriz
|
129 | 167 | — | — | 18 | — | 25 | 339 | ||||||||||||||||||||||||
|
Rafael Bermejo Blanco(*)
|
129 | — | 179 | 107 | — | — | — | 415 | ||||||||||||||||||||||||
|
Ramón Bustamante y de La Mora
|
129 | — | 71 | 107 | — | — | — | 307 | ||||||||||||||||||||||||
|
José Antonio Fernández Rivero(1)
|
129 | — | — | 214 | — | 23 | — | 366 | ||||||||||||||||||||||||
|
Ignacio Ferrero Jordi
|
129 | 167 | — | — | 18 | — | 25 | 339 | ||||||||||||||||||||||||
|
Carlos Loring Martínez de Irujo
|
129 | — | 71 | — | 45 | — | 62 | 307 | ||||||||||||||||||||||||
|
José Maldonado Ramos
|
129 | — | — | 107 | — | 23 | 25 | 284 | ||||||||||||||||||||||||
|
Enrique Medina Fernández
|
129 | 167 | — | 107 | — | — | — | 403 | ||||||||||||||||||||||||
|
Susana Rodríguez Vidarte
|
129 | — | 71 | — | 18 | 23 | 25 | 266 | ||||||||||||||||||||||||
|
Total
(3)
|
1,290 | 501 | 463 | 642 | 99 | 128 | 162 | 3,284 | ||||||||||||||||||||||||
| (1) | José Antonio Fernández Rivero, apart from the amounts listed in the previous table, also received a total of €652 thousand during 2010 in early retirement payments as a former member of the BBVA management. | |
| (2) | José Maldonado Ramos, who stood down as a BBVA executive on December 22, 2009, apart from the amounts shown in the previous table, also received a total of €805 thousand during 2010 as variable remuneration accrued during 2009 for his former position as BBVA Secretary. | |
| (3) | Roman Knörr Borrás, who stood down as director on March 23, 2010, received a total of €74 thousand in 2010 as remuneration for belonging to the Board of Directors and the Executive Committee until that date. | |
| (4) | Under a Board of Directors resolution of May 25, 2010, two new Board committees were set up, the Appointments Committee and the Compensation Committee, to replace the former Appointments & Compensation Committee. The amount included in the table above relates to amounts paid until the creation of the two new committees | |
| (5) | The amount included in the table above relates to amounts paid since the creation of the new committees. | |
| (*) | As previously mentioned, in the meeting held on March 29, 2011, the Board accepted the resignation of Mr. Rafael Bermejo Blanco as member of the Board due to the fact that he had reached the age limit provided in the Regulations of the Board. |
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Remuneration
of executive directors
The remuneration paid to individual executive directors in 2010
is indicated below, broken down by type of remuneration (in
thousands of euros):
|
Fixed
|
Variable
|
|||||||||||
| Remuneration | Remuneration(*) | Total (**) | ||||||||||
|
Chairman and CEO
|
1,928 | 3,388 | 5,316 | |||||||||
|
President and COO
|
1,249 | 1,482 | 2,731 | |||||||||
|
Total
|
3,177 | 4,870 | 8,046 | |||||||||
| (*) | Figures for the variable pay from 2009 received in 2010. | |
| (**) | The remuneration paid to the current President and COO, who was appointed on September 29, 2009, includes the amount payable as Head of Resources & Systems for the time he occupied this position (9 months) and the remuneration earned as President and COO since his appointment. |
In addition, the executive directors received
payment-in-kind
during 2010 totaling €32 thousand, of which €10
thousand relates to the Chairman and CEO and €22 thousand
relates to the President and COO.
The executive directors accrued variable remuneration for 2010,
to be paid in 2011, amounting to €3,011 thousand in the
case of the Chairman and CEO and €1,889 thousand in the
case of the President and COO.
These amounts are recognized under the item “Other
liabilities — Accruals” on the liability side in
the consolidated balance sheet as of December 31, 2010.
Remuneration
of the members of the Management Committee
The remuneration paid in 2010 to the members of BBVA’s
Management Committee who held such position as of
December 31, 2010, other than the executive directors,
amounted to €7,376 thousand in fixed remuneration and
€15,174 thousand in variable remuneration accrued in 2009
and paid in 2010.
In addition, the members of the Management Committee who held
such position as of December 31, 2010, other than the
executive directors, received remuneration in kind and other
items totaling €807 thousand in 2010.
Variable
multi-year stock remuneration program for executive directors
and members of the Management Committee
Settlement
of the multi-year variable share-based remuneration plan for
2009-2010
The AGM of the Bank held on March 13, 2009 approved a
Multi-Year Variable Share-Based Remuneration Plan for 2009/2010
(the “2009/2010 Program”) for members of BBVA’s
executive team. The number of shares to be allocated to each
beneficiary of the 2009/2010 Program is obtained by multiplying
the initial number of units assigned to each such beneficiary by
a coefficient ranging from 0 to 2. This coefficient reflects the
relative performance of BBVA’s total stockholder return
(TSR) during the period
2009-2010
compared to the TSR of a group of 18 international banks of
reference.
In accordance with the resolution of the AGM, the number of
units allocated to BBVA executive directors under the 2009/2010
Program was 215,000 for the Chairman and CEO, 131,707 for the
President and COO, and 817,464 for members of the Management
Committee who held such position as of December 31, 2010,
excluding executive directors.
Once the 2009/2010 Program period was completed, on
December 31, 2010, the TSR for BBVA and the 18 reference
banks was calculated. Since the resulting coefficient was zero,
the 2009/2010 Program was settled without any allocation of
shares to the beneficiaries.
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Multi-year
variable share-based remuneration plan for
2010-2011
The AGM of the Bank held on March 12, 2010, approved a new
Multi-Year Variable Share-Based Remuneration Plan for
2010-2011
(the “2010/2011 Program”) for members of the BBVA
executive team, which will end on December 31, 2011 and be
settled on April 15, 2012 (although early settlement is
also allowed under the Program).
The number of shares to be given to each beneficiary of the
2010/2011 Program will be determined by multiplying the number
of units allocated to each such beneficiary by a coefficient
ranging between 0 and 2. This coefficient reflects the relative
performance of BBVA’s total stockholder return (TSR) during
the period
2010-2011
compared to the TSR of a group of the Bank’s international
peers.
These shares will be given to their beneficiaries after the
settlement of the Program. They will be able to use these shares
as follows: (i) 40 percent of the shares received will
be freely transferable by the beneficiaries at the moment they
are received; (ii) 30 percent of the shares received
will be transferable one year after the settlement date of the
Program; and (iii) the remaining 30 percent will be
transferable starting two years after the settlement date of the
Program.
The number of units assigned for the executive directors under
the AGM resolution is 105,000 for the Chairman and CEO and
90,000 for the President and COO. The total number of units
assigned under this Program to the Management Committee members
who held this position on December 31, 2010, excluding
executive directors, was 385,000.
Scheme
for remuneration of Non-executive Directors with deferred
distribution of shares
The Bank’s AGM of March 18, 2006 resolved, under
agenda item number eight, to establish a remuneration scheme
based on the deferred distribution of BBVA shares to the
Bank’s non-executive directors, to replace the earlier
post-employment scheme in place for these directors.
The plan is based on the annual assignment to non-executive
directors of a number of “theoretical shares”
equivalent to 20% of the total remuneration received by each of
them in the previous year. The share price used in the
calculation is the average closing price of the BBVA shares in
the sixty stock market sessions before the dates of the ordinary
AGMs that approve the annual financial statements for each year.
The shares will be given to each beneficiary on the date he or
she leaves the position of director for any reason except
serious breach of duties.
The number of “theoretical shares” allocated to
non-executive director beneficiaries under the deferred share
distribution scheme approved by the AGM for 2010, equivalent to
20% of the total remuneration paid to each such beneficiary in
2009, is set out below:
|
Theoretical
|
Accumulated
|
|||||||
|
Directors
|
Shares | Theoretical Shares | ||||||
|
Tomás Alfaro Drake
|
3,521 | 13,228 | ||||||
|
Juan Carlos Álvarez Mezquíriz
|
5,952 | 39,463 | ||||||
|
Rafael Bermejo Blanco(*)
|
7,286 | 23,275 | ||||||
|
Ramón Bustamante y de la Mora
|
5,401 | 38,049 | ||||||
|
José Antonio Fernández Rivero
|
6,026 | 30,141 | ||||||
|
Ignacio Ferrero Jordi
|
5,952 | 40,035 | ||||||
|
Carlos Loring Martínez de Irujo
|
5,405 | 25,823 | ||||||
|
Enrique Medina Fernández
|
7,079 | 51,787 | ||||||
|
Susana Rodríguez Vidarte
|
4,274 | 24,724 | ||||||
|
Total(**)
|
50,896 | 286,525 | ||||||
| (*) | As previously mentioned, in the meeting held on March 29, 2011, the Board accepted the resignation of Mr. Rafael Bermejo Blanco as member of the Board due to the fact that he had reached the age limit provided in the Regulations of the Board. |
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| (**) | Additionally 5,198 shares were assigned to Mr. Roman Knörr Borrás who resigned as a member of the Board in the meeting held on March 23, 2010, as he had reached the age limit provided in the Board regulations. |
Pension
commitments
The provisions registered as of December 31, 2010 for
pension commitments relating to the President and COO were
€14,551 thousand, of which €941 thousand were charged
against 2010 earnings. As of the date of this Annual Report,
there are no other pension obligations to executive directors.
In addition, insurance premiums amounting to €95 thousand
were paid on behalf of non-executive members of the Board of
Directors.
The provisions registered as of December 31, 2010 for
pension commitments relating to Management Committee members,
excluding executive directors, amounted to €51,986
thousand, of which €6,756 thousand were charged against
2010 earnings.
Severance
payments
There were no commitments as of December 31, 2010 for the
payment of severance compensation to executive directors.
In the case of the President and COO, the provisions of his
employment contract stipulate that in the event that he loses
this position for any reason other than his own will,
retirement, disability or serious dereliction of duty, he will
take early retirement with a pension payable either as a life
annuity or as lump sum payment equal to 75% of his pensionable
salary, if this should occur before he reaches 55 years of
age, or 85% of such salary after this age.
| C. | Board Practices |
Committees
Our corporate governance system is based on the distribution of
functions between the Board, the Executive Committee and the
other Board Committees, namely: the Audit and Compliance
Committee; the Appointments Committee; the Compensation
Committee; and the Risk Committee.
Our Board of Directors resolved at its meeting of May 25,
2010 to set up two new committees: one in charge of Appointments
and another one in charge of Compensation, which replace the
previous Appointments & Compensation Committee in
order to keep the Bank’s corporate governance system at the
forefront of governance practices and enhance the role of each
committee by achieving greater specialization in each separate
matter.
Executive
Committee
Our Board of Directors is assisted in fulfilling its
responsibilities by the Executive Committee (
Comisión
Delegada Permanente
) of the Board of Directors. The Board of
Directors delegates all management functions, except those that
it must retain due to legal or statutory requirements, to the
Executive Committee.
As of the date of this Annual Report, BBVA’s Executive
Committee was comprised of two executive directors and three
independent directors, as follows.
|
Chairman and Chief Executive Officer:
|
Mr. Francisco González Rodríguez | |
|
President and Chief Operating Officer:
|
Mr. Ángel Cano Fernandez | |
|
Members:
|
Mr. Juan Carlos Álvarez Mezquíriz | |
| Mr. Ignacio Ferrero Jordi | ||
| Mr. Enrique Medina Fernández |
According to our bylaws, the Executive Committee’s
responsibilities include the following: to formulate and propose
policy guidelines, the criteria to be followed in the
preparation of programs and to fix targets, to examine the
proposals put to it in this regard, comparing and evaluating the
actions and results of any direct or indirect
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activity carried out by the Group; to determine the volume of
investment in each individual activity; to approve or reject
operations, determining methods and conditions; to arrange
inspections and internal or external audits of all operational
areas of the Group; and in general to exercise the faculties
delegated to it by the Board of Directors.
Specifically, the Executive Committee is entrusted with
evaluation of our system of corporate governance. This shall be
analyzed in the context of our development and of the results we
have obtained, taking into account any regulations that may be
passed
and/or
recommendations made regarding best market practices and
adapting these to our specific circumstances.
The Executive Committee shall meet on the dates indicated in the
annual calendar of meetings and when the chairman or acting
chairman so decides. During 2010, the Executive Committee met 20
times.
Audit
and Compliance Committee
This committee shall perform the duties required under
applicable laws, regulations and our bylaws. Essentially, it has
authority from the Board to supervise the financial statements
and the oversight of the Group.
The Board regulations establish that the Audit and Compliance
Committee shall have a minimum of four members appointed by the
Board in light of their know-how and expertise in accounting,
auditing
and/or
risk
management. They shall all be independent directors, one of whom
shall act as chairman, also appointed by the Board.
As of the date of this Annual Report, the Audit and Compliance
Committee members were:
|
Chairman:
|
Mr. José Luis Palao García-Suelto | |
|
Members:
|
Mr. Tomás Alfaro Drake | |
| Mr. Ramón Bustamante y de la Mora | ||
| Mr. Carlos Loring Martínez de Irujo | ||
| Mrs. Susana Rodríguez Vidarte |
The scope of its functions is as follows (for purposes of the
below, “entity” refers to BBVA):
| • | Report to the General Meeting on matters that are raised at its meetings on matters within its competence. | |
| • | Supervise the efficacy of the Company’s internal control and oversight, internal audit, where applicable, and the risk-management systems, and discuss with the auditors or audit firms any significant issues in the internal control system detected when the audit is conducted. | |
| • | Supervise the process of drawing up and reporting regulatory financial information. | |
| • | Propose the appointment of auditors or audit firms to the Board of Directors for it to submit the proposal to the General Meeting, in accordance with applicable regulations. | |
| • | Establish correct relations with the auditors or audit firms in order to receive information on any matters that may jeopardize their independence, for examination by the committee, and any others that have to do with the process of auditing the accounts; as well as those other communications provided for in laws and standards of audit. It must unfailingly receive written confirmation by the auditors or audit firms each year of their independence with regard to the entity or entities directly or indirectly related to it and information on additional services of any kind provided to these entities by said auditors or audit firms, or by persons or entities linked to them as provided under Law 19/1988, July 12, on the auditing of accounts. | |
| • | Each year, before the audit report is issued, to put out a report expressing an opinion on the independence of the auditors or audit firms. This report must, in all events, state the provision of any additional services referred to in the previous subsection. | |
| • | Oversee compliance with applicable domestic and international regulations on matters related to money laundering, conduct on the securities markets, data protection and the scope of Group activities with respect to anti-trust regulations. Also to ensure that any requests for action or information made by official authorities in these matters are dealt with in due time and in due form. |
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| • | Ensure that the internal codes of ethics and conduct and securities market trading, as they apply to Group personnel, comply with legislation and are appropriate for the Bank. | |
| • | Especially to enforce compliance with provisions contained in BBVA Director’s Charter, and ensure that directors satisfy applicable standards regarding their conduct on the securities markets. | |
| • | Any others that may have been allocated under these regulations or attributed to the committee by a Board of Directors resolution. |
The committee shall also monitor the independence of external
auditors. This entails the following two duties:
| • | Ensuring that the auditors’ warnings, opinions and recommendations are followed. | |
| • | Establishing the incompatibility between the provision of audit and the provision of consultancy services, unless there are no alternatives in the market to the auditors or companies in the auditors’ group of equal value in terms of their content, quality or efficiency. In such event, the committee must grant its approval, which can be done in advance by delegation to its chairman. |
The committee selects the external auditor for the Bank and its
Group, and for all the Group companies. It must verify that the
audit schedule is being carried out under the service agreement
and that it satisfies the requirements of the competent
authorities and the Bank’s governing bodies. The committee
will also require the auditors, at least once each year, to
assess the quality of the Group’s internal oversight
procedures.
The Audit and Compliance Committee meets as often as necessary
to comply with its tasks, although an annual meeting schedule is
drawn up in accordance with its duties. During 2010 the Audit
and Compliance Committee met 13 times.
Executives responsible for control, internal audit and
regulatory compliance can be invited to attend its meetings and,
at the request of these executives, other staff from these
departments who have particular knowledge or responsibility in
the matters contained in the agenda, can also be invited when
their presence at the meeting is deemed appropriate. However,
only the committee members and the secretary shall be present
when the results and conclusions of the meeting are evaluated.
The committee may engage external advisory services for relevant
issues when it considers that these cannot be properly provided
by experts or technical staff within the Group on grounds of
specialization or independence.
Likewise, the committee can call on the personal cooperation and
reports of any member of the management team when it considers
that this is necessary to carry out its functions with regard to
relevant issues.
The committee has its own specific regulations, approved by the
Board of Directors. These are available on our website and,
amongst other things, regulate its operation.
Appointments
Committee
The Appointments Committee is tasked with assisting the Board on
issues related to the appointment and re-election of Board
members.
This committee shall comprise a minimum of three members who
shall be external directors appointed by the Board, which shall
also appoint its chairman. However, the chairman and the
majority of its members must be independent directors, in
compliance with the Board regulations.
As of the date of this Annual Report, the members of the
Appointments Committee were:
|
Chairman:
|
Mr. Tomás Alfaro Drake | |
|
Members:
|
Mr. José Antonio Fernández Rivero | |
| Mr. José Maldonado Ramos | ||
| Mrs. Susana Rodríguez Vidarte |
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The duties of the Appointments Committee are as follows:
| • | Draw up and report proposals for appointment and re-election of directors. |
To such end, the committee will evaluate the skills, knowledge
and experience that the Board requires, as well as the
conditions that candidates should display to fill the vacancies
arising.
| • | Review the status of each director each year, so that this may be reflected in the annual report on corporate governance. | |
| • | Report on the performance of the Chairman of the Board and, where applicable, the Company’s CEO, such that the Board can make its periodic assessment, under the terms established in the Board regulations. | |
| • | Should the chairmanship of the Board or the post of CEO fall vacant, the committee will examine or organize, in the manner it deems suitable, the succession of the Chairman and/or CEO and make corresponding proposals to the Board for an orderly, well-planned succession. | |
| • | Report any appointment and separation of senior managers. | |
| • | Any others that may have been allocated under the Board regulations or attributed to the committee by a Board of Directors resolution. |
In the performance of its duties, the Appointments Committee
will consult with the Chairman of the Board and, where
applicable, the CEO via the committee chair, especially with
respect to matters related to executive directors and senior
managers.
In accordance with our Board regulations, the committee may ask
members of the BBVA Group to attend its meetings, when their
responsibilities relate to its duties. It may also receive any
advisory services it requires to inform its criteria on issues
falling within the scope of its powers.
The chair of the Appointments Committee will convene it as often
as necessary to comply with its functions although an annual
meeting schedule will be drawn up in accordance with its duties.
During 2010 the Appointments Committee met 2 times (the former
Appointments & Compensation Committee met 3 times in
2010).
Compensation
Committee
The Compensation Committee’s essential function is to
assist the Board on matters regarding the remuneration policy
for directors and senior management.
The committee will comprise a minimum of three members who will
be external directors appointed by the Board, which will also
appoint its chair. The chair and the majority of its members
must be independent directors, in compliance with the Board
regulations.
As of the date of this Annual Report, the members of the
Appointments Committee were:
|
Chairman:
|
Mr. Carlos Loring Martínez de Irujo | |
|
Members:
|
Mr. Juan Carlos Álvarez Mezquiriz | |
| Mr. Ignacio Ferrero Jordi | ||
| Mr. José Maldonado Ramos | ||
| Mrs. Susana Rodríguez Vidarte |
The scope of the functions of the Compensation Committee is as
follows:
| • | Propose the remuneration system for the Board of Directors as a whole, in accordance with the principles established in the Company Bylaws. This committee will propose the items comprising the system, their amounts and method of payment. | |
| • | Determine the extent and amount of the remuneration, entitlements and other economic rewards for the Chairman and CEO, the President and COO and, where applicable, other executive directors of the Bank, so that these can be reflected in their contracts. The Committee’s proposals on such matters will be submitted to the Board of Directors. |
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| • | Issue a report on the directors’ remuneration policy each year. This will be submitted to the Board of Directors, which will apprise the Company’s Annual General Meeting each year. | |
| • | Propose the remuneration policy for senior management to the Board, and the basic terms and conditions to be contained in their contracts. | |
| • | Propose the remuneration policy to the Board for employees whose professional activities may have a significant impact on BBVA’s risk profile. | |
| • | Oversee observance of the remuneration policy established by the Company and periodically review the remuneration policy applied to executive directors, senior management and employees whose professional activities may have a significant impact on the BBVA’s risk profile. | |
| • | Any others that may have been allocated under the Board regulations or attributed to the committee by a Board of Directors resolution. |
In the performance of its duties, the Compensation Committee
will consult with the Chairman of the Board and, where
applicable, the Company’s CEO via the committee chair,
especially with respect to matters related to executive
directors and senior managers.
Pursuant to our Board regulations, the committee may ask members
of the BBVA Group to attend its meetings, when their
responsibilities relate to its duties. It may also receive any
advisory services it requires to inform its criteria on matters
falling within the scope of its powers.
The chair of the Compensation Committee will convene it as often
as necessary to comply with its functions although an annual
meeting schedule will be drawn up in accordance with its duties.
During 2010 the Appointments Committee met 2 times (the former
Appointments & Compensation Committee met 3 times in
2010).
Risk
Committee
The Board’s Risk Committee is tasked with the analysis of
issues related to our risk management and control policy and
strategy. It assesses and approves any risk transactions that
may be significant.
The Risk Committee shall have a majority of external directors,
with a minimum of three members, appointed by the Board of
Directors, which shall also appoint its chairman.
As of the date of this Annual Report, the members of the Risk
Committee were:
|
Chairman:
|
Mr. José Antonio Fernández Rivero | |
|
Members:
|
Mr. Ramón Bustamante y de la Mora | |
| Mr. José Maldonado Ramos | ||
| Mr. Enrique Medina Fernández |
Under the Board regulations, it has the following duties:
| • | Analyze and evaluate proposals related to our risk management and oversight policies and strategy. In particular, these shall identify: |
a) the risk map;
| b) | the setting of the level of risk considered acceptable according to the risk profile (expected loss) and capital map (risk capital) broken down by our businesses and areas of activity; |
c) the internal information and oversight systems used to
oversee and manage risks; and
d) the measures established to mitigate the impact of risks
identified should they materialize.
| • | Monitor the match between risks accepted and the profile established. | |
| • | Assess and approve, where applicable, any risks whose size could compromise our capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks. |
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| • | Check that we possess the means, systems, structures and resources benchmarked against best practices to allow implementation of its risk management strategy. |
The committee meets as often as necessary to best perform its
duties, usually once a week. In 2010, it held 48 meetings.
| D. | Employees |
As of December 31, 2010, we, through our various
affiliates, had 106,976 employees. Approximately 83% of our
employees in Spain held technical, managerial and executive
positions, while the remainder were clerical and support staff.
The table below sets forth the number of BBVA employees by
geographic area.
|
Country
|
BBVA | Banks | Companies | Total | ||||||||||||
|
Spain
|
25,939 | 442 | 2,035 | 28,416 | ||||||||||||
|
United Kingdom
|
93 | — | — | 93 | ||||||||||||
|
France
|
94 | — | — | 94 | ||||||||||||
|
Italy
|
53 | — | 226 | 279 | ||||||||||||
|
Germany
|
40 | — | — | 40 | ||||||||||||
|
Switzerland
|
— | 128 | — | 128 | ||||||||||||
|
Portugal
|
— | 925 | — | 925 | ||||||||||||
|
Belgium
|
40 | — | — | 40 | ||||||||||||
|
Russia
|
4 | — | — | 4 | ||||||||||||
|
Ireland
|
— | 5 | — | 5 | ||||||||||||
|
Total Europe
|
26,263 | 1,500 | 2,261 | 30,024 | ||||||||||||
|
United States
|
165 | 11,975 | — | 12,140 | ||||||||||||
|
Panama
|
— | 345 | — | 345 | ||||||||||||
|
Puerto Rico
|
— | 865 | — | 865 | ||||||||||||
|
Argentina
|
— | 5,705 | — | 5,705 | ||||||||||||
|
Brazil
|
3 | — | 17 | 20 | ||||||||||||
|
Colombia
|
— | 5,867 | — | 5,867 | ||||||||||||
|
Venezuela
|
— | 5,509 | — | 5,509 | ||||||||||||
|
Mexico
|
— | 34,082 | — | 34,082 | ||||||||||||
|
Uruguay
|
— | 200 | — | 200 | ||||||||||||
|
Paraguay
|
— | 372 | — | 372 | ||||||||||||
|
Bolivia
|
— | — | 209 | 209 | ||||||||||||
|
Chile
|
— | 5,413 | — | 5,413 | ||||||||||||
|
Cuba
|
1 | — | — | 1 | ||||||||||||
|
Peru
|
— | 5,715 | — | 5,715 | ||||||||||||
|
Ecuador
|
— | — | 273 | 273 | ||||||||||||
|
Total Latin America
|
4 | 64,073 | 499 | 64,576 | ||||||||||||
|
Hong Kong
|
169 | — | — | 169 | ||||||||||||
|
Japan
|
13 | — | — | 13 | ||||||||||||
|
China
|
13 | — | 11 | 24 | ||||||||||||
|
Singapore
|
17 | — | — | 17 | ||||||||||||
|
India
|
2 | — | — | 2 | ||||||||||||
|
South Korea
|
8 | — | — | 8 | ||||||||||||
|
Total Asia
|
222 | — | 11 | 233 | ||||||||||||
|
Australia
|
3 | — | — | 3 | ||||||||||||
|
Total Oceania
|
3 | — | — | 3 | ||||||||||||
|
Total
|
26,657 | 77,548 | 2,771 | 106,976 | ||||||||||||
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As of December 31, 2009, we, through our various
affiliates, had 103,721 employees. Approximately 82% of our
employees in Spain held technical, managerial and executive
positions, while the remainder were clerical and support staff.
The table below sets forth the number of BBVA employees by
geographic area.
|
Country
|
BBVA | Banks | Companies | Total | ||||||||||||
|
Spain
|
25,871 | 476 | 1,589 | 27,936 | ||||||||||||
|
United Kingdom
|
89 | — | — | 89 | ||||||||||||
|
France
|
94 | — | — | 94 | ||||||||||||
|
Italy
|
55 | — | 208 | 263 | ||||||||||||
|
Germany
|
35 | — | — | 35 | ||||||||||||
|
Switzerland
|
— | 113 | — | 113 | ||||||||||||
|
Portugal
|
— | 917 | — | 917 | ||||||||||||
|
Belgium
|
37 | — | — | 37 | ||||||||||||
|
Russia
|
4 | — | — | 4 | ||||||||||||
|
Ireland
|
— | 5 | — | 5 | ||||||||||||
|
Total Europe
|
26,185 | 1,511 | 1,797 | 29,493 | ||||||||||||
|
United States
|
136 | 12,166 | — | 12,302 | ||||||||||||
|
Panama
|
— | 308 | — | 308 | ||||||||||||
|
Puerto Rico
|
— | 777 | — | 777 | ||||||||||||
|
Argentina
|
— | 5,300 | — | 5,300 | ||||||||||||
|
Brazil
|
3 | — | 17 | 20 | ||||||||||||
|
Colombia
|
— | 5,821 | — | 5,821 | ||||||||||||
|
Venezuela
|
— | 5,791 | — | 5,791 | ||||||||||||
|
Mexico
|
— | 32,580 | — | 32,580 | ||||||||||||
|
Uruguay
|
20 | 185 | — | 205 | ||||||||||||
|
Paraguay
|
— | 250 | — | 250 | ||||||||||||
|
Bolivia
|
— | — | 207 | 207 | ||||||||||||
|
Chile
|
— | 5,039 | — | 5,039 | ||||||||||||
|
Cuba
|
1 | — | — | 1 | ||||||||||||
|
Peru
|
— | 5,208 | — | 5,208 | ||||||||||||
|
Ecuador
|
— | — | 262 | 262 | ||||||||||||
|
Total Latin America
|
24 | 61,259 | 486 | 61,769 | ||||||||||||
|
Hong Kong
|
116 | — | — | 116 | ||||||||||||
|
Japan
|
10 | — | — | 10 | ||||||||||||
|
China
|
15 | — | — | 15 | ||||||||||||
|
Singapore
|
9 | — | — | 9 | ||||||||||||
|
India
|
2 | — | — | 2 | ||||||||||||
|
South Korea
|
2 | — | — | 2 | ||||||||||||
|
Total Asia
|
154 | — | — | 154 | ||||||||||||
|
Australia
|
3 | — | — | 3 | ||||||||||||
|
Total Oceania
|
3 | — | — | 3 | ||||||||||||
|
Total
|
26,502 | 74,936 | 2,283 | 103,721 | ||||||||||||
129
Table of Contents
As of December 31, 2008, we, through our various
affiliates, had 108,972 employees. The table below sets
forth the number of BBVA employees by geographic area:
|
Country
|
BBVA | Banks | Companies | Total | ||||||||||||
|
Spain
|
26,785 | 597 | 1,688 | 29,070 | ||||||||||||
|
United Kingdom
|
98 | — | 6 | 104 | ||||||||||||
|
France
|
97 | — | — | 97 | ||||||||||||
|
Italy
|
58 | — | 194 | 252 | ||||||||||||
|
Germany
|
26 | — | — | 26 | ||||||||||||
|
Switzerland
|
— | 118 | — | 118 | ||||||||||||
|
Portugal
|
— | 936 | — | 936 | ||||||||||||
|
Belgium
|
38 | — | — | 38 | ||||||||||||
|
Jersey
|
— | 3 | — | 3 | ||||||||||||
|
Russia
|
4 | — | — | 4 | ||||||||||||
|
Ireland
|
— | 4 | — | 4 | ||||||||||||
|
Total Europe
|
27,106 | 1,658 | 1,888 | 30,652 | ||||||||||||
|
United States
|
168 | 12,479 | — | 12,647 | ||||||||||||
|
Panama
|
— | 312 | — | 312 | ||||||||||||
|
Puerto Rico
|
— | 910 | — | 910 | ||||||||||||
|
Argentina
|
— | 5,648 | — | 5,648 | ||||||||||||
|
Brazil
|
4 | — | 14 | 18 | ||||||||||||
|
Colombia
|
— | 6,093 | — | 6,093 | ||||||||||||
|
Venezuela
|
— | 6,295 | — | 6,295 | ||||||||||||
|
Mexico
|
— | 34,535 | — | 34,535 | ||||||||||||
|
Uruguay
|
46 | 171 | — | 217 | ||||||||||||
|
Paraguay
|
— | 212 | — | 212 | ||||||||||||
|
Bolivia
|
— | — | 197 | 197 | ||||||||||||
|
Chile
|
— | 5,325 | — | 5,325 | ||||||||||||
|
Cuba
|
1 | — | — | 1 | ||||||||||||
|
Peru
|
— | 5,553 | — | 5,553 | ||||||||||||
|
Ecuador
|
— | — | 216 | 216 | ||||||||||||
|
Total Latin America
|
51 | 65,054 | 427 | 65,532 | ||||||||||||
|
Hong Kong
|
107 | — | — | 107 | ||||||||||||
|
Japan
|
9 | — | — | 9 | ||||||||||||
|
China
|
7 | — | — | 7 | ||||||||||||
|
Singapore
|
18 | — | — | 18 | ||||||||||||
|
Total Asia
|
141 | — | — | 141 | ||||||||||||
|
Total
|
27,466 | 79,191 | 2,315 | 108,972 | ||||||||||||
The terms and conditions of employment in private sector banks
in Spain are negotiated with trade unions representing bank
employees. Wage negotiations take place on an industry-wide
basis. This process has historically produced collective
bargaining agreements binding upon all Spanish banks and their
employees. The collective bargaining agreement in application
during 2009 and 2010 came into effect as of January 1, 2007
and ended on December 31, 2010.
As of December 31, 2010 and 2009, we had 1,060 and 350
temporary employees in our Spanish offices, respectively.
130
Table of Contents
| E. | Share Ownership |
As of March 29, 2011, the members of the Board of Directors
owned an aggregate of 3,181,708 BBVA shares as shown in the
table below :
|
Directly
|
Indirectly
|
|||||||||||||||
|
Owned
|
Owned
|
Total
|
% Capital
|
|||||||||||||
|
Name
|
Shares | Shares | Shares | Stock | ||||||||||||
|
Gonzalez Rodríguez, Francisco
|
395,585 | 1,944,213 | 2,339,798 | 0.052 | ||||||||||||
|
Cano Fernández, Ángel
|
332,584 | — | 332,584 | 0.007 | ||||||||||||
|
Alfaro Drake, Tomás
|
12,213 | — | 12,213 | 0.000 | ||||||||||||
|
Álvarez Mezquiriz, Juan Carlos
|
170,927 | — | 170,927 | 0.004 | ||||||||||||
|
Bustamante y de la Mora, Ramon
|
12,362 | 2,439 | 14,801 | 0.000 | ||||||||||||
|
Fernandez Rivero, José Antonio
|
60,967 | — | 60,967 | 0.001 | ||||||||||||
|
Ferrero Jordi, Ignacio
|
3,616 | 57,499 | 61,115 | 0.001 | ||||||||||||
|
Loring Martínez de Irujo, Carlos
|
47,736 | — | 47,736 | 0.001 | ||||||||||||
|
Maldonado Ramos, José
|
73,264 | — | 73,264 | 0.002 | ||||||||||||
|
Medina Fernández, Enrique
|
39,991 | 1,505 | 41,496 | 0.001 | ||||||||||||
|
Palao García-Suelto, José Luis
|
3,048 | — | 3,048 | 0.000 | ||||||||||||
|
Rodriguez Vidarte, Susana
|
20,801 | 2,958 | 23,759 | 0.001 | ||||||||||||
|
TOTAL
|
1,173,094 | 2,008,614 | 3,181,708 | 0.072 | ||||||||||||
BBVA has not granted options on its shares to any members of its
administrative, supervisory or management bodies. Information
regarding the variable multi-year share based remuneration
program (in which executive directors participate) is provided
under “Item 6. Directors, Senior Management and
Employees — Compensation — Variable
multi-year stock remuneration program for executive directors
and members of the Management Committee”.
As of March 29, 2011 the executive officers (excluding
executive directors) and their families owned
1,086,902 shares. None of our executive officers held 1% or
more of BBVA’s shares as of such date.
As of March 29, 2011, a total of 25,706 employees
(excluding executive officers and directors) owned
42,878,445 shares, which represents 0.95% of our capital
stock.
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| A. | Major Shareholders |
As of December 31, 2010, Manuel Jove Capellán,
beneficially owned 5.07% of our shares. There have not been
significant changes in his percentage ownership in the past
3 years. To our knowledge, no other person, corporation or
government beneficially owned, directly or indirectly, five
percent or more of BBVA’s shares. BBVA’s major
shareholders do not have voting rights which are different from
those held by the rest of its shareholders. To the extent known
to us, BBVA is not controlled, directly or indirectly, by any
other corporation, government or any other natural or legal
person. As of December 31, 2010, there were 952,618
registered holders of BBVA’s shares, with an aggregate of
4,490,908,285 shares, of which 226 shareholders with
registered addresses in the United States held a total of
979,492,736 shares (including shares represented by
American Depositary Receipts (“
ADRs
”)). Since
certain of such shares and ADRs are held by nominees, the
foregoing figures are not representative of the number of
beneficial holders. Our directors and executive officers did not
own any ADRs as of December 31, 2010. See
“Item 6. Directors, Senior Management and
Employees — Share Ownership”
131
Table of Contents
| B. | Related Party Transactions |
Loans
to Directors, Executive Officers and Other Related
Parties
As of December 31, 2010, 2009 and 2008, loans granted to
members of the Board of Directors amounted to an aggregate of
€531, €806 and €33 thousand, respectively.
As of December 31, 2010, 2009 and 2008, loans granted to
the Management Committee, excluding the executive directors,
amounted to an aggregate of €4,924, €3,912 and
€3,891 thousand, respectively.
As of December 31, 2010 and 2009, there were no guarantees
provided on behalf of members of our Management Committee. As of
December 31, 2008 these guarantees amounted to an aggregate
of €13 thousand.
As of December 31, 2010, 2009 and 2008, the loans granted
to parties related to key personnel (the members of the Board of
Directors of BBVA and of the Management Committee) amounted to
an aggregate of €28,493, €51,882 and €8,593
thousand, respectively. As of December 31, 2010, 2009 and
2008, the other exposure (guarantees, financial leases and
commercial loans) to parties related to key personnel amounted
to an aggregate of €4,424, €24,514 and €18,794
thousand, respectively.
Related
Party Transactions in the Ordinary Course of
Business
Loans extended to related parties were made in the ordinary
course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not
involve more than the normal risk of collectability or present
other unfavorable features.
BBVA subsidiaries engage, on a regular and routine basis, in a
number of customary transactions with other BBVA subsidiaries,
including:
| • | overnight call deposits; | |
| • | foreign exchange purchases and sales; | |
| • | derivative transactions, such as forward purchases and sales; | |
| • | money market fund transfers; | |
| • | letters of credit for imports and exports; |
and other similar transactions within the scope of the ordinary
course of the banking business, such as loans and other banking
services to our shareholders, to employees of all levels, to the
associates and family members of all the above and to other BBVA
non-banking subsidiaries or affiliates. All these transactions
have been made:
| • | in the ordinary course of business; | |
| • | on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons; and | |
| • | did not involve more than the normal risk of collectability or present other unfavorable features. |
| C. | Interests of Experts and Counsel |
Not Applicable.
132
Table of Contents
| ITEM 8. | FINANCIAL INFORMATION |
| A. | Consolidated Statements and Other Financial Information |
Financial
Information
See Item 18.
Dividends
The table below sets forth the amount of interim, final and
total cash dividends paid by BBVA on its shares for the years
2006 to 2010. The rate used to convert euro amounts to dollars
was the noon buying rate at the end of each year.
| Per Share | ||||||||||||||||||||||||||||||||||||||||
| First Interim | Second Interim | Third Interim | Final | Total | ||||||||||||||||||||||||||||||||||||
| € | $ | € | $ | € | $ | € | $ | € | $ | |||||||||||||||||||||||||||||||
|
2006
|
€ | 0.132 | $ | 0.174 | € | 0.132 | $ | 0.174 | € | 0.132 | $ | 0.174 | € | 0.241 | $ | 0.318 | € | 0.637 | $ | 0.841 | ||||||||||||||||||||
|
2007
|
€ | 0.152 | $ | 0.222 | € | 0.152 | $ | 0.222 | € | 0.152 | $ | 0.222 | € | 0.277 | $ | 0.405 | € | 0.733 | $ | 1.070 | ||||||||||||||||||||
|
2008
|
€ | 0.167 | $ | 0.232 | € | 0.167 | $ | 0.232 | € | 0.167 | $ | 0.232 | (* | ) | (* | ) | € | 0.501 | $ | 0.697 | ||||||||||||||||||||
|
2009
|
€ | 0.090 | $ | 0.129 | € | 0.090 | $ | 0.129 | € | 0.090 | $ | 0.129 | € | 0.150 | $ | 0.215 | € | 0.420 | $ | 0.602 | ||||||||||||||||||||
|
2010
|
€ | 0.090 | $ | 0.068 | € | 0.090 | $ | 0.068 | € | 0.090 | $ | 0.068 | (** | ) | (** | ) | € | 0.270 | $ | 0.203 | ||||||||||||||||||||
| (*) | On March 13, 2009, our shareholders approved the distribution of additional shareholder remuneration to complement the 2008 cash dividend in the form of an in-kind distribution of a portion of the share premium reserve. On April 20, 2009, our shareholders received BBVA shares from treasury stock in the proportion of one share for every 62 shares outstanding. Accordingly, the number of shares distributed was 60,451,115. | |
| (**) | In execution of the “Dividendo Opción” described under “Item 4. Information on the Company — Supervision and Regulation — Dividends”, on March 29, 2011, the Board of Directors carried out the free-of-charge capital increase approved by our shareholders in the General Shareholders Meeting of March 11, 2011. This free-of-charge capital increase gives BBVA shareholders the option to receive one (1) newly-issued share of the Bank for each 59 shares of BBVA held by them or to receive a cash remuneration of €0.149 per share. For more information, please see BBVA’s report on Form 6-K furnished to the United States Securities Exchange Commission on March 29, 2011. |
This payment entailed a charge against the share premium reserve
of €317 million, the weighted average market price of
BBVA shares in the continuous electronic market on the trading
session on March 12, 2009, the day immediately preceding
the date of the AGM.
We have paid annual dividends to our shareholders since the date
we were founded. Historically, we have paid interim dividends
each year. The total dividend for a year is proposed by the
Board of Directors following the end of the year to which it
relates. The unpaid portion of this dividend (the final
dividend) is paid after the approval of our financial statements
by the shareholders at the AGM. Interim and final dividends are
payable to holders of record on the dividend payment date.
Unclaimed dividends revert to BBVA five years after declaration.
While we expect to declare and pay dividends on our shares on a
quarterly basis in the future, the payment of dividends will
depend upon our earnings, financial condition, governmental
regulations and policies and other factors.
Subject to the terms of the deposit agreement, holders of ADRs
are entitled to receive dividends attributable to the shares
represented by the ADSs evidenced by their ADRs to the same
extent as if they were holders of such shares.
For a description of BBVA’s access to the funds necessary
to pay dividends on the shares, see “Item 4.
Information on the Company — Supervision and
Regulation — Dividends”. In addition, BBVA may
not pay dividends except out of its unrestricted reserves
available for the payment of dividends, after taking into
account the Bank of Spain’s capital adequacy requirements.
Capital adequacy requirements are applied by the Bank of Spain
on both a consolidated and individual basis. See
“Item 4. Information on the Company —
Supervision and
133
Table of Contents
Regulation — Capital Requirements” and
“Item 5. Operating and Financial Review and
Prospects — Liquidity and Capital
Resources — Capital”. Under Spain’s capital
adequacy requirements, we estimate that as of December 31,
2009, BBVA had approximately €15 billion of reserves
in excess of applicable capital and reserve requirements, which
were not restricted as to the payment of dividends.
Legal
Proceedings
The Group is party to certain legal actions in a number of
jurisdictions, including, among others, Spain, Mexico and the
United States, arising out of its ordinary business operations.
BBVA considers that none of those actions is material and none
is expected to result in a significant adverse effect on
BBVA’s financial position at either the individual or
consolidated level. Management believes that adequate provisions
have been made in respect of the litigation arising out of its
ordinary business operations. BBVA has not disclosed to the
markets any contingent liability that could arise from said
legal actions as it does not consider them material.
| B. | Significant Changes |
No significant change has occurred since the date of the
Consolidated Financial Statements.
| ITEM 9. | THE OFFER AND LISTING |
| A. | Offer and Listing Details |
BBVA’s shares are listed on the Spanish stock exchanges in
Madrid, Bilbao, Barcelona and Valencia (the “Spanish Stock
Exchanges”) and listed on the computerized trading system
of the Spanish Stock Exchanges (the “Automated Quotation
System”). BBVA’s shares are also listed on the Mexican
and London stock exchanges as well as quoted on SEAQ
International in London. BBVA’s shares are listed on the
New York Stock Exchange as American Depositary Shares (ADSs).
ADSs are listed on the New York Stock Exchange and are also
traded on the Lima (Peru) Stock Exchange, by virtue of an
exchange agreement entered into between these two exchanges.
Each ADS represents the right to receive one share.
Fluctuations in the exchange rate between the euro and the
dollar will affect the dollar equivalent of the euro price of
BBVA’s shares on the Spanish Stock Exchanges and the price
of BBVA’s ADSs on the New York Stock Exchange. Cash
dividends are paid by BBVA in euro, and exchange rate
fluctuations between the euro and the dollar will affect the
dollar amounts received by holders of ADRs on conversion by The
Bank of New York Mellon (acting as depositary) of cash dividends
on the shares underlying the ADSs evidenced by such ADRs.
134
Table of Contents
The table below sets forth, for the periods indicated, the high
and low sales closing prices for the shares of BBVA on the
Automated Quotation System.
| Euro per Share | ||||||||
| High | Low | |||||||
|
Fiscal year ended December 31, 2006
|
||||||||
|
Annual
|
19.49 | 14.91 | ||||||
|
Fiscal year ended December 31, 2007
|
||||||||
|
Annual
|
20.08 | 15.60 | ||||||
|
Fiscal year ended December 31, 2008
|
||||||||
|
Annual
|
16.58 | 7.16 | ||||||
|
Fiscal year ended December 31, 2009
|
||||||||
|
Annual
|
13.17 | 4.68 | ||||||
|
First Quarter
|
9.28 | 4.68 | ||||||
|
Second Quarter
|
9.03 | 6.32 | ||||||
|
Third Quarter
|
12.71 | 8.63 | ||||||
|
Fourth Quarter
|
13.17 | 11.51 | ||||||
|
Fiscal year ended December 31, 2010
|
||||||||
|
Annual
|
13.15 | 7.08 | ||||||
|
First Quarter
|
13.15 | 9.39 | ||||||
|
Second Quarter
|
11.32 | 7.41 | ||||||
|
Third Quarter
|
10.79 | 8.48 | ||||||
|
Fourth Quarter
|
9.99 | 7.08 | ||||||
|
Month ended September 30, 2010
|
10.32 | 9.76 | ||||||
|
Month ended October 31, 2010
|
9.99 | 9.34 | ||||||
|
Month ended November 30, 2010
|
9.21 | 7.08 | ||||||
|
Month ended December 31, 2010
|
8.15 | 7.56 | ||||||
|
Fiscal year ended December 31, 2011
|
||||||||
|
Month ended January 31, 2011
|
9.08 | 6.92 | ||||||
|
Month ended February 28, 2011
|
9.43 | 8.76 | ||||||
|
Month ended March 31, 2011 (through March 28)
|
9.06 | 8.38 | ||||||
From January 1, 2010 through December 31, 2010 the
percentage of outstanding shares held by BBVA and its affiliates
ranged between 0.383% and 2.267%, calculated on a monthly basis.
As of January 24, 2011, the percentage of outstanding
shares held by BBVA and its affiliates was 1.004%.
135
Table of Contents
The table below sets forth the reported high and low sales
closing prices for the ADSs of BBVA on the New York Stock
Exchange for the periods indicated.
| U.S. Dollars per ADS | ||||||||
| High | Low | |||||||
|
Fiscal year ended December 31, 2006
|
||||||||
|
Annual
|
25.15 | 18.21 | ||||||
|
Fiscal year ended December 31, 2007
|
||||||||
|
Annual
|
26.23 | 21.56 | ||||||
|
Fiscal year ended December 31, 2008
|
||||||||
|
Annual
|
24.27 | 8.45 | ||||||
|
Fiscal year ended December 31, 2009
|
||||||||
|
Annual
|
19.69 | 5.76 | ||||||
|
First Quarter
|
12.66 | 5.76 | ||||||
|
Second Quarter
|
12.73 | 8.44 | ||||||
|
Third Quarter
|
18.16 | 12.09 | ||||||
|
Fourth Quarter
|
19.69 | 16.74 | ||||||
|
Fiscal year ended December 31, 2010
|
||||||||
|
Annual
|
18.99 | 8.87 | ||||||
|
First Quarter
|
18.99 | 12.91 | ||||||
|
Second Quarter
|
15.40 | 8.87 | ||||||
|
Third Quarter
|
14.19 | 10.62 | ||||||
|
Fourth Quarter
|
13.99 | 9.21 | ||||||
|
Month ended September 30, 2010
|
13.93 | 12.30 | ||||||
|
Month ended October 31, 2010
|
13.99 | 12.98 | ||||||
|
Month ended November 30, 2010
|
12.85 | 9.21 | ||||||
|
Month ended December 31, 2010
|
10.80 | 9.98 | ||||||
|
Fiscal year ended December 31, 2011
|
||||||||
|
Month ended January 31, 2011
|
12.45 | 9.03 | ||||||
|
Month ended February 28, 2011
|
12.95 | 11.95 | ||||||
|
Month ended March 31, 2011 (through March 28)
|
12.83 | 11.53 | ||||||
Securities
Trading in Spain
The Spanish securities market for equity securities consists of
the Automated Quotation System and the four stock exchanges
located in Madrid, Bilbao, Barcelona and Valencia. During 2010,
the Automated Quotation System accounted for the majority of the
total trading volume of equity securities on the Spanish Stock
Exchanges.
Automated Quotation System.
The Automated
Quotation System (
Sistema de Interconexión
Bursátil
) links the four local exchanges, providing
those securities listed on it with a uniform continuous market
that eliminates certain of the differences among the local
exchanges. The principal feature of the system is the
computerized matching of buy and sell orders at the time of
entry of the order. Each order is executed as soon as a matching
order is entered, but can be modified or canceled until
executed. The activity of the market can be continuously
monitored by investors and brokers. The Automated Quotation
System is operated and regulated by Sociedad de Bolsas, S.A.
(“
Sociedad de Bolsas
”), a corporation owned by
the companies that manage the local exchanges. All trades on the
Automated Quotation System must be placed through a bank,
brokerage firm, an official stock broker or a dealer firm member
of a Spanish Stock Exchange directly. Since January 1,
2000, Spanish banks have been allowed to place trades on the
Automated Quotation System and have been allowed to become
members of the Spanish Stock Exchanges. We are currently a
member of the four Spanish Stock Exchanges and can trade through
the Automated Quotation System.
136
Table of Contents
In a pre-opening session held from 8:30 a.m. to
9:00 a.m. each trading day, an opening price is established
for each security traded on the Automated Quotation System based
on orders placed at that time. The regime concerning opening
prices was changed by an internal rule issued by the
Sociedad
de Bolsas
. In this new regime all references to maximum
changes in share prices are substituted by static and dynamic
price ranges for each listed share, calculated on the basis of
the most recent historical volatility of each share, and made
publicly available and updated on a regular basis by the
Sociedad de Bolsas
. The computerized trading hours are
from 9:00 a.m. to 5:30 p.m., during which time the
trading price of a security is permitted to vary by up to the
stated levels. If, during the open session, the quoted price of
a share exceeds these static or dynamic price ranges, Volatility
Auctions are triggered, resulting in new static or dynamic price
ranges being set for the share object of the same. Between
5:30 p.m. and 5:35 p.m. a closing price is established
for each security through an auction system similar to the one
held for the pre-opening early in the morning.
Trading hours for block trades (i.e. operations involving a
large number of shares) are also from 9:00 a.m. to
5:30 p.m.
Between 5:30 p.m. and 8:00 p.m., special operations,
whether
Authorized
or
Communicated,
can take place
outside the computerized matching system of the
Sociedad de
Bolsas
if they fulfill certain requirements. In such respect
Communicated
special operations (those that do not need
the prior authorization of the
Sociedad de Bolsas
) can be
traded if all of the following requirements are met:
(i) the trade price of the share must be within the range
of 5% above the higher of the average price and closing price
for the day and 5% below the lower of the average price and
closing price for the day; (ii) the market member executing
the trade must have previously covered certain positions in
securities and cash before executing the trade; and
(iii) the size of the trade must involve at least
€300,000 and represent at least a 20% of the average daily
trading volume of the shares in the
Automated Quotation
System
during the preceding three months. If any of the
aforementioned requirements is not met, a special operation may
still take place, but it will need to take the form of
Authorized
special operation (i.e. those needing the
prior authorization of the
Sociedad de Bolsas
). Such
authorization will only be upheld if any of the following
requirements is met:
| • | the trade involves more than €1.5 million and more than 40% of the average daily volume of the stock during the preceding three months; | |
| • | the transaction derives from a merger or spin-off process or from the reorganization of a group of companies; | |
| • | the transaction is executed for the purposes of settling a litigation or completing a complex group of contracts; or | |
| • | the Sociedad de Bolsas finds other justifiable cause. |
Please note that the regime set forth in the previous two
paragraphs may be subject to change, as article 36 of the
Securities Market Act, defining trades in Spanish Exchanges was,
as described below, modified as a result Law 47/2007. The
Spanish Stock Markets are currently reviewing their trading
rules in light of this new regulation.
Information with respect to the computerized trades between
9:00 a.m. and 5:30 p.m. is made public immediately,
and information with respect to trades outside the computerized
matching system is reported to the
Sociedad de Bolsas
by
the end of the trading day and published in the
Boletín
de Cotización
and in the computer system by the
beginning of the next trading day.
Sociedad de Bolsas
is also the manager of the IBEX
35
®
Index. This index is made up by the 35 most liquid securities
traded on the Spanish Market and, technically, it is a price
index that is weighted by capitalization and adjusted according
to the free float of each company comprised in the index. Apart
from its quotation on the four Spanish Exchanges, BBVA is also
currently included in the IBEX
35
®
Index.
Clearing
and Settlement System.
On April 1, 2003, by virtue of Law 44/2002 and of Order ECO
689/2003 of March 27, 2003 approved by the Spanish Ministry
of Economy, the integration of the two main existing
portfolio-entry settlement systems existing in Spain at the
time−the equity settlement system
Servicio de
Compensación y Liquidación de Valores
(“SCLV”) and the Public Debt settlement system
Central de Anotaciones de Deuda del Estado
(“
CADE”)− took place. As a
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result of this integration, a single entity, known as
Sociedad de Gestión de los Sistemas de Registro
Compensación y Liquidación de Valores
(“Iberclear”) assumed the functions formerly
performed by SCLV and CADE according to the legal regime stated
in article 44 bis of the Spanish Securities Market Act.
Notwithstanding the above, rules concerning the portfolio-entry
settlement systems enacted before this date by SCLV and the Bank
of Spain, as former manager of CADE, continue in force, but any
reference to the SCLV or CADE must be substituted by Iberclear.
In addition, and according to Law 41/1999, Iberclear manages
three securities settlement systems for securities in book-entry
form: The system for securities listed on the four Spanish Stock
Exchanges, the system for Public Debt and the system for debt
securities traded in AIAF Mercado de Renta Fija. Cash
settlement, from February 18, 2008 for all systems is
managed through the TARGET2-Banco de España payment system.
The following four paragraphs exclusively address issues
relating to the securities settlement system managed by
Iberclear for securities listed on the Spanish Stock Exchanges
(the “SCLV system”).
Under Law 41/1999 and Royal Decree 116/1992, transactions
carried out on the Spanish Stock Exchanges are cleared and
settled through Iberclear and its participants (each an
“
entidad participante”
), through the SCLV
system. Only Iberclear participants to this SCLV system are
entitled to use it, with participation restricted to authorized
members of the Spanish Stock Exchanges (for whom participation
was compulsory until March 2007), the Bank of Spain (when an
agreement, approved by the Spanish Ministry of Economy and
Finance, is reached with Iberclear) and, with the approval of
the CNMV, other brokers not members of the Spanish Stock
Exchanges, banks, savings banks and foreign clearing and
settlement systems. BBVA is currently a participant in
Iberclear. Iberclear and its participants are responsible for
maintaining records of purchases and sales under the book-entry
system. In order to be listed, shares of Spanish companies must
be held in book-entry form. Iberclear, maintains a
“two-step” book-entry registry reflecting the number
of shares held by each of its participants as well as the amount
of such shares held on behalf of beneficial owners. Each
participant, in turn, maintains a registry of the owners of such
shares. Spanish law considers the legal owner of the shares to
be:
| • | the participant appearing in the records of Iberclear as holding the relevant shares in its own name, or | |
| • | the investor appearing in the records of the participant as holding the shares. |
Iberclear settles Stock Exchange trades in the SCLV system in
the so-called “D+3 Settlement” by which the settlement
of Stock Exchange trades takes place three business days after
the date on which the transaction was carried out in the Stock
Exchange.
Ministerial Order EHA/2054/2010, amended Iberclear’s
Regulation permitting Iberclear to clear and settle trades of
equity securities listed in the Spanish Stock Exchanges that are
entered into outside such stock exchanges (whether
over-the-counter
or in multilateral trading facilities).
Obtaining legal title to shares of a company listed on a Spanish
Stock Exchange requires the participation of a Spanish
broker-dealer, bank or other entity authorized under Spanish law
to record the transfer of shares in book-entry form in its
capacity as Iberclear participant for the SCLV system. To
evidence title to shares, at the owner’s request the
relevant participant entity must issue a certificate of
ownership. In the event the owner is a participant entity,
Iberclear is in charge of the issuance of the certificate with
respect to the shares held in the participant entity’s own
name.
According to article 42 of the Securities Market Act
brokerage commissions are not regulated. Brokers’ fees, to
the extent charged, will apply upon transfer of title of our
shares from the depositary to a holder of ADSs, and upon any
later sale of such shares by such holder. Transfers of ADSs do
not require the participation of a member of a Spanish Stock
Exchange. The deposit agreement provides that holders depositing
our shares with the depositary in exchange for ADSs or
withdrawing our shares in exchange for ADSs will pay the fees of
the official stockbroker or other person or entity authorized
under Spanish law applicable both to such holder and to the
depositary.
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Securities
Market Legislation
The Securities Markets Act was enacted in 1988 with the purpose
of reforming the organization and supervision of the Spanish
securities markets. This legislation and the regulation
implementing it:
| • | established an independent regulatory authority, the CNMV, to supervise the securities markets; | |
| • | established a framework for the regulation of trading practices, tender offers and insider trading; | |
| • | required stock exchange members to be corporate entities; | |
| • | required companies listed on a Spanish Stock Exchange to file annual audited financial statements and to make public quarterly financial information; | |
| • | established the legal framework for the Automated Quotation System; | |
| • | exempted the sale of securities from transfer and value added taxes; | |
| • | deregulated brokerage commissions; and | |
| • | provided for transfer of shares by book-entry or by delivery of evidence of title. |
On February 14, 1992, Royal Decree No. 116/92
established the clearance and settlement system and the
book-entry system, and required that all companies listed on a
Spanish Stock Exchange adopt the book-entry system.
On November 16, 1998, the Securities Markets Act was
amended in order to adapt it to Directive 93/22/CEE on
investment services (later amended by Directive 95/26/CE and
Directive 97/9/CE of the European Parliament and Council on
investors indemnity systems).
On November 22, 2002, the Securities Markets Act was
amended by Law 44/2002 in order to update Spanish financial law
to global financial markets.
On June 18, 2003, the Securities Markets Act and the
Companies Act (currently, the Capital Companies Act) were
amended by Law 26/2003, in order to reinforce the transparency
of information available regarding listed Spanish companies.
This law added a new chapter, Title X, to the Securities
Markets Act, which: (i) requires disclosure of
shareholders’ agreements relating to listed companies;
(ii) regulates the operation of the general
shareholders’ meetings and of boards of directors of listed
companies; (iii) requires the publication of an annual
report on corporate governance; and (iv) establishes
measures designed to increase the availability of information to
shareholders.
On April 12, 2007, the Spanish Congress approved Law
6/2007, which amends the Securities Markets Act in order to
adapt it to Directive 2004/25/EC on takeover bids, and Directive
2004/109/EC on the harmonization of transparency requirements in
relation to information about issuers whose securities are
admitted to trading on a regulated market (amending Directive
2001/34/EC). Regarding the transparency of listed companies, Law
6/2007 has amended the reporting requirements and the disclosure
regime, and has established changes in the supervision system.
On the takeover bids side, Law 6/2007 has established the cases
in which a company must launch a takeover bid and the ownership
thresholds at which a takeover bid must be launched. It also
regulates conduct rules for the board of directors of target
companies and the squeeze-out and sell-out when a 90% of the
share capital is held after a takeover bid. Additionally, Law
6/2007 has been further developed by Royal Decree 1362/2007, on
transparency requirements for issuers of listed securities.
On December 19, 2007, the Spanish Congress approved Law
47/2007, which amends the Securities Markets Act in order to
adapt it to Directive 2004/37/EC on markets in financial
instruments (MiFID), Directive 2006/49/EC on the capital
adequacy of investment firms and credit institutions, and
Directive 2006/73/EC implementing Directive 2004/39/EC with
respect to organizational requirements and operating conditions
for investment firms and defined terms for the purposes of that
Directive. Further MiFID implementation has been introduced by
Royal Decree 217/2008 and Ministerial Order EHA/1665/2010, which
developed articles 71 and 76 of such Royal Decree 217/2008
regarding fees and types of agreements.
On June 29, 2009, the Spanish Congress approved Law 5/2009,
amending, among other laws, the Securities Markets Act and the
Discipline and Intervention of Credit Institutions Act (Law
26/1988) to adapt them to Directive
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2007/44/EC. See “Item 10. Additional
Information — Exchange Controls —
Restrictions on Acquisitions of Shares”.
Trading
by the Bank and its Affiliates in the Shares
Trading by subsidiaries in their parent companies shares is
restricted by the Spanish Capital Companies Act.
Neither BBVA nor its affiliates may purchase BBVA’s shares
unless the making of such purchases is authorized at a meeting
of BBVA’s shareholders by means of a resolution
establishing, among other matters, the maximum number of shares
to be acquired and the authorization term, which cannot exceed
five years. Restricted reserves equal to the purchase price of
any shares that are purchased by BBVA or its subsidiaries must
be made by the purchasing entity. The total number of shares
held by BBVA and its subsidiaries may not exceed ten percent of
BBVA’s total capital, as per the new treasury stock limits
set forth in Law 3/2009 of structural modifications of
commercial companies. It is the practice of Spanish banking
groups, including ours, to establish subsidiaries to trade in
their parent company’s shares in order to meet imbalances
of supply and demand, to provide liquidity (especially for
trades by their customers) and to modulate swings in the market
price of their parent company’s shares.
Reporting
Requirements
Royal Decree 1362/2007 requires that any entity which acquires
or transfers shares and as a consequence the number of voting
rights held exceeds, reaches or is below the thresholds of 3%,
5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%,
80% y 90% of the capital stock of a company listed on a Spanish
Stock Exchange must, within four days after that acquisition or
transfer, report it to such company, and to the CNMV. This duty
to report the holding of a significant stake will be applicable
not only to the acquisitions and transfers in the terms
described above, but also to those cases in which in the absence
of an acquisition or transfer of shares, the ratio of an
individual’s voting rights exceeds, reaches or is below the
thresholds that trigger the duty to report, as a consequence of
an alteration in the total number of voting rights of an issuer.
In addition, any company listed on a Spanish Stock Exchange must
report on a non-public basis to the CNMV, within 4 Stock
Exchange business days, any acquisition by such company (or an
affiliate) of the company’s own shares if such acquisition,
together with any previous one from the date of the last
communication, exceeds 1% of its capital stock, regardless of
the balance retained. Members of the board of directors must
report the ratio of voting rights held at the time of their
appointment as members of the board, when they are ceased as
members, as well as any transfer or acquisition of share capital
of a company listed on the Spanish Stock Exchanges, regardless
of the size of the transaction. Additionally, since we are a
credit entity, any individual or company who intends to acquire
a significant participation in BBVA’s share capital must
obtain prior approval from the Bank of Spain in order to carry
out the transaction. See “Item 10. Additional
Information — Exchange Controls —
Restrictions on Acquisitions of Shares”.
Royal Decree 1362/2007 also establishes reporting requirements
in connection with any entity acting from a tax haven or a
country where no securities regulatory commission exists, in
which case the threshold of three percent is reduced to one
percent.
Each Spanish bank is required to provide to the Bank of Spain a
list dated the last day of each quarter of all the bank’s
shareholders that are financial institutions and other
non-financial institution shareholders owning at least 0.25% of
a bank’s total share capital. Furthermore, the banks are
required to inform the Bank of Spain, as soon as they become
aware, and in any case not later than in 15 days, of each
acquisition by a person or a group of at least one percent of
such bank’s total share capital.
In addition, BBVA shares were included, among others, in
Annex 1 of the Agreement of the Executive Committee of the
CNMV on naked short selling dated September 22, 2008, which
was supplemented by a further agreement of this body dated
May 27, 2010. According to such committee’s
agreements, from June 11, 2010, the following reporting and
disclosing thresholds are in place for short positions in shares
listed in Spanish regulated markets (including BBVA shares):
(i) Any natural or legal person holding short positions in
shares listed in Spanish regulated markets has to disclose to
the CNMV: any short position exceeding 0.20% in the share
capital of the
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issuers of such shares, any increase or decrease of any short
position from this 0.20% threshold, as well as any change in a
short position (whether downwards or upwards) of at least 0.1%
of such shares; (ii) the CNMV will make public through its
website the following information, provided such information has
been disclosed to the CNMV: the short positions which exceed
0.5% in shares listed in the Spanish regulated markets, the
increase or decrease in short positions in such shares that
range further from this threshold (such as 0.5%, 0.6% and 0.7%);
and the aggregate of any short positions in such shares falling
under the 0.2% and 0.5% thresholds.
Ministerial Order EHA/1421/2009, implements Article 82 of
Securities Market (Law 24/1988 of July 28, 1988) on
the publication of significant information. The Ministerial
Order specifies certain aspects relating to notice of
significant information that were pending implementation in Law
24/1988. In this respect, the principles to be followed and
conditions to be met by entities when they publish and report
significant information are set forth, along with the content
requirements, including when significant information is
connected with accounting, financial or operational projections,
forecasts or estimates. The reporting entity must designate at
least one interlocutor whom the CNMV may consult or from whom it
may request information relating to dissemination of the
significant information. Lastly, some of the circumstances in
which it is considered that an entity is failing to comply with
the duty to publish and report significant information are
described. These include, among others, cases in which
significant information is disseminated at meetings with
investors or shareholders or at presentations to analysts or to
media professionals, but is not communicated, at the same time,
to the CNMV.
Circular 4/2009 of the CNMV further develops Ministerial Order
EHA1421/2009. In this respect, the Circular sets forth a precise
proceeding for the actual report of the significant information
and draws up an illustrative list of the events that may be
deemed to constitute significant information. This list
includes, among others, events connected with strategic
agreements and mergers and acquisitions, information relating to
the reporting entity’s financial statements or those of its
consolidated group, information on notices of call and official
matters and information on significant changes in factors
connected with the activities of the reporting entity and its
group.
Tax
Requirements
According to Law 19/2003 and its associated regulations, an
issuer’s parent company (credit entity or listed company)
is required, on an annual basis, to provide the Spanish tax
authorities with the following information: (i) the
identity and tax residence of the recipients of income from
securities and (ii) the amount of income obtained in each
period.
| B. | Plan of distribution |
Not Applicable.
| C. | Markets |
Not Applicable.
| D. | Selling Shareholders |
Not Applicable.
| E. | Dilution |
Not Applicable.
| F. | Expenses of the Issue |
Not Applicable.
| ITEM 10. | ADDITIONAL INFORMATION |
| A. | Share Capital |
Not Applicable.
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| B. | Memorandum and Articles of Association |
Spanish law and BBVA’s bylaws are the main sources of
regulation affecting the Company. All rights and obligations of
BBVA’s shareholders are contained in its bylaws and in
Spanish law.
The AGM held on March 11, 2011, resolved to amend
articles 1
o
,
6
o
,
9
o
,
13
o
ter,
15
o
,
16
o
,
19
o
,
20
o
,
21
o
,
22
o
,
24
o
,
28
o
,
30
o
,
31
o
,
32
o
,
48
o
,
51
o
,
52
o
,
53
o
,
54
o
,
56
o
of
and the Additional Provisions BBVA’s bylaws following the
proposal of the Board of Directors. The purpose of this
amendment is the adaptation of our bylaws to the amendments
brought in under the consolidated text of the Capital Companies
Act, adopted by Legislative Royal Decree 1/2010 of July 2 and to
Law 12/2010, of June 30, amending Law 19/1988, of
June 12, on Accounts Audits, Law 24/1988, of July 28,
on Securities Exchanges, and the consolidated text of the former
Companies Act adopted under Legislative Royal Decree 1564/1989,
of December 22, and to bring in certain technical
enhancements. As of the date of this Annual Report these
amendments are pending registration with the Commercial Registry.
Registry
and Company’s Objects and Purposes
BBVA is registered with the Commercial Registry of Vizcaya
(Spain). Its registration number at the Commercial Registry of
Vizcaya is volume 2,083, Company section folio 1, sheet BI-17-1,
1st entry. Its corporate objects and purposes are to:
(i) directly or indirectly conduct all types of activities,
transactions, acts, agreements and services relating to the
banking business which are permitted or not prohibited by law
and all banking ancillary activities; (ii) acquire, hold
and dispose of securities; and (iii) make public offers for
the acquisition and sale of securities and all types of holdings
in any kind of company. BBVA’s objects and purposes are
contained in Article 3 of the bylaws.
Certain
Powers of the Board of Directors
In general, provisions regarding directors are contained in our
bylaws. Also, our Board regulations govern the internal
procedures and the operation of the Board and its committees and
directors’ rights and duties as described in their charter.
The referred Board regulations (i) limit a director’s
right to vote on a proposal, arrangement or contract in which
the director is materially interested; (ii) limit the power
or directors to vote on compensation for themselves;
(iii) limit borrowing powers exercisable by the directors
and how such borrowing powers can be amended; or
(iv) require retirement of directors at a certain age. In
addition, the Board regulations contain a series of ethical
standards. See “Item 6. Directors, Senior Management
and Employees”.
Certain
Provisions Regarding Preferred Shares
The bylaws authorize us to issue ordinary, non-voting,
redeemable and preferred shares. As of the date of the filing of
this Annual Report, we have no non-voting, redeemable or
preferred shares outstanding.
The terms of any preferred shares must be agreed by the Board of
Directors before they are issued and the issue shall be made in
accordance with the provisions of the bylaws and the Capital
Companies Act.
Only shares that have been issued as redeemable may be redeemed
by us. Redemption of shares may only occur according to the
terms set forth when they are issued. Redeemable shares must be
fully
paid-up
at
the time of their subscription. If the right to redeem
redeemable shares is exclusively given to BBVA, it may not be
exercised until at least three years after the issue. Redemption
of shares must be financed against profits, free reserves or the
proceeds of new securities issued especially for financing the
redemption of an issue. If financed against profits or free
reserves, BBVA must create a reserve for the amount of the par
value of the redeemed shares. If the redemption is not financed
against profits, free reserves or a new issue, it may only be
done in compliance with the requirements of a reduction in share
capital by the refund of contributions.
Holders of non-voting shares, if issued, are entitled to a
minimum annual dividend, fixed or variable, set out at the time
of the issue. The right of non-voting shares to accumulate
unpaid dividends whenever funds to pay dividends are not
available, any preemptive rights associated with non-voting
shares, and the ability of holders of non-voting shares to
recover voting rights also must be established at the time of
the issue. Non-voting shares are entitled to the dividends to
which ordinary shares are entitled in addition to their minimum
dividend.
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Certain
Provisions Regarding Shareholders Rights
As of the date of the filing of this Annual Report, our capital
is comprised of one class of ordinary shares, all of which have
the same rights.
Once all legal reserves and funds have been provided for out of
the net profits of any given fiscal year, shareholders have the
right to the distribution of an annual dividend equivalent to at
least four percent of our paid-in capital. Shareholders will
participate in the distribution of dividends in proportion to
their paid-in capital. The right to collect a dividend lapses
after five years as of the date in which it was first available
to the shareholders. Shareholders also have the right to
participate in proportion to their paid-in capital in any
distribution resulting from our liquidation.
Each share entitles to one vote. However, unpaid shares with
respect to which a shareholder is in default of the resolutions
of the Board of Directors relating to their payment will not be
entitled to vote. The bylaws contain no provisions regarding
cumulative voting.
The bylaws do not contain any provisions relating to sinking
funds or potential liability of shareholders to further capital
calls by us.
The bylaws do not establish that special quorums are required to
change the rights of shareholders. Under Spanish law, the rights
of shareholders may only be changed by an amendment to the
bylaws that complies with the requirements explained below under
“— Shareholders’ Meetings”, plus the
affirmative vote of the majority of the shares of the class that
will be affected by the amendment.
Shareholders’
Meetings
The AGM has its own set of regulations on issues such as how it
operates and what rights shareholders enjoy regarding AGM. These
establish the possibility of exercising or delegating votes over
remote communication media.
General shareholders’ meetings may be ordinary or
extraordinary. Ordinary general shareholders’ meetings are
held within the first six months of each financial year in order
to review, among other things, the management of the company,
and to approve, if applicable, annual financial statements for
the previous fiscal year. Extraordinary general
shareholders’ meetings are those meetings that are not
ordinary. In any case, the requirements mentioned below for
constitution and adoption of resolutions are applicable to both
categories of general meetings.
General Meetings shall be convened at the initiative of the
Board of Directors whenever it deems this necessary or advisable
for the Company’s interests and in any case on the dates or
in the periods determined by law and these Bylaws or if
requested by one or several shareholders representing at least
five per cent of the share capital.
General Meetings, whether ordinary or extraordinary, must be
convened by means of announcements published in the Official
Gazette of the Companies Registry (“BORME”) and on the
Company website, within the notice period required by law
(currently one month), unless legal provisions establish other
media for disseminating the notice.
Pursuant to the Capital Companies Act, we have set up an Online
Shareholder Forum on the Company’s website (www.bbva.com).
Individual shareholders and voluntary associations constituted
pursuant to prevailing regulations may access the forum with all
due guarantees, in order to facilitate their communication
during the
run-up
to
the General shareholders’ meeting.
As of the date of the filing of this Annual Report, shareholders
have the right to attend general meetings if they:
| • | own at least 500 shares; | |
| • | have registered their shares in the appropriate account registry at least five days prior to the date for which the general meeting has been convened; and | |
| • | retain the ownership of at least 500 shares until the general shareholders’ meeting takes place. |
Additionally, holders of fewer than 500 shares may
aggregate their shares to reach at least such number of shares
and appoint a shareholder as proxy to attend the general
shareholders meeting.
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General shareholders’ meetings will be validly constituted
on first call with the presence of at least 25% of our voting
capital, either in person or by proxy. No minimum quorum is
required to hold a general shareholders’ meeting on second
call. In either case, resolutions will be agreed by the majority
of the votes. However, a general shareholders meeting will only
be validly held with the presence of 50% of our voting capital
on first call or of 25% of the voting capital on second call, in
the case of resolutions concerning the following matters:
| • | issuances of debt; | |
| • | capital increases or decreases; | |
| • | the elimination on or limitation of the pre-emptive subscription rights over new shares; | |
| • | transformation, merger of BBVA or break-up of the company and global assignment of assets and liabilities; | |
| • | the off-shoring of domicile; and | |
| • | any other amendment to the bylaws. |
In these cases, resolutions may only be approved by the vote of
the majority of the shares if at least 50% of the voting capital
is present at the meeting. If the voting capital present at the
meeting is less than 50%, then resolutions may only be adopted
by two-thirds of the shares present.
Additionally, our bylaws state that, in order to adopt
resolutions regarding a change in corporate purpose or the total
liquidation or dissolution of BBVA, at least two-thirds of the
voting capital must be present at the meeting on first call and
at least 60% of voting capital must be present on second call.
Restrictions
on the Ownership of Shares
Our bylaws do not provide for any restrictions on the ownership
of our ordinary shares. Spanish law, however, provides for
certain restrictions which are described below under
“— Exchange Controls — Restrictions on
Acquisitions of Shares”.
Restrictions
on Foreign Investments
The Spanish Stock Exchanges are open to foreign investors.
However, the acquisition of 50% or more of the share capital of
a Spanish company by a person or entity residing in a tax haven
must be notified to the Ministry of Economy and Treasury prior
to its execution. All other investments in our shares by foreign
entities or individuals only require the notification of the
Spanish authorities through the Spanish intermediary that took
part in the investment once it is executed.
Current Spanish regulations provide that once all applicable
taxes have been paid, see “— Exchange
Controls”, foreign investors may freely transfer out of
Spain any amounts of invested capital, capital gains and
dividends.
| C. | Material Contracts |
We are not aware of the execution of any material contracts
other than those executed during our ordinary course of business
during the two years immediately ending December 31, 2010,
and those mentioned in our Consolidated Financial Statements,
nor are we aware that the Bank or any of the Group’s
subsidiaries have entered into contracts that could give rise to
material liabilities for the Group.
| D. | Exchange Controls |
In 1991, Spain adopted the EU standards for free movement of
capital and services. As a result, exchange controls and
restrictions on foreign investments have generally been
abolished and foreign investors may transfer invested capital,
capital gains and dividends out of Spain without limitation as
to amount, subject to applicable taxes. See
“— Taxation”.
Pursuant to Spanish Law 18/1992 on Foreign Investments and Royal
Decree 664/1999, foreign investors may freely invest in shares
of Spanish companies, except in the case of certain strategic
industries.
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Shares in Spanish companies held by foreign investors must be
reported to the Spanish Registry of Foreign Investments by the
depositary bank or relevant Iberclear member. When a foreign
investor acquires shares that are subject to the reporting
requirements of the CNMV, notice must be given by the foreign
investor directly to the Registry of Foreign Investments in
addition to the notices of majority interests that must be sent
to the CNMV and the applicable stock exchanges. This notice must
be given through a bank or other financial institution duly
registered with the Bank of Spain and the CNMV or through bank
accounts opened with any branch of such registered entities.
Investment by foreigners domiciled in enumerated tax haven
jurisdictions is subject to special reporting requirements under
Royal Decree 1080/1991.
On July 5, 2003, Law 19/2003 came into effect. This law is
an update to other Spanish exchange control and money laundering
prevention laws.
Restrictions
on Acquisitions of Shares
The Discipline and Intervention of Credit Institutions Act (Law
26/1988), amended by Law 5/2009, of June 29, provides that
any individual or corporation, acting alone or in concert with
others, intending to directly or indirectly acquire a
significant holding in a Spanish financial institution (as
defined in article 56 of the aforementioned Law 26/1998) or
to directly or indirectly increase its holding in one in such a
way that either the percentage of voting rights or of capital
owned were equal to or more than 20%, 30% or 50%, or by virtue
of the acquisition, might take control over the financial
institution, must first notify the Bank of Spain. The Bank of
Spain will have 60 working days after the date on which the
notification was received, to evaluate the transaction and,
where applicable, challenge the proposed acquisition on the
grounds established by law.
A significant participation is considered 10% of the outstanding
share capital of a bank or a lower percentage if such holding
allows for the exercise of a significant influence.
Any acquisition without such prior notification, or before the
period established in article 58.2 has elapsed or against
the objection of the Bank of Spain, will produce the following
results:
| • | the acquired shares will have no voting rights; and | |
| • | if considered appropriate, the target bank may be taken over or its directors replaced and a sanction imposed. |
The Bank of Spain has 60 working days after the date on which
the notification was received to object to a proposed
transaction. Such objection may be based on the fact that the
Bank of Spain does not consider the acquiring person suitable to
guarantee the sound and prudent operation of the target bank.
Regarding the transparency of listed companies, Law 6/2007
amended the Securities Markets Act on takeover bids and
transparency requirements for issuers. The transparency
requirements have been further developed by Royal Decree
1362/2007 developing the Securities Markets Act on transparency
requirement for issuers of listed securities, specifically
information on significant stakes, reducing the communication
threshold to 3%, and extending the disclosure obligations to the
acquisition or transfer of financial instruments that grant
rights to acquire shares with voting rights.
Tender
Offers
As stated above, the Spanish legal regime concerning takeover
bids was amended by Law 6/2007 in order to adapt the Spanish
Securities Market Act to the Directive 2004/25/EC on takeover
bids, and Directive 2004/109/EC on the harmonization of
transparency requirements in relation to information about
issuers.
| E. | Taxation |
Spanish
Tax Considerations
The following is a summary of the material Spanish tax
consequences to U.S. Residents (as defined below) of the
acquisition, ownership and disposition of BBVA’s ADSs or
ordinary shares as of the date of the filing of this Annual
Report. This summary does not address all tax considerations
that may be relevant to all categories of
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potential purchasers, some of whom (such as life insurance
companies, tax-exempt entities, dealers in securities or
financial institutions) may be subject to special rules. In
particular, the summary deals only with the U.S. Holders
(as defined below) that will hold ADSs or ordinary shares as
capital assets and who do not at any time own individually, and
are not treated as owning, 25% or more of BBVA’s shares,
including ADSs.
As used in this particular section, the following terms have the
following meanings:
(1) “U.S. Holder” means a beneficial owner
of BBVA’s ADSs or ordinary shares that is for
U.S. federal income tax purposes:
| • | a citizen or a resident of the United States, | |
| • | a corporation or other entity treated as a corporation, created or organized under the laws of the United States or any political subdivision thereof, or | |
| • | an estate or trust the income of which is subject to United States federal income tax without regard to its source. |
(2) “Treaty” means the Convention between the
United States and the Kingdom of Spain for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income, together with a related Protocol.
(3) “U.S. Resident” means a U.S. Holder
that is a resident of the United States for the purposes of the
Treaty and entitled to the benefits of the Treaty, whose holding
is not effectively connected with (1) a permanent
establishment in Spain through which such holder carries on or
has carried on business, or (2) a fixed base in Spain from
which such holder performs or has performed independent personal
services.
Holders of ADSs or ordinary shares should consult their tax
advisors, particularly as to the applicability of any tax
treaty. The statements regarding Spanish tax laws set out below
are based on interpretations of those laws in force as of the
date of this Annual Report. Such statements also assume that
each obligation in the Deposit Agreement and any related
agreement will be performed in full accordance with the terms of
those agreements.
Taxation
of Dividends
Under Spanish law, dividends paid by BBVA to a holder of
ordinary shares or ADSs who is not resident in Spain for tax
purposes and does not operate through a permanent establishment
in Spain, are subject to Spanish Non-Resident Income Tax,
withheld at source, currently at a 19% tax rate. For these
purposes, upon distribution of the dividend, BBVA or its paying
agent will withhold an amount equal to the tax due according to
the rules set forth above (i.e., applying the general
withholding tax rate of 19%), transferring the resulting net
amount to the depositary.
However, under the Treaty, if you are a U.S. Resident, you
are entitled to a reduced withholding tax rate of 15%. To
benefit from the Treaty-reduced rate of 15%, if you are a
U.S. Resident, you must provide to BBVA through our paying
agent depositary, before the tenth day following the end of the
month in which the dividends were payable, a certificate from
the U.S. Internal Revenue Service (“IRS”) stating
that, to the best knowledge of the IRS, you are a resident of
the United States within the meaning of the Treaty and entitled
to its benefits.
If the paying agent depositary provides timely evidence (i.e.,
by means of the IRS certificate) of your right to apply the
Treaty-reduced rate will immediately receive the surplus amount
withheld, which will be credited to you. The IRS certificate is
valid for a period of one year from issuance.
To help shareholders obtain such certificates, BBVA has set up
an online procedure to make this as easy as possible.
If the certificate referred to in the above paragraph is not
provided to us through our paying agent depositary within said
term, you may afterwards obtain a refund of the amount withheld
in excess of the rate provided for in the Treaty.
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Scrip
Divided
In the General Annual Meeting that took place on March 11,
2011, the shareholders approved the inclusion of the upcoming
dividend against 2010 earnings and one of the interim dividends
from 2011 profits in a new “Dividendo Opción”
program. This new dividend scheme will let the shareholders
choose how they would like to receive their dividends: in cash,
or in new shares.
Pursuant to the terms of the “Dividendo Opción”
program, the shareholders will receive one
free-of-charge
allocation right for each share of BBVA that they hold, these
rights will be traded on the Spanish Stock Exchanges, for a
minimum period of 15 natural days. At the end of this period,
the
free-of-charge
allocation rights shall be automatically converted into
newly-issued shares of the Company, and under the
“Dividendo Opción” program the shareholders of
BBVA will be able to freely choose among:
(a)
Not transferring their free-of-charge allocation
rights.
In this case, at the end of the trading period, the
shareholders will receive the number of new totally
paid-up
shares to which they are entitled. For tax purposes the delivery
of
paid-up
shares does not constitute income for purposes of the Spanish
Non-Resident Income Tax, whether or not non-residents act
through a permanent establishment in Spain.
The acquisition value of both the new shares received and the
shares from which they were derived, will result from
distributing the total cost among the number of securities (both
existing and those issued as
paid-up
shares corresponding thereto). Such
paid-up
shares will be deemed to have been held for as long as the
shares from which they were derived.
(b)
Selling their
free-of-charge
allocation rights on the market.
In this event, the amount
obtained for the transfer of such rights on the market will be
subject to the following tax treatment:
| • | For purposes of the Spanish Non-Resident Income Tax on non-residents without a permanent establishment, the amount obtained for the transfer of the free-of-charge allocation rights on the market is subject to the same treatment that tax regulations provide for pre-emptive rights. Accordingly, the amount obtained for the transfer of the free-of-charge allocation rights decreases the acquisition value for tax purposes of the shares from which such rights derive, pursuant to Section 37.1.a) of Law 35/2006, of November 28, on Personal Income Tax (Ley del Impuesto sobre la Renta de las Personas Físicas). |
Thus, if the amount obtained for the aforementioned transfer is
larger than the acquisition value of the securities from which
they were derived, the difference will be deemed to be a capital
gain earned by the transferor in the tax period in which the
transfer is effected (see“— Taxation of Capital
Gains” below).
(c)
Using the purchase commitment assumed by BBVA for
free-of-charge
allocation rights.
The tax treatment applicable to the
amount received for the transfer to the Company of the
free-of-charge
allocation rights held by them in their capacity as shareholders
or acquired on the market will be equal to the treatment
applicable to dividends directly distributed in cash and,
consequently, such amount will be subject to the corresponding
withholding.
As this discussion does not address all the possible tax
consequences of participation in the scrip dividend program,
shareholders are advised to consult with their tax advisors
regarding the possible tax consequences of owning scrip
dividends.
Spanish
Refund Procedure
According to Spanish Regulations on Non-Resident Income Tax,
approved by Royal Decree 1776/2004 dated July 30, 2004, as
amended, a refund for the amount withheld in excess of the
Treaty-reduced rate can be obtained from the relevant Spanish
tax authorities. To pursue the refund claim, if you are a
U.S. Resident, you are required to file:
| • | the corresponding Spanish tax form, | |
| • | the certificate referred to in the preceding section, and | |
| • | evidence of the Spanish Non-Resident Income Tax that was withheld with respect to you. |
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The refund claim must be filed within four years from the date
in which the withheld tax was collected by the Spanish tax
authorities, but not before February 1, of the following
year.
U.S. Residents are urged to consult their own tax advisors
regarding refund procedures and any U.S. tax implications
thereof.
Additionally, under the Spanish law, the first €1,500 of
dividends received by individuals who are not resident in Spain
for tax purposes, and do not operate through a permanent
establishment in Spain, will be exempt from taxation in certain
circumstances.
U.S. Holders should consult their tax advisors regarding
the availability of this exemption.
Taxation
of Rights
Distribution of preemptive rights to subscribe for new shares
made with respect to your shares in BBVA will not be treated as
income under Spanish law and, therefore, will not be subject to
Spanish Non-Resident Income Tax. The exercise of such preemptive
rights is not considered a taxable event under Spanish law and
thus is not subject to Spanish tax. Capital gains derived from
the disposition of preemptive rights received by
U.S. Residents are generally not taxed in Spain provided
that certain conditions are met (See “— Taxation
of Capital Gains” below).
Taxation
of Capital Gains
Under Spanish law, any capital gains derived from securities
issued by persons residing in Spain for tax purposes are
considered to be Spanish source income and, therefore, are
taxable in Spain. For Spanish tax purposes, gain recognized by
you, if you are a U.S. Resident, from the sale of
BBVA’s ADSs or ordinary shares will be treated as capital
gains. Spanish Non-Resident Income Tax is currently levied at a
19% tax rate on capital gains recognized by persons who are not
residents of Spain for tax purposes, who are not entitled to the
benefit of any applicable treaty for the avoidance of double
taxation and who do not operate through a fixed base or a
permanent establishment in Spain.
Notwithstanding the discussion above, capital gains derived from
the transfer of shares on an official Spanish secondary stock
market by any holder who is resident in a country that has
entered into a treaty for the avoidance of double taxation with
an “exchange of information” clause (the Treaty
contains such a clause) will be exempt from taxation in Spain.
Additionally, capital gains realized by non-residents of Spain
who are entitled to the benefit of an applicable treaty for the
avoidance of double taxation will, in the majority of cases, not
be taxed in Spain (since most tax treaties provide for taxation
only in the taxpayer’s country of residence). If you are a
U.S. Resident, under the Treaty, capital gains arising from
the disposition of ordinary shares or ADSs will not be taxed in
Spain. You will be required to establish that you are entitled
to this exemption by providing to the relevant Spanish tax
authorities a certificate of residence in the United States from
the IRS (discussed above in “— Taxation of
Dividends”), together with the corresponding Spanish tax
form.
Spanish
Inheritance and Gift Taxes
Transfers of BBVA’s shares or ADSs upon death or by gift to
individuals are subject to Spanish inheritance and gift taxes
(Spanish Law 29/1987), if the transferee is a resident in Spain
for tax purposes, or if BBVA’s shares or ADSs are located
in Spain, regardless of the residence of the transferee. In this
regard, the Spanish tax authorities may argue that all shares of
a Spanish corporation and all ADSs representing such shares are
located in Spain for Spanish tax purposes. The applicable tax
rate for individuals, after applying all relevant factors,
ranges between approximately 7.65% and 81.6%.
Corporations that are non-residents of Spain that receive
BBVA’s shares or ADSs as a gift are subject to Spanish
Non-Resident Income Tax at a 19% tax rate on the fair market
value of such ordinary shares or ADSs as a capital gain tax. If
the donee is a United States resident corporation, the
exclusions available under the Treaty described in
“— Taxation of Capital Gains” above will be
applicable.
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Spanish
Transfer Tax
Transfers of BBVA’s ordinary shares or ADSs will be exempt
from Transfer Tax (
Impuesto sobre Transmisiones
Patrimoniales
) or Value-Added Tax. Additionally, no stamp
duty will be levied on such transfers.
U.S.
Tax Considerations
The following summary describes the material U.S. federal
income tax consequences of the ownership and disposition of ADSs
or ordinary shares, but it does not purport to be a
comprehensive description of all of the tax considerations that
may be relevant to a particular person’s decision to hold
the securities. The summary applies only to U.S. Holders
(as defined under “Spanish Tax Considerations” above)
that are eligible for the benefits of the Treaty and that hold
ADSs or ordinary shares as capital assets for tax purposes and
does not address all of the tax consequences that may be
relevant to holders subject to special rules, such as:
| • | certain financial institutions; | |
| • | dealers and traders who use a mark-to-market method of accounting; | |
| • | persons holding ADSs or ordinary shares as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to the ADSs or ordinary shares; | |
| • | persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; | |
| • | persons liable for the alternative minimum tax; | |
| • | tax-exempt entities; | |
| • | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; | |
| • | persons holding ADSs or ordinary shares in connection with a trade or business conducted outside of the United States; | |
| • | persons who acquired our ADSs or ordinary shares pursuant to the exercise of any employee stock option or otherwise as compensation; or | |
| • | persons who own or are deemed to own 10% or more of our voting shares. |
The summary is based upon the tax laws of the United States
including the Internal Revenue Code of 1986, as amended to the
date hereof (the “Code”), the Treaty, administrative
pronouncements, judicial decisions and final, temporary and
proposed Treasury regulations, all as of the date hereof. These
laws are subject to change, possibly with retroactive effect. In
addition, the summary is based in part on representations by the
depositary and assumes that each obligation provided for in or
otherwise contemplated by BBVA’s deposit agreement and any
other related document will be performed in accordance with its
terms. Prospective purchasers of the ADSs or ordinary shares are
urged to consult their tax advisors as to the U.S., Spanish or
other tax consequences of the ownership and disposition of ADSs
or ordinary shares in their particular circumstances, including
the effect of any U.S. state or local tax laws.
In general, for United States federal income tax purposes, a
U.S. Holder who owns ADSs will be treated as the owner of
the underlying ordinary shares represented by those ADSs.
Accordingly, no gain or loss will be recognized if a
U.S. Holder exchanges ADSs for the underlying ordinary
shares represented by those ADSs.
The U.S. Treasury has expressed concerns that parties to
whom American depositary shares are pre-released may be taking
actions that are inconsistent with the claiming of foreign tax
credits by U.S. holders of American depositary shares. Such
actions would also be inconsistent with the claiming of the
reduced rate of tax applicable to dividends received by certain
non-corporate U.S. Holders, as described below.
Accordingly, the analysis of the creditability of Spanish taxes
described below, and the availability of the reduced tax rate
for dividends received by certain non-corporate
U.S. Holders, could be affected by future actions that may
be taken by such parties.
This discussion assumes that BBVA is not, and will not become, a
passive foreign investment company (“PFIC”) (as
discussed below).
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Taxation
of Distributions
Distributions, before reduction for any Spanish income tax
withheld by BBVA or its paying agent, made with respect to ADSs
or ordinary shares (other than certain pro rata distributions of
ordinary shares or rights to subscribe for ordinary shares of
its capital stock) will be includible in the income of a
U.S. Holder as ordinary dividend income, to the extent paid
out of BBVA’s current or accumulated earnings and profits
as determined in accordance with U.S. federal income tax
principles. Because we do not maintain calculations of our
earnings and profits under U.S. federal income tax
principles, it is expected that distributions generally will be
reported to U.S. Holders as dividends. The amount of such
dividends will generally be treated as foreign source dividend
income and will not be eligible for the “dividends received
deduction” generally allowed to U.S. corporations
under the Code. Subject to applicable limitations and the
discussion above regarding concerns expressed by the
U.S. Treasury, dividends paid to certain non-corporate
U.S. Holders in taxable years beginning before
January 1, 2013 will be taxable at a maximum tax rate of
15%. U.S. Holders should consult their own tax advisors to
determine the availability of this favorable rate in their
particular circumstances.
The amount of dividend income will equal the U.S. dollar
value of the euro received, calculated by reference to the
exchange rate in effect on the date of receipt (which, for
U.S. Holders of ADSs, will be the date such distribution is
received by the depositary), whether or not the depositary or
U.S. Holder in fact converts any euro received into
U.S. dollars at that time. If the dividend is converted
into U.S. dollars on the date of receipt, a
U.S. Holder should not be required to recognize foreign
currency gain or loss in respect of the dividend income. A
U.S. Holder may have foreign currency gain or loss if the
dividend is converted into U.S. dollars after the date of
its receipt.
A scrip dividend (as described in “Item 4 —
Business Overview — Scrip Dividend”) will be
treated in the same manner as a distribution of cash, regardless
of whether a U.S. Holder elects to receive the dividend in
shares rather than cash. If the U.S. Holder elects to
receive the dividend in shares, the U.S. Holder will be
treated as having received a distribution equal to the
U.S.dollar fair market value of the shares on the date of
distribution. The U.S. Holder’s tax basis in such
shares received will be equal to the U.S. dollar fair
market value of the shares on the date of distribution and the
holding period for such shares will begin on the day following
the distribution.
Subject to applicable limitations that may vary depending upon a
U.S. Holder’s circumstances and subject to the
discussion above regarding concerns expressed by the
U.S. Treasury, a U.S. Holder will be entitled to a
credit against its U.S. federal income tax liability, or a
deduction in computing its U.S. federal taxable income, for
Spanish income taxes withheld by BBVA or its paying agent at a
rate not exceeding the rate the U.S. Holder is entitled to
under the Treaty. Spanish taxes withheld in excess of the rate
applicable under the Treaty will not be eligible for credit
against the U.S. Holder’s U.S. federal income tax
liability. See “Spanish Tax Considerations
— Taxation of Dividends” for a discussion of how
to obtain the Treaty rate. The rules governing foreign tax
credits are complex and, therefore, U.S. Holders should
consult their tax advisors regarding the availability of foreign
tax credits in their particular circumstances.
Sale and
Other Disposition of ADSs or Shares
For U.S. federal income tax purposes, gain or loss realized
by a U.S. Holder on the sale or other disposition of ADSs
or ordinary shares will be capital gain or loss in an amount
equal to the difference between the U.S. Holder’s tax
basis in the ADSs or ordinary shares disposed of and the amount
realized on the disposition. Such gain or loss will be long-term
capital gain or loss if the U.S. Holder held the ordinary
shares or ADSs for more than one year at the time of
disposition. Gain or loss, if any, will generally be
U.S. source for foreign tax credit purposes. The
deductibility of capital losses is subject to limitations.
Passive
Foreign Investment Company Rules
Based upon certain proposed Treasury regulations which are
proposed to be effective for taxable years beginning after
December 31, 1994 (“Proposed Regulations”), we
believe that we were not a PFIC for U.S. federal income tax
purposes for our 2010 taxable year. However, since our PFIC
status depends upon the composition of our income and assets and
the market value of our assets (including, among others, less
than 25% owned equity investments) from time to time and since
there is no guarantee that the Proposed Regulations will be
adopted in their
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current form and because the manner of the application of the
Proposed Regulations is not entirely clear, there can be no
assurance that we will not be considered a PFIC for any taxable
year.
If we were treated as a PFIC for any taxable year during which a
U.S. Holder held ADSs or ordinary shares, gain recognized
by such U.S. Holder on a sale or other disposition
(including certain pledges) of an ADS or an ordinary share would
be allocated ratably over the U.S. Holder’s holding
period for the ADS or the ordinary share. The amounts allocated
to the taxable year of the sale or other exchange and to any
year before we became a PFIC would be taxed as ordinary income.
The amount allocated to each other taxable year would be subject
to tax at the highest rate in effect for individuals or
corporations, as appropriate, for that taxable year, and an
interest charge would be imposed on the amount allocated to such
taxable year. The same treatment would apply to any distribution
received by a U.S. Holder on its ordinary shares or ADSs to
the extent that such distribution exceeds 125% of the average of
the annual distributions on the ordinary shares or ADSs received
during the preceding three years or the U.S. Holder’s
holding period, whichever is shorter. In addition, if we were a
PFIC or, with respect to a particular U.S. Holder, were
treated as a PFIC for the taxable year in which we paid a
dividend or the prior taxable year, the 15% dividend rate
discussed above with respect to dividends paid to certain
non-corporate U.S. Holders would not apply. Certain
elections may be available (including a
mark-to-market
election) that may provide an alternative tax treatments.
U.S. Holders should consult their tax advisors regarding
whether we are or were a PFIC, the potential application of the
PFIC rules to determine whether any of these elections for
alternative treatment would be available and, if so, what the
consequences of the alternative treatments would be in their
particular circumstances. Under recently enacted legislation
effective as of March 18, 2010, if we were a PFIC for any
taxable year during which a U.S. Holder held an ADS or
ordinary share, unless otherwise provided by the
U.S. Treasury, such U.S. Holder would be required to
file an annual report containing such information as the
U.S. Treasury may require.
Information
Reporting and Backup Withholding
Information returns may be filed with the IRS in connection with
payments of dividends on, and the proceeds from a sale or other
disposition of, ADSs or ordinary shares. A U.S. Holder may
be subject to U.S. backup withholding on these payments if
the U.S. Holder fails to provide its taxpayer
identification number to the paying agent and comply with
certain certification procedures or otherwise establish an
exemption from backup withholding. The amount of any backup
withholding from a payment to a U.S. Holder will be allowed
as a credit against the U.S. Holder’s
U.S. federal income tax liability and may entitle the
U.S. Holder to a refund, provided that the required
information is timely furnished to the IRS.
For taxable years beginning after March 18, 2010, new
legislation requires certain U.S. Holders who are
individuals to report information relating to stock of a
non-U.S. person,
subject to certain exceptions (including an exception for stock
held in custodial accounts maintained by a U.S. financial
institution). U.S. Holders are urged to consult their tax
advisors regarding the effect, if any, of this legislation on
their ownership and disposition of ordinary shares or ADSs.
| F. | Dividends and Paying Agents |
Not Applicable.
| G. | Statement by Experts |
Not Applicable.
| H. | Documents on Display |
The documents concerning BBVA which are referred to in this
Annual Report may be inspected at its offices at Plaza de
San Nicolás 4, 48005 Bilbao, Spain. In addition, we
are subject to the information requirements of the Exchange Act,
except that as a foreign issuer, we are not subject to the proxy
rules or the short-swing profit disclosure rules of the Exchange
Act. In accordance with these statutory requirements, we file or
furnish reports and other information with the SEC. Reports and
other information filed or furnished by BBVA with the SEC may be
inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, N.E.,
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Washington, D.C. 20549. Copies of such material may also be
inspected at the offices of the New York Stock Exchange, 11 Wall
Street, New York, New York 10005, on which BBVA’s ADSs are
listed. In addition, the SEC maintains a web site that contains
information filed or furnished electronically with the SEC,
which can be accessed over the internet at
http://www.sec.gov.
| I. | Subsidiary Information |
Not Applicable.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Dealing in financial instruments can entail the assumption or
transfer of one or more classes of risk by financial
institutions. The risks related to financial instruments are:
| • | Credit risk: the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. | |
| • | Market risks: the risks arising from the maintenance of financial instruments whose value may be affected by changes in market conditions. It includes three types of risk: |
| — | Foreign-exchange risk: the risk resulting from variations in foreign exchange rates. | |
| — | Interest-rate risk: the risk arising from variations in market interest rates. | |
| — | Price risk: the risk resulting from variations in market prices in financial instruments, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on the market. |
| • | Liquidity risk: this relates to the probability that a company cannot meet its payment commitments duly without having to resort to borrowing funds under onerous conditions, or damaging its image and reputation of the entity. |
The basic measurement model we use for measuring risk is
Value-at-Risk
(“VaR”), which provides a forecast of the maximum loss
that a portfolio could incur on a one-day time horizon with a
99% probability, stemming from fluctuations recorded in the
equity, interest rate, foreign exchange rates and commodity
prices. For certain positions, moreover, we also consider other
risks, such as the credit spread, basis risk or volatility and
correlation risk, where necessary. The VaR is calculated by
using a historical period of two years for the observation of
the risk factors.
BBVA, S.A. and BBVA Bancomer have been authorized by the Bank of
Spain to use their internal model to determine capital
requirements deriving from risk positions in their trading book,
which jointly accounts for 80 to 90% of the Group’s trading
book market risk. BBVA is in the process of incorporating the
new regulatory capital charges to comply with the most recent
guidelines of the regulators.
Our prevailing market risk limits model consists of a system of
VaR and economic capital limits and VaR sublimits, as well as
stop-loss limits for each of our business units. The global
limits are proposed by the Risk Area and approved by the
Executive Committee on an annual basis, once they have been
submitted to the Board’s Risk Committee.
This risk limits structure has been developed by identifying
specific risks by type, trading activity and trading desk. The
market risk units maintain consistency between the global and
specific limits. This system of limits is supplemented by
measurement of the impacts of extreme market movements on risk
positions. We are currently performing stress testing on
historical and economic crisis scenarios, as well as impact
analyses on the income statement in plausible but unlikely
economic crisis scenarios, drawn up by our Economic Research
Department.
In order to assess business unit performance over the year, the
accrual of negative earnings is linked to the reduction of VaR
limits set. The control structure in place is supplemented by
limits on loss and alert signals to anticipate the effects of
adverse situations in terms of risk
and/or
result. All the tasks associated with stress testing,
methodologies, scenarios of market variables and reports are
undertaken in co-ordination with our various Risk Areas.
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Finally, the market risk measurement model includes back-testing
or ex-post comparison, which helps to refine the accuracy of the
risk measurements by comparing
day-on-day
results with their corresponding VaR measurements.
Market
Risk in Trading Portfolio in 2010
The market risk factors used to measure and control risks in the
trading portfolio are the basis of all calculations using the
VaR.
VaR measures the maximum loss with a given probability over a
given period as a result of changes in the general conditions of
financial markets and their effects on market risk factors. We
mainly conduct daily VaR estimates using the historic simulation
methodology.
The types of risk factors we use to measure VaR are:
| • | Interest rate risk: the potential loss in value of the portfolio due to movements in interest rate curves. We use all interest rate curves in which we have positions and risks exist. We also use a wide range of vertices reflecting the different maturities within each curve. | |
| • | Credit spread risk: the potential loss in the value of corporate bonds or any corporate bond derivatives caused by movements in credit spreads for such instruments. Credit spread VaR is estimated by moving the credit spreads used as risk factors through a range of scenarios. The risk factors used in the simulation are credit spread curves by sector and by rating, and specific spread curves for individual issuers. | |
| • | Exchange rate risk: the potential loss caused by movements in exchange rates. Exchange rate risk VaR is estimated by analyzing present positions with observed actual changes in exchange rates. | |
| • | Equity or commodity risk: the potential loss caused by movements in equity prices, stock-market indices and commodity prices. Equity or commodity risk VaR is estimated by re-measuring present positions using actual changes in equity prices, stock-market indices and commodity prices. | |
| • | Vega risk: the potential loss caused by movements in implied volatilities affecting the value of options. Vega (equities, interest rate and exchange rate) risk VaR is estimated by analyzing implied volatility surfaces with observed changes in the implied volatilities of equity, interest rate and exchange rate options. | |
| • | Correlation risk: the potential loss caused by a disparity between the estimated and actual correlation between two assets, currencies, derivatives, instruments or markets. |
Finally, all these measurements are supplemented with VaR
estimation with exponential smoothing, to better reflect the
impact of movements.
Our market risk remains at low levels compared to the aggregates
of risks managed by BBVA, particularly in terms of credit risk.
This is due to the nature of the business and our policy of
minimal proprietary trading. However, in 2010 the market risk of
our trading portfolio increased significantly from previous
years to an average economic capital of €353 million
in 2010 from €285 million in 2009 due to the greater
market volatility in interest rates and credit spreads, together
with greater exposure to interest-rate risk towards the end of
the year, which reflect the tense situation in the markets in
the last part of 2010.
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Our main risk factor in 2010 and going forward continues to be
interest-rate risk, with a weight of 61% of the total portfolio
risk as of December 31, 2010 (this figure includes the
spread risk). Equity risk accounted for 9%, a fall from the
previous year (14%). In contrast, exchange rate risk increased
slightly in weight to 7% (compared to 4% as of December 31,
2009). Finally, volatility risk remained stable at 24% of the
total portfolio risk as of December 31, 2010. The table
below shows the components of VaR as of December 31, 2010
and 2009 respectively, and the average, maximum and minimum VaRs
for the years then ended.
|
Risk
|
December 31, 2010 | December 31, 2009 | ||||||
| (In millions of euros) | ||||||||
|
Interest/Spread risk
|
29.5 | 37.6 | ||||||
|
Exchange rate risk
|
3.3 | 2.3 | ||||||
|
Equity risk
|
4.2 | 8.9 | ||||||
|
Vega/Correlation risk
|
11.6 | 15.4 | ||||||
|
Diversification effect
|
(21.0 | ) | (33.2 | ) | ||||
|
Total
|
27.6 | 31.0 | ||||||
|
Average
|
32.9 | 26.2 | ||||||
|
Maximum
|
40.8 | 33.1 | ||||||
|
Minimum
|
25.2 | 18.2 | ||||||
By geographical area 64.5% of the market risk in 2010 (on an
annual average basis) corresponded to Global Markets Europe
trading desks and 35.5% to the Group’s banks in the
Americas, 23% of which was in Mexico.
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The back-testing comparison performed with market risk
management results for the parent company (which accounts for
most of the Group’s market risk) follows the principles set
out in the Basel Accord. It makes a
day-on-day
comparison between actual risks and those estimated by the
model, and proved that the risk measurement model continued to
work correctly throughout 2010.
The breakdown of the risk exposure by categories of the
instruments within the trading portfolio as of December 31,
2010, 2009 and 2008 were as follows:
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Financial assets held for trading
|
||||||||||||
|
Debt securities
|
24,358 | 34,672 | 26,556 | |||||||||
|
Government
|
20,397 | 31,290 | 20,778 | |||||||||
|
Credit institutions
|
2,274 | 1,384 | 2,825 | |||||||||
|
Other sectors
|
1,687 | 1,998 | 2,953 | |||||||||
|
Trading derivatives
|
33,665 | 29,278 | 40,946 | |||||||||
Market
Risk in Non — Trading Activities in 2010
Structural
Interest Rate Risk
Structural interest-rate risk refers to the potential alteration
of a company’s net interest income
and/or
total
net-asset value caused by variations in interest rates. A
financial institution’s exposure to adverse changes in
market rates is a risk inherent in the banking business, while
also presenting an opportunity to create value.
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Table of Contents
The variations in market interest rates have an effect on our
net interest income, from a medium- and short-term perspective,
and on our economic value if a long-term view is adopted. The
main source of risk resides in the timing mismatch that exists
between repricing and the maturity dates of the asset and
liability products comprising the banking book. This is
illustrated in the chart below, which shows the gap analysis of
our structural balance sheet as of December 31, 2010 in
euros.
(Million euros)
Rates have remained at low levels in 2010, with a reduction in
long-term rates consistent with the slowdown in business
activity. This market scenario has been taken into consideration
in advance by the Financial Management unit, which through the
Assets and Liabilities Committee (ALCO), is in charge of
maximizing the economic value of the banking book and preserving
net interest income to ensure recurrent earnings. To do so, it
not only takes the market outlook into consideration, but it
also ensures that exposure levels match the risk profile defined
by our management bodies and that a balance is maintained
between expected earnings and the risk level borne. The
implementation of a transfer pricing system that centralizes our
interest rate risk on ALCO’s books has helped to assure
that balance-sheet risk is being properly managed.
Structural interest-rate risk control and monitoring is
performed in the Risk area, which, acting as an independent
unit, helps ensure that the risk management and control
functions are conveniently segregated. This policy is in line
with the Basel Committee on Banking Supervision recommendations.
The Risk area is responsible for designing models and
measurement systems, together with the development of
monitoring, reporting and control policies. It also performs
monthly measurements of interest rate risk and risk control and
analysis, which is then reported to the main governing bodies,
such as the Executive Committee and the Board’s Risk
Committee.
Our structural interest-rate risk measurement model uses a set
of metrics and tools that enable our risk profile to be
identified and assessed. From the perspective of characterizing
the balance sheet, models of analysis have been developed to
establish assumptions dealing fundamentally with prepayment of
loans and the performance of deposits with no explicit maturity.
Moreover, in order to take into account additional sources of
cash flows mismatch risk, not only parallel movements are
considered but also changes in the slope and curvature of the
interest rate curve, and a model for simulating interest rate
curves is also applied to enable risk to be quantified in terms
of probabilities. This simulation model, which also considers
the diversification between currencies and business units,
calculates the earnings at risk (EaR) and economic risk capital
(ECR) defined as the maximum adverse deviations in net interest
income and economic value, respectively, for a particular
confidence level and
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Table of Contents
time horizon. All this is done in addition to measurements of
sensitivity to a standard deviation of 100 basis points for
all the market yield curves. The chart below shows the
structural interest-rate profile of our main entities, according
to their sensitivities.
Structural
interest rate risk profile
The limits structure is one of the mainstays in control
policies, because it represents our risk appetite as defined by
the Executive Committee. Balance-sheet management has enabled
risk levels to be maintained in keeping with our risk profile,
as is demonstrated in the following chart, which shows average
limits use in each entity during 2010.
Structural
interest rate risk. Average use of limits in 2010
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Table of Contents
The table below shows the estimated impact on the BBVA
Group’s net interest income and economic value for 2010 of
a 100 basis point increase and decrease in average interest
rates for the year.
| Impact on Net Interest Income | Impact on Economic Value (*) | |||||||
|
100 Basis-Point
|
100 Basis-Point
|
100 Basis-Point
|
100 Basis-Point
|
|||||
| Increase | Decrease | Increase | Decrease | |||||
|
BBVA Group
|
(0.43)% | +0.26% | (0.44)% | (0.91)% | ||||
| (*) | Percentage relating to equity. |
Structural
Exchange Rate Risk
The currencies with greatest capital impact on the BBVA Group
underwent widespread appreciations in 2010. BBVA Group’s
geographical diversification, given the uncertain economic
climate and the public debt crisis episodes in Europe, has had a
positive effect on its capital ratios, equity and earnings, due
to amongst other factors, the favorable impact of the
appreciation of the major currencies against the euro.
These market variations have an effect on our solvency ratios
and our estimated earnings whenever there is exposure deriving
from the contribution of subsidiary entities operating in
“non-euro” markets. The Asset/Liability Management
unit, through ALCO, actively manages structural exchange rate
risk using hedging policies that aim to minimize the effect of
foreign exchange fluctuations on capital ratios, as well as to
assure the equivalent value in euros of the foreign currency
earnings contributed by our various subsidiaries while
controlling the impact on reserves.
The Risk area acts as an independent unit responsible for
designing measurement models, making risk calculations and
controlling compliance with limits, reporting on all these
issues to the Board’s Risk Committee and to the Executive
Committee.
Structural exchange rate risk is evaluated using a measurement
model that simulates multiple scenarios of exchange rates and
evaluates their impacts on our capital ratios, equity and the
income statement. On the basis of this exchange-rate simulation,
a distribution is produced of their possible impact on the three
core items that determine their maximum adverse deviation for a
particular confidence level and time horizon, depending on
market liquidity in each currency. The risk measurements are
completed with stress testing and backtesting, which give a
complete view of exposure and the impacts on the group of
structural exchange rate risk.
All these metrics are incorporated into the decision-making
process by Asset/Liability Management, so that it can adapt our
risk profile to the guidelines derived from the limits structure
authorized by the Executive Committee. Active management of
foreign exchange exposure has enabled us to take advantage of
the favorable evolution of currencies in 2010, while
consistently maintaining risk levels within the established
limits, despite high market volatility. The average hedging
level of the carrying value of BBVA investments in currencies
stood at around 30%, while hedging of foreign currency earnings
in 2010 remained at lower levels. In addition to this
corporate-level hedging, dollar positions are held at a local
level by some of the subsidiary banks. Thanks to a proactive
policy in foreign exchange management, hedges exist at the
closing of the year for both the carrying amounts of the BBVA
investments and the expected earnings in America for 2011.
As of December 31, 2010, the average asset exposure
sensitivity to a 1% depreciation in exchange rates stood at
€113 million
,
with the following concentration:
45% in the Mexican peso, 28% in other South American currencies
and 18% in the U.S. dollar.
Structural
Risk in Equity Portfolio
Our exposure to structural equity risk comes largely from our
holdings in industrial and financial companies with medium- to
long-term investment horizons, reduced by the short net
positions held in derivative instruments on the same underlying
assets, in order to limit portfolio sensitivity to potential
price cuts. The aggregate sensitivity of our consolidated equity
to a 1% fall in the price of the shares stood, on
December 31, 2010, at €47.5 million, while the
sensitivity of the consolidated earnings to the same change in
price on the same date is estimated at €3.3 million.
The latter is positive in the case of falls in prices as these
are short net positions in derivatives. This figure is
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Table of Contents
determined by considering the exposure on shares measured at
market price or, if not available, at fair value, including the
net positions in options on the same underlyings in delta
equivalent terms. Treasury Area portfolio positions are not
included in the calculation.
The Risk area measures and effectively monitors structural risk
in the equity portfolio. To do so, it estimates the sensitivity
figures and the capital necessary to cover possible unexpected
losses due to the variations in the value of the equity
portfolio at a confidence level that corresponds to the
institution’s target rating, and taking account of the
liquidity of the positions and the statistical performance of
the assets under consideration. These figures are supplemented
by periodic stress comparisons, back-testing and scenario
analyses.
Liquidity
Risk
The aim of liquidity risk management, assessment and control is
to ensure, in the short-term, that payment commitments can be
duly met without having to resort to borrowing funds under
burdensome terms, or damaging the image and reputation of the
institution. In the medium-term, its aim is to ensure that our
financing structure is appropriate and that it moves in the
right direction in the context of the current economic
situation, and considering the markets and regulatory changes.
Liquidity and structural finance management in our Group is
based on the principle of the financial autonomy of our
subsidiaries. This management approach helps limit liquidity
risk and reduce the vulnerability of our Group during high-risk
periods.
The management and monitoring of liquidity risk is carried out
comprehensively in each of our units with both a short and
long-term approach. The short-term liquidity approach has a time
horizon of up to 366 days. It is focused on the management
of payments and collections from Treasury and Markets and
includes the operations specific to each area and the
Bank’s possible liquidity requirements. The second
medium-term or medium-financing approach is focused on financial
management of the balance sheet as a whole, with a time horizon
of one year or more.
The comprehensive management of liquidity is carried out by the
Assets and Liabilities Committee (ALCO) in each management unit.
The Financial Management unit, as part of the Financial
Division, analyzes the implications of the Bank’s various
projects in terms of finance and liquidity requirements and its
compatibility with the target financing structure and the
situation of the financial markets. The Financial Management
unit executes proposals agreed by the ALCO in accordance with
the agreed budgets and manages liquidity risk using a broad
scheme of limits,
sub-limits
and alerts approved by the Executive Committee. The Risk Area
uses these limits to carry out its mediation and control work
independently and provides the manager with the support tools
and metrics needed for decision-making. Each of the local risk
areas, which are independent from the local manager, complies
with the corporative principles of liquidity risk control that
are established by the Global Market Risk (GRM) unit, which is
the global structural risks unit for the whole Group.
At the level of each entity, the managing areas request and
propose a scheme of quantitative and qualitative limits and
alerts that affect liquidity risk in the short and medium term.
Once agreed with the GRM, controls and limits are proposed to
the Board of Directors for its approval at least once a year.
The proposals submitted by the GRM take into consideration the
market situation according to our target risk tolerance level.
The implementation of a new Liquidity and Finance Manual, which
was approved in the last quarter of 2010, has meant the
extension of schemes limiting the internal financing of business
units, the financial structure and financing concentration, as
well as establishing alerts in qualitative liquidity indicators.
GRM carries out regular measurements of risk incurred and the
monitoring of consumption of limits. It develops tools and
adapts valuation models, carries out regular stress tests and
reports to ALCO and the Group’s Management Committee on a
monthly basis about liquidity levels. It also reports to the
management areas and to the GRM Management Committee. The
frequency of communication and the amount of information under
the current Contingency Plan is decided by the Liquidity
Committee on the proposal of the Technical Liquidity Group
(TLG). The TLG carries out the initial analysis of the
Bank’s short or long-term liquidity situation. The TLG is
made up of specialized staff from the Short-Term Cash Desk,
Financial Management and the Global Market Risk Unit
(UCRAM-Structural Risk). If the alert levels suggest a
deterioration of the relative situation, the TLG reports the
matter to the Liquidity Committee, which is composed of the
managers of the related areas. If required, the
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Table of Contents
Liquidity Committee is responsible for calling the Financing
Committee, which is made up of the President and COO, the
Director of the Financial Area, the Director of the Risk Area,
the Director of Global Business and the Director of Business of
the country in question.
One of the most significant aspects that have had an effect on
the monitoring and management of liquidity risk in 2010 has been
the management and development of the sovereign risk crisis. In
this sense, the role of the central banks has been decisive in
calming markets during the Eurozone debt crisis and the ECB has
been proactive in guaranteeing the liquidity conditions of the
interbank markets. Our Group has not needed to make use of the
extraordinary measures established by the Spanish and European
authorities to mitigate tension in bank financing.
On the regulatory side, the Basel Committee on Banking
Supervision (Bank for International Settlements) has proposed a
new liquidity regulatory scheme based on two ratios: the
Liquidity Coverage Ratio (LCR), that will enter into force in
2015 and the Net Stable Funding Ratio (NSFR), which will be
implemented in 2018. The Group participated in the related
impact study (QIS) and has taken into account the new regulatory
challenges in its new general framework for action in the field
of liquidity and finance.
|
Up to 1
|
1 to 3
|
3 to 12
|
1 to 5
|
Over 5
|
||||||||||||||||||||||||
|
2010
|
Demand | Month | Months | Months | Years | Years | Total | |||||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
17,275 | 1,497 | 693 | 220 | 282 | — | 19,967 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
2,471 | 10,590 | 1,988 | 1,658 | 4,568 | 2,329 | 23,604 | |||||||||||||||||||||
|
Loans and advances to customers
|
16,543 | 33,397 | 21,127 | 49,004 | 85,800 | 141,338 | 347,209 | |||||||||||||||||||||
|
Debt securities
|
497 | 3,471 | 12,423 | 8,123 | 35,036 | 28,271 | 87,821 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 636 | 1,515 | 3,503 | 13,748 | 17,827 | 37,229 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
50 | 5,102 | 3,130 | 2,704 | — | 1 | 10,987 | |||||||||||||||||||||
|
Deposits from credit institutions
|
4,483 | 30,031 | 4,184 | 3,049 | 9,590 | 5,608 | 56,945 | |||||||||||||||||||||
|
Deposits from customers
|
111,090 | 69,625 | 21,040 | 45,110 | 21,158 | 6,818 | 274,841 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
96 | 5,243 | 10,964 | 7,159 | 42,907 | 15,843 | 82,212 | |||||||||||||||||||||
|
Subordinated liabilities
|
— | 537 | 3 | 248 | 2,732 | 13,251 | 16,771 | |||||||||||||||||||||
|
Other financial liabilities
|
4,177 | 1,207 | 175 | 433 | 647 | 1,564 | 8,203 | |||||||||||||||||||||
|
Short positions
|
— | 651 | — | 10 | — | 3,385 | 4,046 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 826 | 1,473 | 3,682 | 12,813 | 16,037 | 34,831 | |||||||||||||||||||||
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Table of Contents
|
Up to 1
|
1 to 3
|
3 to 12
|
1 to 5
|
Over 5
|
||||||||||||||||||||||||
|
2009
|
Demand | Month | Months | Months | Years | Years | Total | |||||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
14,650 | 535 | 248 | 735 | 163 | — | 16,331 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
3,119 | 8,484 | 1,549 | 1,914 | 4,508 | 2,626 | 22,200 | |||||||||||||||||||||
|
Loans and advances to customers
|
4,313 | 31,155 | 19,939 | 40,816 | 94,686 | 140,178 | 331,087 | |||||||||||||||||||||
|
Debt securities
|
1,053 | 4,764 | 15,611 | 10,495 | 37,267 | 29,080 | 98,270 | |||||||||||||||||||||
|
Other assets
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 637 | 2,072 | 3,863 | 13,693 | 12,608 | 32,873 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
213 | 4,807 | 3,783 | 12,293 | — | — | 21,096 | |||||||||||||||||||||
|
Deposits from credit institutions
|
1,836 | 24,249 | 5,119 | 5,145 | 6,143 | 6,453 | 48,945 | |||||||||||||||||||||
|
Deposits from customers
|
106,942 | 55,482 | 34,329 | 32,012 | 18,325 | 6,293 | 253,383 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
— | 10,226 | 16,453 | 15,458 | 40,435 | 14,614 | 97,186 | |||||||||||||||||||||
|
Subordinated liabilities
|
— | 500 | 689 | 2 | 1,529 | 14,585 | 17,305 | |||||||||||||||||||||
|
Other financial liabilities
|
3,825 | 822 | 141 | 337 | 480 | 20 | 5,625 | |||||||||||||||||||||
|
Short positions
|
— | 448 | — | 16 | — | 3,366 | 3,830 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 735 | 1,669 | 3,802 | 13,585 | 10,517 | 30,308 | |||||||||||||||||||||
|
Up to 1
|
1 to 3
|
3 to 12
|
1 to 5
|
Over 5
|
||||||||||||||||||||||||
|
2008
|
Demand | Month | Months | Months | Years | Years | Total | |||||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
13,487 | 476 | 296 | 181 | 202 | — | 14,642 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
6,198 | 16,216 | 1,621 | 2,221 | 4,109 | 3,314 | 33,679 | |||||||||||||||||||||
|
Loans and advances to customers
|
13,905 | 36,049 | 23,973 | 45,320 | 91,030 | 131,045 | 341,322 | |||||||||||||||||||||
|
Debt securities
|
716 | 1,701 | 12,230 | 9,483 | 24,640 | 23,934 | 72,704 | |||||||||||||||||||||
|
Other assets
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 3,739 | 2,206 | 5,442 | 16,965 | 16,427 | 44,779 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
2,419 | 8,737 | 2,441 | 3,165 | — | — | 16,762 | |||||||||||||||||||||
|
Deposits from credit institutions
|
4,906 | 22,412 | 4,090 | 5,975 | 6,581 | 5,609 | 49,573 | |||||||||||||||||||||
|
Deposits from customers
|
101,141 | 68,804 | 27,025 | 35,176 | 16,440 | 5,137 | 253,723 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
— | 9,788 | 13,516 | 12,072 | 45,469 | 20,483 | 101,328 | |||||||||||||||||||||
|
Subordinated liabilities
|
69 | 913 | 1 | 872 | 3,582 | 10,812 | 16,249 | |||||||||||||||||||||
|
Other financial liabilities
|
5,000 | 1,152 | 385 | 203 | 1,371 | 342 | 8,453 | |||||||||||||||||||||
|
Short positions
|
— | 24 | — | 23 | — | 2,653 | 2,700 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 2,693 | 3,108 | 6,310 | 15,538 | 13,886 | 41,535 | |||||||||||||||||||||
Credit
Risk Management
Credit risk is defined as the risk that one party to a financial
instrument will cause a financial loss for the other party by
failing to discharge a contractual obligation due to the
insolvency or incapacity of the natural or legal persons
involved.
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Table of Contents
Maximum
exposure to credit risk
The Group’s maximum credit risk exposure as of
December 31, 2010, 2009 and 2008, without recognizing the
availability of collateral or other credit enhancements to
guarantee compliance, is broken down by financial instrument and
counterparties in the table below:
|
Maximum Credit Risk Exposure
|
2010 | 2009 | 2008 | |||||||||
| (In millions of euros) | ||||||||||||
|
Financial assets held for trading
|
24,358 | 34,672 | 26,556 | |||||||||
|
Debt securities
|
24,358 | 34,672 | 26,556 | |||||||||
|
Government
|
20,397 | 31,290 | 20,778 | |||||||||
|
Credit institutions
|
2,274 | 1,384 | 2,825 | |||||||||
|
Other sectors
|
1,687 | 1,998 | 2,953 | |||||||||
|
Other financial assets designated at fair value through
profit or loss
|
691 | 639 | 516 | |||||||||
|
Debt securities
|
691 | 639 | 516 | |||||||||
|
Government
|
70 | 60 | 38 | |||||||||
|
Credit institutions
|
87 | 83 | 24 | |||||||||
|
Other sectors
|
534 | 496 | 454 | |||||||||
|
Available-for-sale
financial assets
|
50,602 | 57,067 | 39,961 | |||||||||
|
Debt securities
|
50,602 | 57,067 | 39,961 | |||||||||
|
Government
|
33,074 | 38,345 | 19,576 | |||||||||
|
Credit institutions
|
11,235 | 12,646 | 13,377 | |||||||||
|
Other sectors
|
6,293 | 6,076 | 7,008 | |||||||||
|
Loans and receivables
|
373,037 | 353,741 | 375,387 | |||||||||
|
Loans and advances to credit institutions
|
23,604 | 22,200 | 33,679 | |||||||||
|
Loans and advances to customers
|
347,210 | 331,087 | 341,322 | |||||||||
|
Government
|
31,224 | 26,219 | 22,503 | |||||||||
|
Agriculture
|
3,977 | 3,924 | 4,109 | |||||||||
|
Industry
|
36,578 | 42,799 | 46,576 | |||||||||
|
Real estate and construction
|
55,854 | 55,766 | 54,522 | |||||||||
|
Trade and finance
|
45,689 | 40,714 | 44,885 | |||||||||
|
Loans to individuals
|
135,868 | 126,488 | 127,890 | |||||||||
|
Finance leases
|
8,141 | 8,222 | 9,385 | |||||||||
|
Other
|
29,879 | 26,955 | 31,452 | |||||||||
|
Debt securities
|
2,223 | 454 | 386 | |||||||||
|
Government
|
2,040 | 342 | 290 | |||||||||
|
Credit institutions
|
6 | 4 | 4 | |||||||||
|
Other sectors
|
177 | 108 | 92 | |||||||||
|
Held-to-maturity
investments
|
9,946 | 5,438 | 5,285 | |||||||||
|
Government
|
8,792 | 4,064 | 3,844 | |||||||||
|
Credit institutions
|
552 | 754 | 800 | |||||||||
|
Other sectors
|
602 | 620 | 641 | |||||||||
|
Derivatives (trading and hedging)
|
44,762 | 42,836 | 46,887 | |||||||||
|
Subtotal
|
503,396 | 494,393 | 494,591 | |||||||||
|
Valuation adjustments
|
299 | 436 | 942 | |||||||||
|
Total balance
|
503,695 | 494,829 | 495,533 | |||||||||
|
Financial guarantees
|
36,441 | 33,185 | 35,952 | |||||||||
|
Drawable by third parties
|
86,790 | 84,925 | 92,663 | |||||||||
|
Government
|
4,135 | 4,567 | 4,221 | |||||||||
|
Credit institutions
|
2,303 | 2,257 | 2,021 | |||||||||
|
Other sectors
|
80,352 | 78,101 | 86,421 | |||||||||
|
Other contingent exposures
|
3,784 | 7,398 | 6,234 | |||||||||
|
Total off-balance
|
127,015 | 125,508 | 134,849 | |||||||||
|
Total maximum credit exposure
|
630,710 | 620,337 | 630,382 | |||||||||
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Table of Contents
For financial assets recognized in the consolidated balance
sheets, credit risk exposure is equal to the carrying amount,
except for trading and hedging derivatives. The maximum exposure
to credit risk on financial guarantees is the maximum that we
would be liable for if these guarantees were called in.
For trading and hedging derivatives, this information reflects
the maximum credit risk exposure better than the amount shown on
the balance sheet because it does not only include the market
value on the date of the transactions (the carrying amount only
shows this figure); it also estimates the potential risk of
these transactions on their due date.
Regarding the renegotiated financial assets as of
December 31, 2010, we did not perform any renegotiations
that resulted in the need to reclassify doubtful risks as
outstanding risks. The amount of financial assets that would be
irregular had their conditions not been renegotiated is not
significant with respect to the Group’s total loan
portfolio as of December 31, 2010.
Mitigation
of credit risk, collateral and other credit enhancements,
including risk hedging and mitigation policies
In most cases, maximum exposure to credit risk is reduced by
collateral, credit enhancements and other actions which mitigate
our exposure.
We apply a credit risk hedging and mitigation policy deriving
from a banking approach focused on relationship banking. On this
basis, the provision of guarantees is a necessary but not
sufficient instrument when taking risks; therefore for us to
assume risks, we need to verify the payment or resource
generation capacity to ensure the amortization of the risk
incurred.
The above is carried out through a prudent risk management
policy which consists of analyzing the financial risk in a
transaction, based on the repayment or resource generation
capacity of the credit recipient, the provision of guarantees in
any of the generally accepted ways (cash collateral, pledged
assets, personal guarantees, covenants or hedges) appropriate to
the risk undertaken, and lastly on the recovery risk (the
asset’s liquidity).
The procedures for the management and valuation of collaterals
are set out in the internal Manual on Credit Risk Management
Policies, which we actively use in the arrangement of
transactions and in the monitoring of both these and customers.
This Manual lays down the basic principles of credit risk
management, which includes the management of the collateral
assigned in transactions with customers. Accordingly, the risk
management model jointly values the existence of an adequate
cash flow generation by the obligor that enables him to service
the debt, together with the existence of suitable and sufficient
guarantees that ensure the recovery of the credit when the
obligor’s circumstances render such obligor unable to meet
their obligations.
The procedures used for the valuation of the collateral are
consistent with the market’s best practices, which involve
the use of appraisal for real estate guarantees, market price
for shares, quoted value of shares in a mutual fund, among other
things.
All collaterals assigned are to be properly instrumented and
recognized in the corresponding register, and must receive the
approval of our legal department.
The following is a description of the main collateral for each
financial instrument class:
| • | Financial assets held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument. In trading derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees, depending on the counterparty solvency and the nature of the transaction. | |
| • | Other financial assets designated at fair value through profit or loss: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
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| • | Available-for-sale financial assets: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. | |
| • | Loans and receivables: |
| • | Loans and advances to credit institutions: These have the counterparty’s personal guarantee. | |
| • | Total lending to customers: Most of these operations are backed by personal guarantees extended by the counterparty. The collateral received to secure loans and advances to other debtors includes mortgages, cash guarantees and other collateral such as pledged securities. Other kinds of credit enhancements may be put in place such as guarantees. | |
| • | Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
| • | Held-to-maturity investments: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. | |
| • | Hedging derivatives: Credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are settled at their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. | |
| • | Financial guarantees, other contingent exposures and drawable by third parties: These have the counterparty’s personal guarantee. |
Our collateralized credit risk as of December 31, 2010,
2009 and 2008, excluding balances deemed impaired, is broken
down in the table below:
|
Collateralized Credit Risk
|
2010 | 2009 | 2008 | |||||||||
| (In millions of euros) | ||||||||||||
|
Mortgage loans
|
132,628 | 127,957 | 125,540 | |||||||||
|
Operating assets mortgage loans
|
3,638 | 4,050 | 3,896 | |||||||||
|
Home mortgages
|
108,224 | 99,493 | 96,772 | |||||||||
|
Rest of mortgages
|
20,766 | 24,414 | 24,872 | |||||||||
|
Secured loans, except mortgage
|
18,154 | 20,917 | 19,982 | |||||||||
|
Cash guarantees
|
281 | 231 | 250 | |||||||||
|
Secured loan (pledged securities)
|
563 | 692 | 458 | |||||||||
|
Rest of secured loans
|
17,310 | 19,994 | 19,274 | |||||||||
|
Total
|
150,782 | 148,874 | 145,522 | |||||||||
In addition, we hold derivatives that carry contractual, legal
compensation rights that have effectively reduced credit risk by
€27,933 million as of December 31, 2010, by
€27,026 million as of December 31, 2009 and by
€29,377 million as of December 31, 2008.
As of December 31, 2010, specifically in relation to
mortgages, the average amount pending loan collection
represented 53.1% of the collateral pledged (54% as of
December 31, 2009 and 55% as of December 31, 2008).
Credit
quality of financial assets that are neither past due nor
impaired
We have ratings tools that enable us to rank the credit quality
of our operations and customers based on a scoring system and to
map these ratings to probability of default (PD) scales. To
analyze the performance of PD, we have a series of tracking
tools and historical databases that house the pertinent
information generated internally.
The scoring tools vary by customer segment (such as companies,
corporate clients, SMEs and public authorities). Scoring is a
decision model that contributes to both the arrangement and
management of retail type loans: consumer loans, mortgages,
credit cards for individuals, among others. Scoring is the tool
used to decide to whom a loan should be assigned, what amount
should be assigned and what strategies can help establish the
price, because it is an algorithm that sorts transactions in
accordance with their credit rating. The move towards advanced
164
Table of Contents
risk management makes it possible to establish more proactive
commercial relations with customers. Proactive scoring
establishes limits for customers that are then used when
granting transactions.
Rating tools, as opposed to scoring tools, do not assess
transactions but focus on customers instead, such as companies,
corporate clients, SMEs or public authorities. For wholesale
portfolios where the number of defaults is very low (sovereigns,
corporates, financial entities) the internal ratings models are
fleshed out by benchmarking the statistics maintained by
external rating agencies (Moody’s, Standard &
Poor’s and Fitch). To this end, each year we compare the
PDs compiled by the agencies at each level of risk rating and
map the measurements compiled by the various agencies to our
master rating scale.
Once the probability of default for the transactions or
customers has been determined, the so-called business cycle
adjustment starts. This involves generating a risk metric
outside the context estimate, seeking to gather information that
represents behavior for an entire economic cycle. This
probability is linked to our master rating scale.
We maintain a master rating scale with a view to facilitating
the uniform classification of our various asset risk portfolios.
The table below shows the abridged scale which groups
outstanding risk into 17 categories as of December 31, 2010:
| Probability of Default (Basic Points) | ||||||||||||
|
Internal Rating
|
Minimum from
|
|||||||||||
|
Reduced List (17 groups)
|
Average | >= | Maximum | |||||||||
|
AAA
|
1 | — | 2 | |||||||||
|
AA+
|
2 | 2 | 3 | |||||||||
|
AA
|
3 | 3 | 4 | |||||||||
|
AA−
|
4 | 4 | 5 | |||||||||
|
A+
|
5 | 5 | 6 | |||||||||
|
A
|
8 | 6 | 9 | |||||||||
|
A−
|
10 | 9 | 11 | |||||||||
|
BBB+
|
14 | 11 | 17 | |||||||||
|
BBB
|
20 | 17 | 24 | |||||||||
|
BBB−
|
31 | 24 | 39 | |||||||||
|
BB+
|
51 | 39 | 67 | |||||||||
|
BB
|
88 | 67 | 116 | |||||||||
|
BB−
|
150 | 116 | 194 | |||||||||
|
B+
|
255 | 194 | 335 | |||||||||
|
B
|
441 | 335 | 581 | |||||||||
|
B−
|
785 | 581 | 1,061 | |||||||||
|
C
|
2,122 | 1,061 | 4,243 | |||||||||
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Table of Contents
The table below outlines the distribution of exposure including
derivatives by internal ratings, to financial entities and
public institutions (excluding sovereign risk), of the
Group’s main entities as of December 31, 2010, 2009
and 2008:
|
Credit Risk Distribution by Internal Rating
|
2010 | 2009 | 2008 | |||||||||
|
AAA/AA+/AA/AA−
|
26.94 | % | 19.55 | % | 23.78 | % | ||||||
|
A+/A/A−
|
27.49 | % | 28.78 | % | 26.59 | % | ||||||
|
BBB+
|
9.22 | % | 8.65 | % | 9.23 | % | ||||||
|
BBB
|
4.49 | % | 7.06 | % | 5.76 | % | ||||||
|
BBB−
|
5.50 | % | 6.91 | % | 9.48 | % | ||||||
|
BB+
|
5.10 | % | 4.46 | % | 8.25 | % | ||||||
|
BB
|
4.57 | % | 6.05 | % | 6.16 | % | ||||||
|
BB−
|
4.88 | % | 6.45 | % | 5.91 | % | ||||||
|
B+
|
4.84 | % | 5.38 | % | 3.08 | % | ||||||
|
B
|
4.81 | % | 3.34 | % | 1.44 | % | ||||||
|
B−
|
1.89 | % | 0.88 | % | 0.28 | % | ||||||
|
CCC/CC
|
0.27 | % | 2.49 | % | 0.03 | % | ||||||
|
Total
|
100.00 | % | 100.00 | % | 100.00 | % | ||||||
Policies
and procedures for preventing excessive risk
concentration
In order to prevent the
build-up
of
excessive concentrations of credit risk at the individual,
country and sector levels, we oversee updated risk concentration
indices at the individual and portfolio levels tied to the
various observable variables within the field of credit risk
management. The limit on our exposure or share of a
customer’s financial business therefore depends on the
customer’s credit rating, the nature of the facility, and
our presence in a given market, based on the following
guidelines:
| • | The need to balance the customer’s financing needs, broken down by type (commercial/financial, short/long-term, etc.), and the degree to which its business is or is not attractive to us. We believe this approach provides a better operational mix that is still compatible with the needs of the bank’s clientele. | |
| • | Other determining factors are national legislation and the ratio between the size of customer lending and the Bank’s equity (to prevent risk from becoming overly concentrated among few customers). Additional factors taken into consideration include constraints related to market, customer, internal regulation and macroeconomic factors, etc. | |
| • | In addition, correct portfolio management leads to identification of risk concentrations and enables appropriate action to be taken. |
Operations with customers or groups that entail an expected loss
plus economic capital of over €18 million are approved
at the highest level, i.e., by the Board’s Risk Committee.
As a reference, this is equivalent in terms of exposure to 10%
of eligible equity for AAA and to 1% for a BB rating, implying
oversight of the major individual risk concentrations by the
highest-level risk governance bodies as a function of credit
ratings.
There is an additional guideline in terms of a maximum risk
concentration level of up to and including 10% of equity: up to
this level there are stringent requirements in terms of in-depth
knowledge of the client, its operating markets and sectors of
operation.
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Table of Contents
Financial
assets past due but not impaired
The table below provides details of financial assets past due as
of December 31, 2010, 2009 and 2008 but not considered to
be impaired, including any amount past due on these dates,
listed by their first due date:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
|
Less
|
Less
|
Less
|
||||||||||||||||||||||||||||||||||
|
than 1
|
1 to 2
|
1 to 3
|
than 1
|
1 to 2
|
1 to 3
|
than 1
|
1 to 2
|
1 to 3
|
||||||||||||||||||||||||||||
|
Financial Assets Past Due but Not
|
Months
|
Months
|
Months
|
Months
|
Months
|
Months
|
Months
|
Months
|
Months
|
|||||||||||||||||||||||||||
|
Impaired
|
Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | |||||||||||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||||||||||||||
|
Loans and advances to credit institutions
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Loans and advances to customers
|
1,082 | 311 | 277 | 2,653 | 336 | 311 | 1,580 | 534 | 447 | |||||||||||||||||||||||||||
|
Government
|
122 | 27 | 27 | 45 | 32 | 19 | 30 | 10 | 12 | |||||||||||||||||||||||||||
|
Other sectors
|
960 | 284 | 250 | 2,608 | 304 | 292 | 1,550 | 524 | 435 | |||||||||||||||||||||||||||
|
Debt securities
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Total
|
1,082 | 311 | 277 | 2,653 | 336 | 311 | 1,580 | 534 | 447 | |||||||||||||||||||||||||||
Impaired
assets and impairment losses
The table below shows the composition of the balance of impaired
financial assets broken down by heading in the balance sheet and
the impaired contingent liabilities as of December 31,
2010, 2009 and 2008:
|
Impaired Risks.
|
||||||||||||
|
Breakdown by Type of Asset and by Sector
|
2010 | 2009 | 2008 | |||||||||
| (In millions of euros) | ||||||||||||
|
IMPAIRED RISKS ON BALANCE
|
||||||||||||
|
Available-for-sale
financial assets
|
140 | 212 | 188 | |||||||||
|
Debt securities
|
140 | 212 | 188 | |||||||||
|
Loans and receivables
|
15,472 | 15,311 | 8,540 | |||||||||
|
Loans and advances to credit institutions
|
101 | 100 | 95 | |||||||||
|
Loans and advances to customers
|
15,361 | 15,197 | 8,437 | |||||||||
|
Debt securities
|
10 | 14 | 8 | |||||||||
|
Total Impaired Risks on Balance(1)
|
15,612 | 15,523 | 8,728 | |||||||||
|
Impaired Risks Off Balance(2)
|
||||||||||||
|
Impaired contingent liabilities
|
324 | 405 | 131 | |||||||||
|
TOTAL IMPAIRED RISKS(1)+(2)
|
15,936 | 15,928 | 8,859 | |||||||||
|
Of which:
|
||||||||||||
|
Government
|
123 | 87 | 102 | |||||||||
|
Credit institutions
|
129 | 172 | 165 | |||||||||
|
Other sectors
|
15,360 | 15,264 | 8,461 | |||||||||
|
Mortgage
|
8,627 | 7,932 | 3,047 | |||||||||
|
With partial secured loans
|
159 | 37 | 4 | |||||||||
|
Rest
|
6,574 | 7,295 | 5,410 | |||||||||
|
Impaired contingent liabilities
|
324 | 405 | 131 | |||||||||
|
TOTAL IMPAIRED RISKS
|
15,936 | 15,928 | 8,859 | |||||||||
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Table of Contents
The changes in 2010, 2009 and 2008 in the impaired financial
assets and contingent liabilities were as follows:
|
Changes in Impaired Financial
|
||||||||||||
|
Assets and Contingent Liabilities
|
2010 | 2009 | 2008 | |||||||||
| (In millions of euros) | ||||||||||||
|
Balance at the beginning
|
15,928 | 8,859 | 3,418 | |||||||||
|
Additions(1)
|
13,207 | 17,298 | 11,488 | |||||||||
|
Recoveries(2)
|
(9,138 | ) | (6,524 | ) | (3,668 | ) | ||||||
|
Net additions(1)+(2)
|
4,069 | 10,774 | 7,820 | |||||||||
|
Transfers to write-off
|
(4,307 | ) | (3,737 | ) | (2,198 | ) | ||||||
|
Exchange differences and other
|
247 | 32 | (181 | ) | ||||||||
|
Balance at the end
|
15,936 | 15,928 | 8,859 | |||||||||
|
Recoveries on entries(%)
|
69 | 38 | 32 | |||||||||
Below are details of the impaired financial assets as of
December 31, 2010, 2009 and 2008, without considering
impaired liabilities or valuation adjustments, classified by
geographical location of risk and by the time since their oldest
past-due amount or the period since they were deemed impaired:
|
Less than 6
|
6 to 9
|
9 to 12
|
More than
|
|||||||||||||||||
|
Months
|
Months
|
Months
|
12 Months
|
|||||||||||||||||
|
2010
|
Past-Due | Past-Due | Past-Due | Past-Due | Total | |||||||||||||||
| (In millions of euros) | ||||||||||||||||||||
|
Spain
|
5,279 | 1,064 | 798 | 4,544 | 11,685 | |||||||||||||||
|
Rest of Europe
|
106 | 24 | 24 | 55 | 209 | |||||||||||||||
|
Latin America
|
1,473 | 112 | 100 | 397 | 2,082 | |||||||||||||||
|
The United States
|
1,110 | 84 | 111 | 331 | 1,636 | |||||||||||||||
|
Rest of the world
|
— | — | — | — | — | |||||||||||||||
|
Total
|
7,968 | 1,284 | 1,034 | 5,327 | 15,612 | |||||||||||||||
Below are details of the impaired financial assets as of
December 31, 2010, classified by type of loan in accordance
with its associated guarantee, and by the time since their
oldest past-due amount or the period since they were deemed
impaired:
|
Less than
|
6 to 9
|
9 to 12
|
More than
|
|||||||||||||||||
|
6 Months
|
Months
|
Months
|
12 Months
|
|||||||||||||||||
|
2010
|
Past-Due | Past-Due | Past-Due | Past-Due | Total | |||||||||||||||
| (In millions of euros) | ||||||||||||||||||||
|
Unsecured loans
|
4,309 | 338 | 271 | 1,710 | 6,628 | |||||||||||||||
|
Mortgage
|
3,301 | 946 | 763 | 3,617 | 8,627 | |||||||||||||||
|
Residential mortgage
|
629 | 304 | 271 | 1,472 | 2,676 | |||||||||||||||
|
Commercial mortgage (rural properties in operation and offices,
and industrial buildings)
|
561 | 128 | 100 | 602 | 1,391 | |||||||||||||||
|
Rest of residential mortgage
|
701 | 132 | 99 | 593 | 1,525 | |||||||||||||||
|
Plots and other real state assets
|
1,410 | 382 | 293 | 950 | 3,035 | |||||||||||||||
|
Other partially secured loans
|
159 | — | — | — | 159 | |||||||||||||||
|
Others
|
199 | — | — | — | 198 | |||||||||||||||
|
Total
|
7,968 | 1,284 | 1,034 | 5,327 | 15,612 | |||||||||||||||
Financial income accrued from impaired financial assets amounted
to €1,717 million, €1,485 million and
1,042 million as of December 31, 2010, 2009 and 2008,
respectively. This income is not recognized in the accompanying
consolidated income statement due to the existence of doubts as
to the collection of these assets. Note 2.2.1.b to the
Consolidated Financial Statements gives a description of the
individual analysis of impaired
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Table of Contents
financial assets, including the factors the entity takes into
account in determining that they are impaired and the extension
of guarantees and other credit enhancements.
The following shows the changes in impaired financial assets
written off from the balance sheet for the years ended
December 31, 2010, 2009 and 2008 because the possibility of
their recovery was deemed remote:
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Changes in Written-Off
|
||||||||||||
|
Balance at the beginning of year
|
9,834 | 6,872 | 5,622 | |||||||||
|
Increase:
|
4,788 | 3,880 | 1,976 | |||||||||
|
Decrease:
|
(1,448 | ) | (1,172 | ) | (567 | ) | ||||||
|
Re-financing or restructuring
|
(1 | ) | — | — | ||||||||
|
Cash recovery
|
(253 | ) | (188 | ) | (199 | ) | ||||||
|
Foreclosed assets
|
(5 | ) | (48 | ) | (13 | ) | ||||||
|
Sales of written-off
|
(342 | ) | (590 | ) | (261 | ) | ||||||
|
Other causes
|
(847 | ) | (346 | ) | (94 | ) | ||||||
|
Net exchange differences
|
193 | 253 | (159 | ) | ||||||||
|
Balance at the end
|
13,367 | 9,833 | 6,872 | |||||||||
Our non-performing assets (“NPA”) ratios for the
headings “Loans and advances to customers” and
“Contingent liabilities” as of December 31, 2010,
2009 and 2008 were 4.1%, 4.3% and 2.3%, respectively.
A breakdown of impairment losses by type of financial instrument
registered in the income statement and the recoveries of
impaired financial assets in 2010, 2009 and 2008 is provided
Note 49 to the Consolidated Financial Statements. The
accumulated balance of impairment losses broken down by
portfolio as of December 31, 2010, 2009 and 2008 is as
follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Impairment Losses
|
||||||||||||
|
Available-for-sale
portfolio
|
619 | 449 | 202 | |||||||||
|
Loans and receivables
|
9,473 | 8,805 | 7,505 | |||||||||
|
Loans and advances to customers
|
9,396 | 8,720 | 7,412 | |||||||||
|
Loans and advances to credit institutions
|
67 | 68 | 74 | |||||||||
|
Debt securities
|
10 | 17 | 19 | |||||||||
|
Held to maturity investment
|
1 | 1 | 4 | |||||||||
|
Total
|
10,093 | 9,255 | 7,711 | |||||||||
|
Of which:
|
||||||||||||
|
For impaired portfolio
|
7,362 | 6,380 | 3,480 | |||||||||
|
For currently non-impaired portfolio
|
2,731 | 2,875 | 4,231 | |||||||||
In addition to the amounts indicated above, provisions for
contingent exposures and commitments rose to €264,
€243 and €421 million as of December 31,
2010, 2009 and 2008 respectively (see Note 25 to the
Consolidated Financial Statements).
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Table of Contents
The changes in the accumulated impairment losses for the years
2010, 2009 and 2008 were as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In millions of euros) | ||||||||||||
|
Changes in the Impairment Losses
|
||||||||||||
|
Balance at the beginning
|
9,255 | 7,711 | 7,194 | |||||||||
|
Increase in impairment losses charged to income
|
7,207 | 8,282 | 4,590 | |||||||||
|
Decrease in impairment losses credited to income
|
(2,236 | ) | (2,622 | ) | (1,457 | ) | ||||||
|
Acquisition of subsidiaries
|
— | — | 1 | |||||||||
|
Disposal of subsidiaries
|
— | — | (4 | ) | ||||||||
|
Transfers to written-off loans
|
(4,488 | ) | (3,878 | ) | (1,951 | ) | ||||||
|
Exchange differences and other
|
355 | (238 | ) | (662 | ) | |||||||
|
Balance at the end
|
10,093 | 9,255 | 7,711 | |||||||||
|
Of which:
|
||||||||||||
|
For impaired portfolio
|
7,362 | 6,380 | 3,480 | |||||||||
|
For currently non-impaired portfolio
|
2,731 | 2,875 | 4,231 | |||||||||
Most of the impairment on financial assets are included under
the heading “Loans and receivables — Loans and
advances to customers”. The changes in impairment for 2010,
2009 and 2008 are shown in this heading:
|
Changes in the Impairment Losses
|
2010 | 2009 | 2008 | |||||||||
| (In millions of euros) | ||||||||||||
|
Loans and advances to customers
|
||||||||||||
|
Balance at the beginning
|
8,720 | 7,412 | 7,117 | |||||||||
|
Increase in impairment losses charged to income
|
7,014 | 7,983 | 4,434 | |||||||||
|
Decrease in impairment losses credited to income
|
(2,200 | ) | (2,603 | ) | (1,636 | ) | ||||||
|
Acquisition of subsidiaries
|
— | — | — | |||||||||
|
Disposal of subsidiaries
|
— | — | — | |||||||||
|
Transfers to written-off loans
|
(4,423 | ) | (3,828 | ) | (1,950 | ) | ||||||
|
Exchange differences and other
|
285 | (244 | ) | (553 | ) | |||||||
|
Balance at the end
|
9,396 | 8,720 | 7,412 | |||||||||
|
Of which:
|
||||||||||||
|
For impaired portfolio
|
6,683 | 5,864 | 3,239 | |||||||||
|
For currently non-impaired portfolio
|
2,713 | 2,856 | 4,173 | |||||||||
170
Table of Contents
Risk
Concentrations
The table below shows the Group’s financial instruments by
geographical area, not taking into account valuation
adjustments, as of December 31, 2010, 2009 and 2008:
|
Europe,
|
||||||||||||||||||||||||
|
2010
|
Excluding
|
Latin
|
||||||||||||||||||||||
|
Risks On-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||
|
Financial assets held for trading
|
18,903 | 22,899 | 3,951 | 15,126 | 2,404 | 63,283 | ||||||||||||||||||
|
Debt securities
|
9,522 | 2,839 | 654 | 10,938 | 405 | 24,358 | ||||||||||||||||||
|
Equity instruments
|
3,041 | 888 | 148 | 861 | 322 | 5,260 | ||||||||||||||||||
|
Derivatives
|
6,340 | 19,172 | 3,149 | 3,327 | 1,677 | 33,665 | ||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
284 | 98 | 481 | 1,913 | 1 | 2,777 | ||||||||||||||||||
|
Debt securities
|
138 | 66 | 480 | 7 | — | 691 | ||||||||||||||||||
|
Equity instruments
|
146 | 32 | 1 | 1,906 | 1 | 2,086 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
25,230 | 7,689 | 7,581 | 14,449 | 1,234 | 56,183 | ||||||||||||||||||
|
Debt securities
|
20,725 | 7,470 | 6,903 | 14,317 | 1,187 | 50,602 | ||||||||||||||||||
|
Equity instruments
|
4,505 | 219 | 678 | 132 | 47 | 5,581 | ||||||||||||||||||
|
Loans and receivables
|
218,399 | 30,985 | 39,944 | 77,861 | 5,847 | 373,036 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
6,786 | 7,846 | 864 | 7,090 | 1,018 | 23,604 | ||||||||||||||||||
|
Loans and advances to customers
|
210,102 | 23,139 | 38,649 | 70,497 | 4,822 | 347,209 | ||||||||||||||||||
|
Debt securities
|
1,511 | — | 431 | 274 | 7 | 2,223 | ||||||||||||||||||
|
Held-to-maturity
investments
|
7,504 | 2,443 | — | — | — | 9,947 | ||||||||||||||||||
|
Hedging derivatives
|
234 | 2,922 | 131 | 281 | 35 | 3,603 | ||||||||||||||||||
|
Total
|
270,554 | 67,036 | 52,088 | 109,630 | 9,521 | 508,829 | ||||||||||||||||||
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
Latin
|
|||||||||||||||||||||||
|
Risks Off-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
|
Financial guarantees
|
20,175 | 6,773 | 3,069 | 4,959 | 1,465 | 36,441 | ||||||||||||||||||
|
Contingent exposures
|
35,784 | 19,144 | 17,604 | 17,132 | 910 | 90,574 | ||||||||||||||||||
|
Total
|
55,959 | 25,917 | 20,673 | 22,091 | 2,375 | 127,015 | ||||||||||||||||||
171
Table of Contents
|
Europe,
|
||||||||||||||||||||||||
|
2009
|
Excluding
|
Latin
|
||||||||||||||||||||||
|
Risks On-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||
|
Financial assets held for trading
|
22,893 | 25,583 | 3,076 | 15,941 | 2,240 | 69,733 | ||||||||||||||||||
|
Debt securities
|
14,487 | 7,434 | 652 | 11,803 | 296 | 34,672 | ||||||||||||||||||
|
Equity instruments
|
3,268 | 624 | 35 | 1,662 | 194 | 5,783 | ||||||||||||||||||
|
Derivatives
|
5,138 | 17,525 | 2,389 | 2,476 | 1,750 | 29,278 | ||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
330 | 73 | 436 | 1,498 | — | 2,337 | ||||||||||||||||||
|
Debt securities
|
157 | 42 | 435 | 5 | — | 639 | ||||||||||||||||||
|
Equity instruments
|
173 | 31 | 1 | 1,493 | — | 1,698 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
30,177 | 11,660 | 7,828 | 12,585 | 1,266 | 63,516 | ||||||||||||||||||
|
Debt securities
|
24,838 | 11,429 | 7,082 | 12,494 | 1,223 | 57,066 | ||||||||||||||||||
|
Equity instruments
|
5,339 | 231 | 746 | 91 | 43 | 6,450 | ||||||||||||||||||
|
Loans and receivables
|
206,097 | 34,613 | 40,469 | 66,395 | 6,167 | 353,741 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
2,568 | 11,280 | 2,441 | 4,993 | 918 | 22,200 | ||||||||||||||||||
|
Loans and advances to customers
|
203,529 | 23,333 | 37,688 | 61,298 | 5,239 | 331,087 | ||||||||||||||||||
|
Debt securities
|
— | — | 340 | 104 | 10 | 454 | ||||||||||||||||||
|
Held-to-maturity
investments
|
2,625 | 2,812 | — | — | — | 5,437 | ||||||||||||||||||
|
Hedging derivatives
|
218 | 2,965 | 117 | 270 | 25 | 3,595 | ||||||||||||||||||
|
Total
|
262,340 | 77,706 | 51,926 | 96,689 | 9,698 | 498,359 | ||||||||||||||||||
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
Latin
|
|||||||||||||||||||||||
|
Risks Off-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
|
Financial guarantees
|
15,739 | 7,826 | 3,330 | 4,601 | 1,689 | 33,185 | ||||||||||||||||||
|
Contingent exposures
|
37,804 | 24,119 | 15,990 | 13,164 | 1,246 | 92,323 | ||||||||||||||||||
|
Total
|
53,543 | 31,945 | 19,320 | 17,765 | 2,935 | 125,508 | ||||||||||||||||||
172
Table of Contents
|
Europe,
|
||||||||||||||||||||||||
|
2008
|
Excluding
|
Latin
|
||||||||||||||||||||||
|
Risks On-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
| (In millions of euros) | ||||||||||||||||||||||||
|
Financial assets held for trading
|
20,489 | 30,251 | 4,566 | 16,120 | 1,873 | 73,299 | ||||||||||||||||||
|
Debt securities
|
7,799 | 5,926 | 652 | 11,563 | 616 | 26,556 | ||||||||||||||||||
|
Equity instruments
|
2,332 | 1,376 | 80 | 1,071 | 938 | 5,797 | ||||||||||||||||||
|
Derivatives
|
10,358 | 22,949 | 3,834 | 3,486 | 319 | 40,946 | ||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
245 | 24 | 442 | 1,042 | 1 | 1,754 | ||||||||||||||||||
|
Debt securities
|
63 | — | 441 | 12 | — | 516 | ||||||||||||||||||
|
Equity instruments
|
182 | 24 | 1 | 1,030 | 1 | 1,238 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
15,233 | 10,460 | 9,633 | 8,449 | 2,999 | 46,774 | ||||||||||||||||||
|
Debt securities
|
11,811 | 9,970 | 8,889 | 8,368 | 924 | 39,962 | ||||||||||||||||||
|
Equity instruments
|
3,422 | 490 | 744 | 81 | 2,075 | 6,812 | ||||||||||||||||||
|
Loans and receivables
|
215,030 | 44,394 | 38,268 | 69,534 | 8,162 | 375,388 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
6,556 | 15,848 | 2,479 | 7,466 | 1,330 | 33,679 | ||||||||||||||||||
|
Loans and advances to customers
|
208,474 | 28,546 | 35,498 | 61,978 | 6,826 | 341,322 | ||||||||||||||||||
|
Debt securities
|
— | — | 291 | 90 | 6 | 387 | ||||||||||||||||||
|
Held-to-maturity
investments
|
2,396 | 2,889 | — | — | — | 5,285 | ||||||||||||||||||
|
Hedging derivatives
|
439 | 2,789 | 270 | 309 | 26 | 3,833 | ||||||||||||||||||
|
Total
|
253,832 | 90,807 | 53,179 | 95,454 | 13,060 | 506,333 | ||||||||||||||||||
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
Latin
|
|||||||||||||||||||||||
|
Risks Off-Balance
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
|
Financial guarantees
|
16,843 | 8,969 | 3,456 | 4,721 | 1,963 | 35,952 | ||||||||||||||||||
|
Contingent exposures
|
45,039 | 22,366 | 16,194 | 13,559 | 1,739 | 98,897 | ||||||||||||||||||
|
Total
|
61,882 | 31,335 | 19,650 | 18,280 | 3,702 | 134,849 | ||||||||||||||||||
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
| A. | Debt Securities |
Not Applicable.
| B. | Warrants and Rights |
Not Applicable.
| C. | Other Securities |
Not Applicable.
173
Table of Contents
| D. | American Depositary Shares |
Our ADSs are listed on the New York Stock Exchange under the
symbol “BBVA”. The Bank of New York Mellon is the
depositary (the “Depositary”) issuing ADSs pursuant to
an amended and restated deposit agreement dated June 29,
2007 among BBVA, the Depositary and the holders from time to
time of ADSs (the “Deposit Agreement”). Each ADS
represents the right to receive one share. The table below sets
forth the fees payable, either directly or indirectly, by a
holder of ADSs as of the date of this Annual Report.
|
Category
|
Depositary Actions
|
Associated Fee/By Whom Paid
|
||
|
(a) Depositing or substituting the underlying shares
|
Issuance of ADSs | Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADSs delivered (charged to person depositing the shares or receiving the ADSs) | ||
|
(b) Receiving or distributing dividends
|
Distribution of cash dividends or other cash distributions; distribution of share dividends or other free share distributions; distribution of securities other than ADSs or rights to purchase additional ADSs | Not applicable | ||
|
(c) Selling or exercising rights
|
Distribution or sale of securities | Not applicable | ||
|
(d) Withdrawing an underlying security
|
Acceptance of ADSs surrendered for withdrawal of deposited securities | Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADSs surrendered (charged to person surrendering or to person to whom withdrawn securities are being delivered) | ||
|
(e) Transferring, splitting or grouping receipts
|
Transfers, combining or grouping of depositary receipts | Not applicable | ||
|
(f) General depositary services, particularly those charged
on an annual basis
|
Other services performed by the Depositary in administering the ADSs | Not applicable | ||
|
(g) Expenses of the Depositary
|
Expenses incurred on behalf of holders in connection with
1) stock transfer or other taxes (including Spanish income taxes) and other governmental charges;
2) cable, telex and facsimile transmission and delivery charges incurred at request of holder of ADS or person depositing shares for the issuance of ADSs;
3) transfer, brokerage or registration fees for the registration of shares or other deposited securities on the share register and applicable to transfers of shares or other deposited securities to or from the name of the custodian;
4) reasonable and customary expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars
|
Expenses payable by holders of ADSs or persons depositing shares for the issuance of ADSs; expenses payable in connection with the conversion of foreign currency into U.S. dollars are payable out of such foreign currency |
174
Table of Contents
The Depositary may remit to us all or a portion of the
Depositary fees charged for the reimbursement of certain of the
expenses we incur in respect of the ADS program established
pursuant to the Deposit Agreement upon such terms and conditions
as we may agree from time to time. In the year ended
December 31, 2010, the Depositary reimbursed us $527
thousand with respect to certain fees and expenses. The table
below sets forth the types of expenses that the Depositary has
agreed to reimburse and the amounts reimbursed in 2010.
|
Amount
|
||||
|
Reimbursed in
|
||||
|
the Year
|
||||
|
Ended
|
||||
|
Category of Expenses
|
December 31, 2010 | |||
| Thousands of dollars | ||||
|
NYSE Listing Fees
|
119 | |||
|
Investor Relations Marketing
|
210 | |||
|
Professional Services
|
129 | |||
|
AGM Expenses
|
69 | |||
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not Applicable.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not Applicable.
| ITEM 15. | CONTROLS AND PROCEDURES |
Conclusion
Regarding the Effectiveness of Disclosure Controls and
Procedures
As of December 31, 2010, BBVA, under the supervision and
with the participation of BBVA’s management, including our
Chairman and Chief Executive Officer, President and Chief
Operating Officer and Chief Accounting Officer, performed an
evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in
Rule 13a-15(e)
under the Exchange Act). There are, as described below, inherent
limitations to the effectiveness of any control system,
including disclosure controls and procedures. Accordingly, even
effective disclosure controls and procedures can provide only
reasonable assurance of achieving their control objectives.
Based upon that evaluation, BBVA’s Chairman and Chief
Executive Officer, President and Chief Operating Officer and
Chief Accounting Officer concluded that BBVA’s disclosure
controls and procedures are effective to ensure that information
relating to BBVA, including its consolidated subsidiaries,
required to be disclosed in reports that it files under the
Exchange Act is (1) recorded, processed, summarized and
reported within the time periods specified in the SEC’s
rules and forms, and (2) accumulated and communicated to
the management, including principal financial officers, as
appropriate to allow timely decisions regarding required
disclosure.
Management’s
Report on Internal Control Over Financial Reporting
The management of BBVA is responsible for establishing and
maintaining adequate internal control over financial reporting
as defined in
Rule 13a-15(f)
under the Exchange Act. BBVA’s internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
| • | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of BBVA; |
175
Table of Contents
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of BBVA’s management and directors; and | |
| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of BBVA’s
management, including our Chairman and Chief Executive Officer,
President and Chief Operating Officer and Chief Accounting
Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the criteria
established in
Internal Control — Integrated
Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission
(“
COSO
”). Based on this assessment, our
management concluded that, as of December 31, 2010, our
internal control over financial reporting was effective based on
those criteria.
Our internal control over financial reporting as of
December 31, 2010 has been audited by Deloitte S.L., an
independent registered public accounting firm, as stated in
their report which follows below.
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Banco Bilbao
Vizcaya Argentaria, S.A.:
We have audited the internal control over financial reporting of
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”)
and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA
Group (the “Group” — Note 3) as of
December 31, 2010, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Group’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
176
Table of Contents
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Group maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2010, based on the criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2010 of the Group and our report dated
April 1, 2011 expressed an unqualified opinion on those
consolidated financial statements and included an explanatory
paragraph stating that the International Financial Reporting
Standards adopted by the European Union (“EU-IFRS”)
required to be applied under the Bank of Spain’s Circular
4/2004 vary in certain significant respects from accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) and that the information relating
to the nature and effect of such differences is presented in
Note 60 to the consolidated financial statements of the
Group.
/s/
DELOITTE,
S.L.
Madrid — Spain
April 1, 2011
Changes
in Internal Control Over Financial Reporting
There has been no change in BBVA’s internal control over
financial reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) that occurred during the period covered
by this Annual Report that has materially affected, or is
reasonably likely to materially affect, internal control over
financial reporting.
| ITEM 16. | [RESERVED] |
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
The charter for our Audit and Compliance Committee provides that
the Chairman of the Audit and Compliance Committee is required
to have experience in financial matters as well as knowledge of
the accounting standards and principles required by the banking
regulators, and we have determined that Mr. José Luis
Palao García Suelto, the Chairman of the Audit and
Compliance Committee, has such experience and knowledge and is
an “audit committee financial expert” as such term is
defined by the regulations of the Securities and Exchange
Commission issued pursuant to Section 407 of the
Sarbanes-Oxley Act of 2002. Mr. Palao is independent within
the meaning of the New York Stock Exchange listing standards.
In addition, we believe that the remaining members of the Audit
and Compliance Committee have an understanding of applicable
generally accepted accounting principles, experience analyzing
and evaluating financial statements that present a breadth and
level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by our Consolidated
Financial Statements, an understanding of internal controls over
financial reporting, and an understanding of audit committee
functions. Our Audit and Compliance Committee has experience
overseeing and assessing the performance of BBVA and its
consolidated subsidiaries and our external auditors with respect
to the preparation, auditing and evaluation of our Consolidated
Financial Statements.
| ITEM 16B. | CODE OF ETHICS |
BBVA’s Code of Ethics and Conduct applies, among others, to
its chief executive officer, chief financial officer and chief
accounting officer. This code establishes the principles that
guide these officers’ respective actions: ethical conduct,
professional standards and confidentiality. It also establishes
the limitations and defines the conflicts of interest arising
from their status as senior executives. We have not waived
compliance with, nor made any
177
Table of Contents
amendment to, the Code of Ethics and Conduct in 2010.
BBVA’s Code of Ethics and Conduct can be found on its
website at www.bbva.com.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table provides information on the aggregate fees
billed by our principal accountants, Deloitte, S.L., by type of
service rendered for the periods indicated.
| Year Ended December 31, | ||||||||
|
Services Rendered
|
2010 | 2009 | ||||||
| (In millions of euros) | ||||||||
|
Audit Fees(1)
|
7.3 | 6.9 | ||||||
|
Audit-Related Fees(2)
|
1.3 | 0.7 | ||||||
|
Tax Fees(3)
|
0.3 | 0.2 | ||||||
|
All Other Fees(4)
|
0.6 | 0.7 | ||||||
|
Total
|
9.5 | 8.5 | ||||||
| (1) | Aggregate fees billed for each of the last two fiscal years for professional services rendered by Deloitte, S.L. for the audit of BBVA’s annual financial statements or services that are normally provided by Deloitte, S.L. in connection with statutory and regulatory filings or engagements for those fiscal years. Total audit fees billed by Deloitte, S.L. and its worldwide affiliates, were €16.4 million and €13.1 million in 2010 and 2009, respectively. | |
| (2) | Aggregate fees billed in each of the last two fiscal years for assurance and related services by Deloitte, S.L. that are reasonably related to the performance of the audit or review of BBVA’s financial statements and are not reported under (1) above. | |
| (3) | Aggregate fees billed in each of the last two fiscal years for professional services rendered by Deloitte, S.L. for tax compliance, tax advice, and tax planning. | |
| (4) | Aggregate fees billed in each of the last two fiscal years for products and services provided by Deloitte, S.L. other than the services reported in (1), (2) and (3) above. Services in this category consisted primarily of employee education courses and verification of the security of information systems. |
The Audit
and Compliance Committee’s Pre-Approval Policies and
Procedures
In order to assist in ensuring the independence of our external
auditor, the regulations of our Audit and Compliance Committee
provides that our external auditor is generally prohibited from
providing us with non-audit services, other than under the
specific circumstance described below. For this reason, our
Audit and Compliance Committee has developed a pre-approval
policy regarding the contracting of BBVA’s external
auditor, or any affiliate of the external auditor, for
professional services. The professional services covered by such
policy include audit and non-audit services provided to BBVA or
any of its subsidiaries reflected in agreements dated on or
after May 6, 2003.
The pre-approval policy is as follows:
1. The hiring of BBVA’s external auditor or any of its
affiliates is prohibited, unless there is no other firm
available to provide the needed services at a comparable cost
and that could deliver a similar level of quality.
2. In the event that there is no other firm available to
provide needed services at a comparable cost and delivering a
similar level of quality, the external auditor (or any of its
affiliates) may be hired to perform such services, but only with
the pre-approval of the Audit and Compliance Committee.
3. The Chairman of the Audit and Compliance Committee has
been delegated the authority to approve the hiring of
BBVA’s external auditor (or any of its affiliates). In such
an event, however, the Chairman would be required to inform the
Audit and Compliance Committee of such decision at the
Committee’s next meeting.
4. The hiring of the external auditor for any of
BBVA’s subsidiaries must also be pre-approved by the Audit
and Compliance Committee.
178
Table of Contents
5. Agreements entered into prior to May 6, 2003
between BBVA or any of its subsidiaries and any of their
respective external auditors, required the approval of the Audit
and Compliance Committee in the event that services provided
under such agreements continued after May 6, 2004.
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not Applicable.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
|
Total Number of
|
Maximum Number
|
|||||||||||||||
|
Shares (or Units)
|
(or Approximate Dollar
|
|||||||||||||||
|
Purchased as Part
|
Value) of Shares (or
|
|||||||||||||||
|
Total Number of
|
Average Price
|
of Publicly
|
Units) that may yet Be
|
|||||||||||||
|
Ordinary Shares
|
Paid per Share (or
|
Announced Plans or
|
Purchased Under the
|
|||||||||||||
|
2010
|
Purchased | Unit) | Programs | Plans or Programs | ||||||||||||
|
January 1 to January 31
|
50,319,956 | € | 11.93 | — | — | |||||||||||
|
February 1 to February 28
|
56,619,454 | € | 10.01 | — | — | |||||||||||
|
March 1 to March 31
|
42,829,540 | € | 10.41 | — | — | |||||||||||
|
April 1 to April 30
|
77,852,734 | € | 10.45 | — | — | |||||||||||
|
May 1 to May 31
|
113,715,210 | € | 8.79 | — | — | |||||||||||
|
June 1 to June 30
|
75,038,225 | € | 9.21 | — | — | |||||||||||
|
July 1 to July 31
|
98,431,518 | € | 9.13 | — | — | |||||||||||
|
August 1 to August 31
|
36,309,050 | € | 9.95 | — | — | |||||||||||
|
September 1 to September 30
|
60,745,856 | € | 10.02 | — | — | |||||||||||
|
October 1 to October 31
|
80,592,413 | € | 9.63 | — | — | |||||||||||
|
November 1 to November 30
|
69,811,829 | € | 8.25 | — | — | |||||||||||
|
December 1 to December 31
|
59,563,014 | € | 8.24 | — | — | |||||||||||
|
Total
|
821,828,799 | € | 9.53 | — | — | |||||||||||
During 2010, we sold a total of 780,423,886 shares for an
average price of €9.48 per share.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
During the years ended December 31, 2010, 2009 and 2008 and
through the date of this Annual Report, the principal
independent accountant engaged to audit our financial
statements, Deloitte S.L., has not resigned, indicated that it
has declined to stand for re-election after the completion of
its current audit or been dismissed. For each of the years ended
December 31, 2010, 2009 and 2008, Deloitte S.L. has not
expressed reliance on another accountant or accounting firm in
its report on our audited annual accounts for such periods.
| ITEM 16G. | CORPORATE GOVERNANCE |
Compliance
with NYSE Listing Standards on Corporate Governance
On November 4, 2003, the SEC approved new rules proposed by
the New York Stock Exchange (the “
NYSE
”)
intended to strengthen corporate governance standards for listed
companies. In compliance therewith, the following is a summary
of the significant differences between our corporate governance
practices and those applicable to domestic issuers under the
NYSE listing standards. The Group’s website address is
www.bbva.com. We include on such website a narrative description
in English of corporate governance differences between NYSE
rules and home country practice in Spain.
179
Table of Contents
Independence
of the Directors on the Board of Directors and
Committees
Under the NYSE corporate governance rules, (i) a majority
of a U.S. company’s board of directors must be
composed of independent directors, (ii) all members of the
audit committee must be independent and (iii) all
U.S. companies listed on the NYSE must have a compensation
committee and a nominations committee and all members of such
committees must be independent. In each case, the independence
of directors must be established pursuant to highly detailed
rules promulgated by the NYSE and, in the case of the audit
committee, the NYSE and the SEC.
With the exception of the rules on the composition of the Audit
and Compliance Committee contained in the Securities Market Act,
where at least one of the members must be an independent
director, Spanish law does not contain any other requirement
that members of the board of directors or the committees thereof
be independent, nor does Spanish law provide for the time being
any definition of what constitutes independence for the purpose
of board or committee membership or otherwise. In addition,
Spanish law does not require that a company have a compensation
committee or an appointments committee. However, there are
non-binding recommendations for listed companies in Spain to
have these committees and for them to be composed of a majority
of non-executive directors as well as a definition of what
constitutes independence for directors.
As described above, pursuant to article 1 of our Board
regulations BBVA considers that independent directors are those
who fulfill the requirements described below:
Independent directors are external directors appointed for their
personal and professional background who can pursue their duties
without being constrained by their relations with the Company,
its significant shareholders or its executives.
Independent directors may not:
a) Have been employees or executive directors in Group
companies, unless three or five years, respectively, have passed
since they ceased to be so.
b) Receive any amount or benefit from the Company or its
Group companies for any reason other than remuneration of their
directorship, unless it is insignificant.
Neither dividends nor supplementary pension payments that the
director may receive from earlier professional or employment
relationships shall be taken into account for the purposes of
this section, provided they are not subject to conditions and
the company paying them may not at its own discretion suspend,
alter or revoke their accrual without breaching its obligations.
c) Be or have been a partner in the external auditors’
firm or in charge of the auditor’s report with respect to
the Company or any other Group company during the last three
years.
d) Be executive director or senior manager in any other
company on which a Company executive director or senior manager
is external director.
e) Maintain or have maintained during the past year an
important business relationship with the Company or any of its
Group companies, either on
his/her
own
behalf or as relevant shareholder, director or senior manager of
a company that maintains or has maintained such relationship.
“Business relationships”
shall mean
relationships as provider of goods
and/or
services, including financial, advisory
and/or
consultancy services.
f) Be significant shareholders, executive directors or
senior managers of any organization that receives or has
received significant donations from the Company or its Group
during the last three years.
Those who are merely trustees on a foundation receiving
donations shall not be ineligible under this section.
g) Be married to or linked by equivalent emotional
relationship, or related by up to second-degree family ties to
an executive director or senior manager of the Company.
h) Have not been proposed by the Appointments Committee for
appointment or renewal.
180
Table of Contents
i) Fall within the cases described under letters a), e),
f) or g) of this section, with respect to any
significant shareholder or shareholder represented on the Board.
In cases of family relationships described under letter g), the
limitation shall not only apply to the shareholder, but also to
the directors it nominates for the Company’s Board.
Directors owning shares in the Company may be independent
providing they comply with the above conditions and their
shareholding is not legally considered as significant.
According to recommendations on corporate governance, the Board
has established a limit on how long a director may remain
independent. Directors may not remain on the Board as
independent directors after having sat on it as such for more
than 12 consecutive years.
Our Board of Directors has a large number of non-executive
directors and nine out of the 12 members of our Board are
independent under the definition of independence described
above. In addition, our Audit and Compliance Committee is
composed exclusively of independent directors and the committee
chairman is required to have experience in financial management
and an understanding of the standards and accounting procedures
required by the governmental authorities that regulate the
banking sector. In accordance with the non-binding
recommendation, our Board of Directors has an Appointments
Committee and a Compensation Committee which are composed mainly
of independent directors.
Separate
Meetings for Independent Directors
In accordance with the NYSE corporate governance rules,
independent directors must meet periodically outside of the
presence of the executive directors. Under Spanish law, this
practice is not contemplated as such. We note, however, that our
independent directors meet periodically outside the presence of
our executive directors anytime the Audit and Compliance
Committee or the Appointments Committee and Compensation
Committee meet, since these Committees are comprised solely of
non-executive directors. In addition, our independent directors
meet outside the presence of our executive directors as often as
they deem fit, and usually prior to meetings of the Board of
Directors or its Committees.
Code
of Ethics
The NYSE listing standards require U.S. companies to adopt
a code of business conduct and ethics for directors, officers
and employees, and promptly disclose any waivers of the code for
directors or executive officers. For information with respect to
BBVA’s code of business conduct and ethics see
“Item 16B. Code of Ethics”.
181
Table of Contents
| ITEM 17. | FINANCIAL STATEMENTS |
We have responded to Item 18 in lieu of responding to this
Item.
| ITEM 18. | FINANCIAL STATEMENTS |
Reference is made to Item 19 for a list of all financial
statements filed as a part of this Annual Report.
| ITEM 19. | EXHIBITS |
|
Exhibit
|
||||
|
Number
|
Description
|
|||
| 1 | .1 | Amended and Restated Bylaws ( Estatutos ) of the Registrant. | ||
| 8 | .1 | Consolidated Companies Composing Registrant (see Appendix I to XI to our Consolidated Financial Statements included herein). | ||
| 12 | .1 | Section 302 Chairman and Chief Executive Officer Certification. | ||
| 12 | .2 | Section 302 President and Chief Operating Officer Certification. | ||
| 12 | .3 | Section 302 Chief Accounting Officer Certification. | ||
| 13 | .1 | Section 906 Certification. | ||
| 15 | .1 | Consent of Independent Registered Public Accounting Firm | ||
We will furnish to the Commission, upon request, copies of any
unfiled instruments that define the rights of holders of our
long-term debt.
182
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the Registrant certifies that
it meets all of the requirements for filing on
Form 20-F
and had duly caused this Annual Report to be signed on its
behalf by the undersigned, thereto duly authorized.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
| By: |
/s/
JAVIER
MALAGON NAVAS
Title: Chief Accounting Officer |
Date: April 1, 2011
183
Table of Contents
CONTENTS
|
CONSOLIDATED FINANCIAL STATEMENTS
|
||||||||
|
•
|
Consolidated balance sheets | F-2 | ||||||
|
•
|
Consolidated income statements | F-5 | ||||||
|
•
|
Consolidated statements of recognized income and expenses | F-6 | ||||||
|
•
|
Consolidated statements of changes in equity | F-7 | ||||||
|
•
|
Consolidated statements of cash flows | F-10 | ||||||
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
||||||||
| Introduction, basis of presentation of the consolidated annual financial statements and other information | F-12 | |||||||
| Principles of consolidation, accounting policies and measurement bases applied and IFRS recent pronouncements | F-15 | |||||||
| Banco Bilbao Vizcaya Argentaria Group | F-40 | |||||||
| Application of earnings | F-44 | |||||||
| Earnings per share | F-46 | |||||||
| Basis and methodology for segment reporting | F-47 | |||||||
| Risk exposure | F-50 | |||||||
| Fair value of financial instruments | F-74 | |||||||
| Cash and balances with central banks | F-80 | |||||||
| Financial assets and liabilites held for trading | F-81 | |||||||
| Other financial assets designated at fair value through profit or loss | F-86 | |||||||
| Available for sale financial assets | F-86 | |||||||
| Loans and receivables | F-91 | |||||||
| Held-to-maturity investments | F-94 | |||||||
| Hedging derivatives (receivable and payable) and fair value changes of the hedged items in portfolio hedges | F-96 | |||||||
| Non-current assets held for sale and liabilities associated with non-current assets held for sale | F-99 | |||||||
| Investments | F-101 | |||||||
| Reinsurance assets | F-104 | |||||||
| Tangible assets | F-105 | |||||||
| Intangible assets | F-109 | |||||||
| Tax assets and liabilities | F-111 | |||||||
| Other assets and liabilities | F-114 | |||||||
| Financial liabilities at amortized cost | F-114 | |||||||
| Liabilities under insurance contracts | F-121 | |||||||
| Provisions | F-121 | |||||||
| Pensions and other commitments | F-123 | |||||||
| Common stock | F-136 | |||||||
| Share premium | F-138 | |||||||
| Reserves | F-138 | |||||||
| Treasury stock | F-141 | |||||||
| Valuation adjustments | F-142 | |||||||
| Non-controlling interest | F-142 | |||||||
| Capital base and capital management | F-142 | |||||||
| Financial guarantees and drawable by third parties | F-144 | |||||||
| Assets assigned to other own and third-party obligations | F-144 | |||||||
| Other contingent assets and contingent liabilities | F-145 | |||||||
Table of Contents
| Purchase and sale commitments and future payment obligations | F-145 | |||||||
| Transactions on behalf of third parties | F-145 | |||||||
| Interest, income and similar expenses | F-146 | |||||||
| Dividend income | F-149 | |||||||
| Share of profit or loss of entities accounted for using the equity method | F-150 | |||||||
| Fee and commission income | F-150 | |||||||
| Fee and commission expenses | F-150 | |||||||
| Net gains (losses) on financial assets and liabilities | F-151 | |||||||
| Other operating income and expenses | F-152 | |||||||
| Administrative costs | F-152 | |||||||
| Depreciation and amortization | F-156 | |||||||
| Provisions (net) | F-156 | |||||||
| Impairment losses on financial assets (net) | F-156 | |||||||
| Impairment losses on other assets (net) | F-157 | |||||||
| Gains (losses) on derecognized assets not classified as non-current assets held for sale | F-157 | |||||||
| Gains (losses) in non-current assets held for sale not classified as discontinued operations | F-157 | |||||||
| Consolidates statement of cash flows | F-158 | |||||||
| Accountant fees and services | F-159 | |||||||
| Related party transactions | F-159 | |||||||
| Remuneration of the Board of Directors and Members of the Bank’s Management Committee | F-161 | |||||||
| Detail of the Directors’ holdings in companies with similar business activities | F-164 | |||||||
| Other information | F-164 | |||||||
| Subsequent events | F-165 | |||||||
| Differences between Eu-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and the United States generally accepted accounting principles and other required disclosures english | F-165 |
Table of Contents
APPENDICES
| Financial Statements of Banco Bilbao Vizcaya Argentaria, S.A. | I-1 | |||||||
| Additional information on consolidated subsidiaries composing the BBVA Group | II-1 | |||||||
| Additional information on jointly controlled companies accounted for under the proportionate consolidation method in the BBVA Group | III-1 | |||||||
| Additional information on investments and jointly controlled companies accounted for using the equity method in the BBVA Group | IV-1 | |||||||
| Changes and notification of investments in the BBVA Group in 2010 | V-1 | |||||||
| Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2010 | VI-1 | |||||||
| BBVA Group’s securitization fund | VII-1 | |||||||
| Details of the outstanding subordinated debt and preferred securities issued by the Bank or entities in the Group consolidated as of December 31, 2010 | VIII-1 | |||||||
| Consolidated balance sheets as of December 31, 2010, 2009 and 2008 held in foreign currency | IX-1 | |||||||
| Consolidated income statements for the first and second half of 2010, 2009 and 2007 | X-1 | |||||||
| GLOSSARY | XI-1 |
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Banco Bilbao
Vizcaya Argentaria, S.A.:
We have audited the accompanying consolidated balance sheets of
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”)
and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA
Group (the “Group” — Note 3) as of
December 31, 2010, 2009 and 2008, and the related
consolidated income statements, statements of recognized income
and expense, statements of changes in equity and statements of
cash flows for each of the three years in the period ended
December 31, 2010. These consolidated financial statements
are the responsibility of the controlling Company’s
Directors. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of BANCO BILBAO VIZCAYA
ARGENTARIA, S.A. and subsidiaries composing the BANCO BILBAO
VIZCAYA ARGENTARIA Group as of December 31, 2010, 2009 and
2008, and the consolidated results of their operations and their
consolidated cash flows for each of the three years in the
period ended December 31, 2010, in conformity with the
International Financial Reporting Standards adopted by the
European Union (“EU-IFRS”) required to be applied
under the Bank of Spain’s Circular
4/2004
(see
Note 1.2).
EU-IFRS required to be applied under the Bank of Spain’s
Circular 4/2004 vary in certain significant respects from
accounting principles generally accepted in the United States of
America (“U.S. GAAP”). Information relating to
the nature and effect of such differences is presented in
Note 60 to the consolidated financial statements.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Group’s internal control over financial reporting as of
December 31, 2010, based on the criteria established in
Internal Control — Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated April 1, 2011 expressed an
unqualified opinion on the Group’s internal control over
financial reporting
/s/
DELOITTE,
S.L.
Madrid — Spain
April 1, 2011
F-1
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO
VIZCAYA ARGENTARIA GROUP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010, 2009 and 2008
(Notes 1 to 5)
VIZCAYA ARGENTARIA GROUP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010, 2009 and 2008
(Notes 1 to 5)
| Notes | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
ASSETS
|
||||||||||||||||
|
CASH AND BALANCES WITH CENTRAL BANKS
|
9 | 19,981 | 16,344 | 14,659 | ||||||||||||
|
FINANCIAL ASSETS HELD FOR TRADING
|
10 | 63,283 | 69,733 | 73,299 | ||||||||||||
|
Loans and advances to credit institutions
|
— | — | — | |||||||||||||
|
Loans and advances to customers
|
— | — | — | |||||||||||||
|
Debt securities
|
24,358 | 34,672 | 26,556 | |||||||||||||
|
Equity instruments
|
5,260 | 5,783 | 5,797 | |||||||||||||
|
Trading derivatives
|
33,665 | 29,278 | 40,946 | |||||||||||||
|
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH
PROFIT OR LOSS
|
11 | 2,774 | 2,337 | 1,754 | ||||||||||||
|
Loans and advances to credit institutions
|
— | — | — | |||||||||||||
|
Loans and advances to customers
|
— | — | — | |||||||||||||
|
Debt securities
|
688 | 639 | 516 | |||||||||||||
|
Equity instruments
|
2,086 | 1,698 | 1,238 | |||||||||||||
|
AVAILABLE-FOR-SALE
FINANCIAL ASSETS
|
12 | 56,456 | 63,521 | 47,780 | ||||||||||||
|
Debt securities
|
50,875 | 57,071 | 39,831 | |||||||||||||
|
Equity instruments
|
5,581 | 6,450 | 7,949 | |||||||||||||
|
LOANS AND RECEIVABLES
|
13 | 364,707 | 346,117 | 369,494 | ||||||||||||
|
Loans and advances to credit institutions
|
23,637 | 22,239 | 33,856 | |||||||||||||
|
Loans and advances to customers
|
338,857 | 323,442 | 335,260 | |||||||||||||
|
Debt securities
|
2,213 | 436 | 378 | |||||||||||||
|
HELD-TO-MATURITY
INVESTMENTS
|
14 | 9,946 | 5,437 | 5,282 | ||||||||||||
|
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO
HEDGES OF INTEREST RATE RISK
|
15 | 40 | — | — | ||||||||||||
|
HEDGING DERIVATIVES
|
15 | 3,563 | 3,595 | 3,833 | ||||||||||||
|
NON-CURRENT ASSETS HELD FOR SALE
|
16 | 1,529 | 1,050 | 444 | ||||||||||||
|
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY
METHOD
|
17 | 4,547 | 2,922 | 1,467 | ||||||||||||
|
Associates
|
4,247 | 2,614 | 894 | |||||||||||||
|
Jointly controlled entities
|
300 | 308 | 573 | |||||||||||||
|
INSURANCE CONTRACTS LINKED TO PENSIONS
|
— | — | — | |||||||||||||
|
REINSURANCE ASSETS
|
18 | 28 | 29 | 29 | ||||||||||||
|
TANGIBLE ASSETS
|
19 | 6,701 | 6,507 | 6,908 | ||||||||||||
|
Property, plants and equipment
|
5,132 | 4,873 | 5,174 | |||||||||||||
|
For own use
|
4,408 | 4,182 | 4,442 | |||||||||||||
|
Other assets leased out under an operating lease
|
724 | 691 | 732 | |||||||||||||
|
Investment properties
|
1,569 | 1,634 | 1,734 | |||||||||||||
|
INTANGIBLE ASSETS
|
20 | 8,007 | 7,248 | 8,439 | ||||||||||||
|
Goodwill
|
6,949 | 6,396 | 7,659 | |||||||||||||
|
Other intangible assets
|
1,058 | 852 | 780 | |||||||||||||
|
TAX ASSETS
|
21 | 6,649 | 6,273 | 6,484 | ||||||||||||
|
Current
|
1,113 | 1,187 | 1,266 | |||||||||||||
|
Deferred
|
5,536 | 5,086 | 5,218 | |||||||||||||
|
OTHER ASSETS
|
22 | 4,527 | 3,952 | 2,778 | ||||||||||||
|
Inventories
|
2,788 | 1,933 | 1,066 | |||||||||||||
|
Rest
|
1,739 | 2,019 | 1,712 | |||||||||||||
|
TOTAL ASSETS
|
552,738 | 535,065 | 542,650 | |||||||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated balance sheet as of
December 31, 2010.
F-2
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED
BALANCE SHEETS
AS OF DECEMBER 31, 2010, 2009
and 2008
(Notes 1 to 5)
(Notes 1 to 5)
| Notes | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
LIABILITIES AND EQUITY
|
||||||||||||||||
|
FINANCIAL LIABILITIES HELD FOR TRADING
|
10 | 37,212 | 32,830 | 43,009 | ||||||||||||
|
Deposits from central banks
|
— | — | — | |||||||||||||
|
Deposits from credit institutions
|
— | — | — | |||||||||||||
|
Customer deposits
|
— | — | — | |||||||||||||
|
Debt certificates
|
— | — | — | |||||||||||||
|
Trading derivatives
|
33,166 | 29,000 | 40,309 | |||||||||||||
|
Short positions
|
4,046 | 3,830 | 2,700 | |||||||||||||
|
Other financial liabilities
|
— | — | — | |||||||||||||
|
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH
PROFIT OR LOSS
|
11 | 1,607 | 1,367 | 1,033 | ||||||||||||
|
Deposits from central banks
|
— | — | — | |||||||||||||
|
Deposits from credit institutions
|
— | — | — | |||||||||||||
|
Customer deposits
|
— | — | — | |||||||||||||
|
Debt certificates
|
— | — | — | |||||||||||||
|
Subordinated liabilities
|
— | — | — | |||||||||||||
|
Other financial liabilities
|
1,607 | 1,367 | 1,033 | |||||||||||||
|
FINANCIAL LIABILITIES AT AMORTIZED COST
|
23 | 453,164 | 447,936 | 450,605 | ||||||||||||
|
Deposits from central banks
|
11,010 | 21,166 | 16,844 | |||||||||||||
|
Deposits from credit institutions
|
57,170 | 49,146 | 49,961 | |||||||||||||
|
Customer deposits
|
275,789 | 254,183 | 255,236 | |||||||||||||
|
Debt certificates
|
85,179 | 99,939 | 104,157 | |||||||||||||
|
Subordinated liabilities
|
17,420 | 17,878 | 16,987 | |||||||||||||
|
Other financial liabilities
|
6,596 | 5,624 | 7,420 | |||||||||||||
|
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO
HEDGES OF INTEREST RATE RISK
|
(2 | ) | — | — | ||||||||||||
|
HEDGING DERIVATIVES
|
15 | 1,664 | 1,308 | 1,226 | ||||||||||||
|
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR
SALE
|
16 | — | — | — | ||||||||||||
| LIABILITIES UNDER INSURANCE CONTRACTS | 24 | 8,034 | 7,186 | 6,571 | ||||||||||||
|
PROVISIONS
|
25 | 8,322 | 8,559 | 8,678 | ||||||||||||
|
Provisions for pensions and similar obligations
|
5,980 | 6,246 | 6,359 | |||||||||||||
|
Provisions for taxes and other legal contingencies
|
304 | 299 | 263 | |||||||||||||
|
Provisions for contingent exposures and commitments
|
264 | 243 | 421 | |||||||||||||
|
Other provisions
|
1,774 | 1,771 | 1,635 | |||||||||||||
|
TAX LIABILITIES
|
21 | 2,195 | 2,208 | 2,266 | ||||||||||||
|
Current
|
604 | 539 | 984 | |||||||||||||
|
Deferred
|
1,591 | 1,669 | 1,282 | |||||||||||||
|
OTHER LIABILITIES
|
22 | 3,067 | 2,908 | 2,557 | ||||||||||||
|
TOTAL LIABILITIES
|
515,263 | 504,302 | 515,945 | |||||||||||||
F-3
Table of Contents
| Notes | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
LIABILITIES AND EQUITY
(Continued)
|
||||||||||||||||
|
STOCKHOLDERS’ FUNDS
|
36,689 | 29,362 | 26,586 | |||||||||||||
|
Common Stock
|
27 | 2,201 | 1,837 | 1,837 | ||||||||||||
|
Issued
|
2,201 | 1,837 | 1,837 | |||||||||||||
|
Unpaid and uncalled(-)
|
— | — | — | |||||||||||||
|
Share premium
|
28 | 17,104 | 12,453 | 12,770 | ||||||||||||
|
Reserves
|
29 | 14,360 | 12,074 | 9,410 | ||||||||||||
|
Accumulated reserves (losses)
|
14,305 | 11,765 | 8,801 | |||||||||||||
|
Reserves (losses) of entities accounted for using the equity
method
|
55 | 309 | 609 | |||||||||||||
|
Other equity instruments
|
37 | 12 | 89 | |||||||||||||
|
Equity component of compound financial instruments
|
— | — | — | |||||||||||||
|
Other equity instruments
|
37 | 12 | 89 | |||||||||||||
|
Less: Treasury stock
|
30 | (552 | ) | (224 | ) | (720 | ) | |||||||||
|
Income attributed to the parent company
|
4,606 | 4,210 | 5,020 | |||||||||||||
|
Less: Dividends and remuneration
|
(1,067 | ) | (1,000 | ) | (1,820 | ) | ||||||||||
|
VALUATION ADJUSTMENTS
|
31 | (770 | ) | (62 | ) | (930 | ) | |||||||||
|
Available-for-sale
financial assets
|
333 | 1,951 | 931 | |||||||||||||
|
Cash flow hedging
|
49 | 188 | 207 | |||||||||||||
|
Hedging of net investment in foreign transactions
|
(158 | ) | 219 | 247 | ||||||||||||
|
Exchange differences
|
(978 | ) | (2,236 | ) | (2,231 | ) | ||||||||||
|
Non-current assets
held-for-sale
|
— | — | — | |||||||||||||
|
Entities accounted for using the equity method
|
(16 | ) | (184 | ) | (84 | ) | ||||||||||
|
Other valuation adjustments
|
— | — | — | |||||||||||||
|
NON-CONTROLLING INTEREST
|
32 | 1,556 | 1,463 | 1,049 | ||||||||||||
|
Valuation adjustments
|
(86 | ) | 18 | (175 | ) | |||||||||||
|
Rest
|
1,642 | 1,445 | 1,224 | |||||||||||||
|
TOTAL EQUITY
|
37,475 | 30,763 | 26,705 | |||||||||||||
|
TOTAL LIABILITIES AND EQUITY
|
552,738 | 535,065 | 542,650 | |||||||||||||
|
Memorandum Item
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
CONTINGENT EXPOSURES
|
34 | 36,441 | 33,185 | 35,952 | ||||||||||||
|
CONTINGENT COMMITMENTS
|
34 | 90,574 | 92,323 | 98,897 | ||||||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated balance sheet as of
December 31, 2010.
F-4
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO
VIZCAYA ARGENTARIA GROUP
CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (Notes 1 to 5)
VIZCAYA ARGENTARIA GROUP
CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (Notes 1 to 5)
| Notes | 2010 | 2009 | 2008 | |||||||||||||
| Millions of Euros | ||||||||||||||||
|
INTEREST AND SIMILAR INCOME
|
39 | 21,134 | 23,775 | 30,404 | ||||||||||||
|
INTEREST AND SIMILAR EXPENSES
|
39 | (7,814 | ) | (9,893 | ) | (18,718 | ) | |||||||||
|
NET INTEREST INCOME
|
13,320 | 13,882 | 11,686 | |||||||||||||
|
DIVIDEND INCOME
|
40 | 529 | 443 | 447 | ||||||||||||
|
SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE
EQUITY METHOD
|
41 | 335 | 120 | 293 | ||||||||||||
|
FEE AND COMMISSION INCOME
|
42 | 5,382 | 5,305 | 5,539 | ||||||||||||
|
FEE AND COMMISSION EXPENSES
|
43 | (845 | ) | (875 | ) | (1,012 | ) | |||||||||
|
NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES
|
44 | 1,441 | 892 | 1,328 | ||||||||||||
|
Financial instruments held for trading
|
643 | 321 | 265 | |||||||||||||
|
Other financial instruments at fair value through profit or loss
|
83 | 79 | (17 | ) | ||||||||||||
|
Other financial instruments not at fair value through profit or
loss
|
715 | 492 | 1,080 | |||||||||||||
|
Rest
|
— | — | — | |||||||||||||
|
EXCHANGE DIFFERENCES (NET)
|
453 | 652 | 231 | |||||||||||||
|
OTHER OPERATING INCOME
|
45 | 3,543 | 3,400 | 3,559 | ||||||||||||
|
Income on insurance and reinsurance contracts
|
2,597 | 2,567 | 2,512 | |||||||||||||
|
Financial income from non-financial services
|
647 | 493 | 485 | |||||||||||||
|
Rest of other operating income
|
299 | 340 | 562 | |||||||||||||
|
OTHER OPERATING EXPENSES
|
45 | (3,248 | ) | (3,153 | ) | (3,093 | ) | |||||||||
|
Expenses on insurance and reinsurance contracts
|
(1,815 | ) | (1,847 | ) | (1,896 | ) | ||||||||||
|
Changes in inventories
|
(554 | ) | (417 | ) | (403 | ) | ||||||||||
|
Rest of other operating expenses
|
(879 | ) | (889 | ) | (794 | ) | ||||||||||
|
GROSS INCOME
|
20,910 | 20,666 | 18,978 | |||||||||||||
|
ADMINISTRATION COSTS
|
46 | (8,207 | ) | (7,662 | ) | (7,756 | ) | |||||||||
|
Personnel expenses
|
(4,814 | ) | (4,651 | ) | (4,716 | ) | ||||||||||
|
General and administrative expenses
|
(3,393 | ) | (3,011 | ) | (3,040 | ) | ||||||||||
|
DEPRECIATION AND AMORTIZATION
|
47 | (761 | ) | (697 | ) | (699 | ) | |||||||||
|
PROVISIONS (NET)
|
48 | (482 | ) | (458 | ) | (1,431 | ) | |||||||||
|
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)
|
49 | (4,718 | ) | (5,473 | ) | (2,941 | ) | |||||||||
|
Loans and receivables
|
(4,563 | ) | (5,199 | ) | (2,797 | ) | ||||||||||
|
Other financial instruments not at fair value through profit or
loss
|
(155 | ) | (274 | ) | (144 | ) | ||||||||||
|
NET OPERATING INCOME
|
6,742 | 6,376 | 6,151 | |||||||||||||
|
NET OPERATING INCOME
|
6,742 | 6,376 | 6,151 | |||||||||||||
|
IMPAIRMENT LOSSES ON OTHER ASSETS (NET)
|
50 | (489 | ) | (1,618 | ) | (45 | ) | |||||||||
|
Goodwill and other intangible assets
|
(13 | ) | (1,100 | ) | (1 | ) | ||||||||||
|
Other assets
|
(476 | ) | (518 | ) | (44 | ) | ||||||||||
|
GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS
NON-CURRENT ASSETS HELD FOR SALE
|
51 | 41 | 20 | 72 | ||||||||||||
|
NEGATIVE GOODWILL
|
20 | 1 | 99 | — | ||||||||||||
|
GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT
CLASSIFIED AS DISCONTINUED OPERATIONS
|
52 | 127 | 859 | 748 | ||||||||||||
|
INCOME BEFORE TAX
|
6,422 | 5,736 | 6,926 | |||||||||||||
|
INCOME TAX
|
21 | (1,427 | ) | (1,141 | ) | (1,541 | ) | |||||||||
|
INCOME FROM CONTINUING TRANSACTIONS
|
4,995 | 4,595 | 5,385 | |||||||||||||
|
INCOME FROM DISCONTINUED TRANSACTIONS (NET)
|
— | — | — | |||||||||||||
|
NET INCOME
|
4,995 | 4,595 | 5,385 | |||||||||||||
|
Net Income attributed to parent company
|
4,606 | 4,210 | 5,020 | |||||||||||||
|
Net income attributed to non-controlling interests
|
32 | 389 | 385 | 365 | ||||||||||||
| Note | 2010 | 2009 | 2008 | |||||||||||||
| Euros | ||||||||||||||||
|
EARNINGS PER SHARE
|
5 | |||||||||||||||
|
Basic earnings per share
|
1.17 | 1.08 | 1.31 | |||||||||||||
|
Diluted earnings per share
|
1.17 | 1.08 | 1.31 | |||||||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated income statement for the
year ending December 31, 2010.
F-5
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO VIZCAYA ARGENTARIA GROUP
(Notes 1
to 5)
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
NET INCOME RECOGNIZED IN INCOME STATEMENT
|
4,995 | 4,595 | 5,385 | |||||||||
|
OTHER RECOGNIZED INCOME (EXPENSES)
|
(813 | ) | 1,061 | (3,237 | ) | |||||||
|
Available-for-sale
financial assets
|
(2,166 | ) | 1,502 | (3,787 | ) | |||||||
|
Valuation gains/(losses)
|
(1,963 | ) | 1,520 | (2,065 | ) | |||||||
|
Amounts removed to income statement
|
(206 | ) | (18 | ) | (1,722 | ) | ||||||
|
Reclassifications
|
3 | — | — | |||||||||
|
Cash flow hedging
|
(190 | ) | (32 | ) | 361 | |||||||
|
Valuation gains/(losses)
|
(156 | ) | (21 | ) | 373 | |||||||
|
Amounts removed to income statement
|
(34 | ) | (11 | ) | (12 | ) | ||||||
|
Amounts removed to the initial carrying amount of the hedged
items
|
— | — | — | |||||||||
|
Reclassifications
|
— | — | — | |||||||||
|
Hedging of net investment in foreign transactions
|
(377 | ) | (27 | ) | (50 | ) | ||||||
|
Valuation gains/(losses)
|
(377 | ) | (27 | ) | (50 | ) | ||||||
|
Amounts removed to income statement
|
— | — | — | |||||||||
|
Reclassifications
|
— | — | — | |||||||||
|
Exchange differences
|
1,384 | 68 | (661 | ) | ||||||||
|
Valuation gains/(losses)
|
1,380 | 141 | (678 | ) | ||||||||
|
Amounts removed to income statement
|
4 | (73 | ) | 17 | ||||||||
|
Reclassifications
|
— | — | — | |||||||||
|
Non-current assets held for sale
|
— | — | — | |||||||||
|
Valuation gains/(losses)
|
— | — | — | |||||||||
|
Amounts removed to income statement
|
— | — | — | |||||||||
|
Reclassifications
|
— | — | — | |||||||||
|
Actuarial gains and losses in post-employment plans
|
— | — | — | |||||||||
|
Entities accounted for using the equity method
|
228 | (88 | ) | (144 | ) | |||||||
|
Valuation gains/(losses)
|
228 | (88 | ) | (144 | ) | |||||||
|
Amounts removed to income statement
|
— | — | — | |||||||||
|
Reclassifications
|
— | — | — | |||||||||
|
Rest of recognized income and expenses
|
— | — | — | |||||||||
|
Income tax
|
308 | (362 | ) | 1,044 | ||||||||
|
TOTAL RECOGNIZED INCOME/EXPENSES
|
4,182 | 5,656 | 2,148 | |||||||||
|
Attributed to the parent company
|
3,898 | 5,078 | 1,838 | |||||||||
|
Attributed to minority interests
|
284 | 578 | 310 | |||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated statement of recognized
income and expense for the year ended December 31, 2010.
F-6
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO VIZCAYA ARGENTARIA GROUP
(Notes 1
to 5)
| Total Equity Attributed to the Parent Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Funds | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reserves (Note 29) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Reserves
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
(Losses) From
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Entities
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Accounted
|
Less:
|
Less:
|
Non-
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
|
Share
|
Accumulated
|
for Using
|
Other
|
Treasury
|
Income Attributed
|
Dividends and
|
Total
|
Valuation
|
Controlling
|
||||||||||||||||||||||||||||||||||||||||||
|
Stock
|
Premium
|
Reserves
|
the Equity
|
Equity
|
Stock
|
to the Parent
|
Remunerations
|
Stockholders’
|
Adjustments
|
Interests
|
Total
|
|||||||||||||||||||||||||||||||||||||||||
|
2010
|
(Note 27) | (Note 28) | (Losses) | Method | Instruments | (Note 30) | Company | (Note 4) | Funds | (Note 31) | Total | (Note 32) | Equity | |||||||||||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balances as of January 1, 2010
|
1,837 | 12,453 | 11,765 | 309 | 12 | (224 | ) | 4,210 | (1,000 | ) | 29,362 | (62 | ) | 29,300 | 1,463 | 30,763 | ||||||||||||||||||||||||||||||||||||
|
Effect of changes in accounting policies
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Effect of correction of errors
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Adjusted initial balance
|
1,837 | 12,453 | 11,765 | 309 | 12 | (224 | ) | 4,210 | (1,000 | ) | 29,362 | (62 | ) | 29,300 | 1,463 | 30,763 | ||||||||||||||||||||||||||||||||||||
|
Total income/expense recognized
|
— | — | — | — | — | — | 4,606 | — | 4,606 | (708 | ) | 3,898 | 284 | 4,182 | ||||||||||||||||||||||||||||||||||||||
|
Other changes in equity
|
364 | 4,651 | 2,540 | (254 | ) | 25 | (328 | ) | (4,210 | ) | (67 | ) | 2,721 | — | 2,721 | (191 | ) | 2,530 | ||||||||||||||||||||||||||||||||||
|
Common stock increase
|
364 | 4,651 | — | — | — | — | — | — | 5,015 | — | 5,015 | — | 5,015 | |||||||||||||||||||||||||||||||||||||||
|
Common stock reduction
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Conversion of financial liabilities into capital
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Increase of other equity instruments
|
— | — | — | — | 25 | — | — | — | 25 | — | 25 | — | 25 | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of financial liabilities to other equity
instruments
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of other equity instruments to financial
liabilities
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Dividend distribution
|
— | — | — | — | — | — | (558 | ) | (1,067 | ) | (1,625 | ) | — | (1,625 | ) | (197 | ) | (1,822 | ) | |||||||||||||||||||||||||||||||||
|
Transactions including treasury stock and other equity
instruments (net)
|
— | — | (105 | ) | — | — | (328 | ) | — | — | (433 | ) | — | (433 | ) | — | (433 | ) | ||||||||||||||||||||||||||||||||||
|
Transfers between total equity entries
|
— | — | 2,865 | (213 | ) | — | — | (3,652 | ) | 1,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
|
Increase/Reduction due to business combinations
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Payments with equity instruments
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Rest of increases/reductions in total equity
|
— | — | (220 | ) | (41 | ) | — | — | — | — | (261 | ) | — | (261 | ) | 6 | (255 | ) | ||||||||||||||||||||||||||||||||||
|
Balances as of December 31, 2010
|
2,201 | 17,104 | 14,305 | 55 | 37 | (552 | ) | 4,606 | (1,067 | ) | 36,689 | (770 | ) | 35,919 | 1,556 | 37,475 | ||||||||||||||||||||||||||||||||||||
F-7
Table of Contents
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS
ENDED DECEMBER 31, 2010, 2009 AND 2008
(Notes 1 to 5)
(Notes 1 to 5)
| Total Equity Attributed to the Parent Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Funds | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reserves (Note 29) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Reserves
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
(Losses)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
from
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Entities
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Accounted
|
Less:
|
Income
|
Less:
|
Non-
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
|
Share
|
Accumulated
|
for Using
|
Treasury
|
Attributed
|
Dividends and
|
Total
|
Valuation
|
Controlling
|
|||||||||||||||||||||||||||||||||||||||||||
|
Stock
|
Premium
|
Reserves
|
the Equity
|
Other Equity
|
Stock
|
to the Parent
|
Remunerations
|
Stockholders’
|
Adjustments
|
Interests
|
Total
|
|||||||||||||||||||||||||||||||||||||||||
|
2009
|
(Note 27) | (Note 28) | (Losses) | Method | Instruments | (Note 30) | Company | (Note 4) | Funds | (Note 31) | Total | (Note 32) | Equity | |||||||||||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balances as of January 1, 2009
|
1,837 | 12,770 | 8,801 | 609 | 89 | (720 | ) | 5,020 | (1,820 | ) | 26,586 | (930 | ) | 25,656 | 1,049 | 26,705 | ||||||||||||||||||||||||||||||||||||
|
Effect of changes in accounting policies
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Effect of correction of errors
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Adjusted initial balance
|
1,837 | 12,770 | 8,801 | 609 | 89 | (720 | ) | 5,020 | (1,820 | ) | 26,586 | (930 | ) | 25,656 | 1,049 | 26,705 | ||||||||||||||||||||||||||||||||||||
|
Total income/expense recognized
|
— | — | — | — | — | — | 4,210 | — | 4,210 | 868 | 5,078 | 578 | 5,656 | |||||||||||||||||||||||||||||||||||||||
|
Other changes in equity
|
— | (317 | ) | 2,964 | (300 | ) | (77 | ) | 496 | (5,020 | ) | 820 | (1,434 | ) | — | (1,434 | ) | (164 | ) | (1,598 | ) | |||||||||||||||||||||||||||||||
|
Common stock increase
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Common stock reduction
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Conversion of financial liabilities into capital
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Increase of other equity instruments
|
— | — | — | — | 10 | — | — | — | 10 | — | 10 | — | 10 | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of financial liabilities to other equity
instruments
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of other equity instruments to financial
liabilities
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Dividend distribution
|
— | — | — | — | — | — | — | (1,000 | ) | (1,000 | ) | — | (1,000 | ) | (144 | ) | (1,144 | ) | ||||||||||||||||||||||||||||||||||
|
Transactions including treasury stock and other equity
instruments (net)
|
— | — | (238 | ) | — | — | 496 | — | — | 258 | — | 258 | — | 258 | ||||||||||||||||||||||||||||||||||||||
|
Transfers between total equity entries
|
— | — | 3,378 | (178 | ) | — | — | (5,020 | ) | 1,820 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
|
Increase/Reduction due to business combinations
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Payments with equity instruments
|
— | (317 | ) | — | — | (87 | ) | — | — | — | (404 | ) | — | (404 | ) | — | (404 | ) | ||||||||||||||||||||||||||||||||||
|
Rest of increases/reductions in total equity
|
— | — | (176 | ) | (122 | ) | — | — | — | — | (298 | ) | — | (298 | ) | (20 | ) | (318 | ) | |||||||||||||||||||||||||||||||||
|
Balances as of December 31, 2009
|
1,837 | 12,453 | 11,765 | 309 | 12 | (224 | ) | 4,210 | (1,000 | ) | 29,362 | (62 | ) | 29,300 | 1,463 | 30,763 | ||||||||||||||||||||||||||||||||||||
F-8
Table of Contents
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS
ENDED DECEMBER 31, 2010, 2009 AND 2008
(Notes 1 to 5)
(Notes 1 to 5)
| Total Equity Attributed to the Parent Company | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Funds | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reserves (Note 29) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Reserves
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
(Losses)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
from
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Entities
|
Income
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
Accounted
|
Less:
|
Attributed
|
Less:
|
Non-
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
|
Share
|
Accumulated
|
for Using
|
Other
|
Treasury
|
to the
|
Dividends and
|
Total
|
Valuation
|
controlling
|
||||||||||||||||||||||||||||||||||||||||||
|
Stock
|
Premium
|
Reserves
|
the Equity
|
Equity
|
Stock
|
Parent
|
Remunerations
|
Stockholders’
|
Adjustments
|
Interests
|
Total
|
|||||||||||||||||||||||||||||||||||||||||
|
2008
|
(Note 27) | (Note 28) | (Losses) | Method | Instruments | (Note 30) | Company | (Note 4) | Funds | (Note 31) | Total | (Note 32) | Equity | |||||||||||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Balances as of January 1, 2008
|
1,837 | 12,770 | 5,609 | 451 | 68 | (389 | ) | 6,126 | (1,661 | ) | 24,811 | 2,252 | 27,063 | 880 | 27,943 | |||||||||||||||||||||||||||||||||||||
|
Effect of changes in accounting policies
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Effect of correction of errors
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Adjusted initial balance
|
1,837 | 12,770 | 5,609 | 451 | 68 | (389 | ) | 6,126 | (1,661 | ) | 24,811 | 2,252 | 27,063 | 880 | 27,943 | |||||||||||||||||||||||||||||||||||||
|
Total income/expense recognized
|
— | — | — | — | — | — | 5,020 | — | 5,020 | (3,182 | ) | 1,838 | 310 | 2,148 | ||||||||||||||||||||||||||||||||||||||
|
Other changes in equity
|
— | — | 3,192 | 158 | 21 | (331 | ) | (6,126 | ) | (159 | ) | (3,245 | ) | — | (3,245 | ) | (142 | ) | (3,387 | ) | ||||||||||||||||||||||||||||||||
|
Common stock increase
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Common stock reduction
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Conversion of financial liabilities into capital
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Increase of other equity instruments
|
— | — | — | — | 21 | — | — | — | 21 | — | 21 | — | 21 | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of financial liabilities to other equity
instruments
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Reclassification of other equity instruments to financial
liabilities
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Dividend distribution
|
— | — | — | — | — | — | (1,002 | ) | (1,820 | ) | (2,822 | ) | — | (2,822 | ) | (142 | ) | (2,964 | ) | |||||||||||||||||||||||||||||||||
|
Transactions including treasury stock and other equity
instruments (net)
|
— | — | (172 | ) | — | — | (331 | ) | — | — | (503 | ) | — | (503 | ) | — | (503 | ) | ||||||||||||||||||||||||||||||||||
|
Transfers between total equity entries
|
— | — | 3,431 | 33 | — | — | (5,125 | ) | 1,661 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
|
Increase/Reduction due to business combinations
|
— | — | 9 | — | — | — | — | — | 9 | — | 9 | — | 9 | |||||||||||||||||||||||||||||||||||||||
|
Payments with equity instruments
|
— | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
Rest of increases/reductions in total equity
|
— | — | (75 | ) | 125 | — | — | — | — | 49 | — | 49 | — | 49 | ||||||||||||||||||||||||||||||||||||||
|
Balances as of December 31, 2008
|
1,837 | 12,770 | 8,801 | 609 | 89 | (720 | ) | 5,020 | (1,820 | ) | 26,586 | (930 | ) | 25,656 | 1,049 | 26,705 | ||||||||||||||||||||||||||||||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated statement of changes in
equity for the year ended December 31, 2010.
F-9
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A. AND COMPANIES COMPOSING THE
BANCO BILBAO VIZCAYA ARGENTARIA GROUP
| Notes | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
CASH FLOW FROM OPERATING ACTIVITIES(1)
|
53 | 8,503 | 2,567 | (1,992 | ) | |||||||||||
|
Net income for the year
|
4,995 | 4,595 | 5,385 | |||||||||||||
|
Adjustments to obtain the cash flow from operating
activities:
|
(534 | ) | (591 | ) | (1,112 | ) | ||||||||||
|
Depreciation and amortization
|
761 | 697 | 699 | |||||||||||||
|
Other adjustments
|
(1,295 | ) | (1,288 | ) | (1,811 | ) | ||||||||||
|
Net increase/decrease in operating assets
|
6,452 | (9,781 | ) | 45,714 | ||||||||||||
|
Financial assets held for trading
|
(6,450 | ) | (3,566 | ) | 10,964 | |||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
437 | 582 | 588 | |||||||||||||
|
Available-for-sale
financial assets
|
(7,064 | ) | 15,741 | (800 | ) | |||||||||||
|
Loans and receivables
|
18,590 | (23,377 | ) | 30,866 | ||||||||||||
|
Other operating assets
|
939 | 839 | 4,096 | |||||||||||||
|
Net increase/decrease in operating liabilities
|
9,067 | (12,359 | ) | 37,908 | ||||||||||||
|
Financial liabilities held for trading
|
4,383 | (10,179 | ) | 23,736 | ||||||||||||
|
Other financial liabilities designated at fair value through
profit or loss
|
240 | 334 | — | |||||||||||||
|
Financial liabilities at amortized cost
|
5,687 | (3,564 | ) | 20,058 | ||||||||||||
|
Other operating liabilities
|
(1,243 | ) | 1,050 | (5,886 | ) | |||||||||||
|
Collection/Payments for income tax
|
1,427 | 1,141 | 1,541 | |||||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES(2)
|
53 | (7,078 | ) | (643 | ) | (2,865 | ) | |||||||||
|
Investment
|
8,762 | 2,396 | 4,617 | |||||||||||||
|
Tangible assets
|
1,040 | 931 | 1,199 | |||||||||||||
|
Intangible assets
|
464 | 380 | 402 | |||||||||||||
|
Investments
|
1,209 | 2 | 672 | |||||||||||||
|
Subsidiaries and other business units
|
77 | 7 | 1,559 | |||||||||||||
|
Non-current assets held for sale and associated liabilities
|
1,464 | 920 | 515 | |||||||||||||
|
Held-to-maturity
investments
|
4,508 | 156 | — | |||||||||||||
|
Other settlements related to investing activities
|
— | — | 270 | |||||||||||||
|
Divestments
|
1,684 | 1,753 | 1,752 | |||||||||||||
|
Tangible assets
|
261 | 793 | 168 | |||||||||||||
|
Intangible assets
|
6 | 147 | 31 | |||||||||||||
|
Investments
|
1 | 1 | 9 | |||||||||||||
|
Subsidiaries and other business units
|
69 | 32 | 13 | |||||||||||||
|
Non-current assets held for sale and associated liabilities
|
1,347 | 780 | 374 | |||||||||||||
|
Held-to-maturity
investments
|
— | — | 283 | |||||||||||||
|
Other collections related to investing activities
|
— | — | 874 | |||||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES(3)
|
53 | 1,148 | (74 | ) | (2,271 | ) | ||||||||||
|
Investment
|
12,410 | 10,012 | 17,807 | |||||||||||||
|
Dividends
|
1,218 | 1,567 | 2,813 | |||||||||||||
|
Subordinated liabilities
|
2,846 | 1,667 | 735 | |||||||||||||
|
Common stock amortization
|
— | — | — | |||||||||||||
|
Treasury stock acquisition
|
7,828 | 6,431 | 14,095 | |||||||||||||
|
Other items relating to financing activities
|
518 | 347 | 164 | |||||||||||||
|
Divestments
|
13,558 | 9,938 | 15,536 | |||||||||||||
|
Subordinated liabilities
|
1,205 | 3,103 | 1,535 | |||||||||||||
|
Common stock increase
|
4,914 | — | — | |||||||||||||
|
Treasury stock disposal
|
7,439 | 6,835 | 13,745 | |||||||||||||
|
Other items relating to financing activities
|
— | — | 256 | |||||||||||||
|
EFFECT OF EXCHANGE RATE CHANGES(4)
|
1,063 | (161 | ) | (791 | ) | |||||||||||
|
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS
(1+2+3+4)
|
3,636 | 1,689 | (7,919 | ) | ||||||||||||
|
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR
|
16,331 | 14,642 | 22,561 | |||||||||||||
|
CASH OR CASH EQUIVALENTS AT END OF THE YEAR
|
19,967 | 16,331 | 14,642 | |||||||||||||
F-10
Table of Contents
|
Components of Cash and Equivalent at end of the Year
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Cash
|
4,284 | 4,218 | 3,915 | |||||||||||||
|
Balance of cash equivalent in central banks
|
15,683 | 12,113 | 10,727 | |||||||||||||
|
Other financial assets
|
— | — | — | |||||||||||||
|
Less: Bank overdraft refundable on demand
|
— | — | — | |||||||||||||
|
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR
|
9 | 19,967 | 16,331 | 14,642 | ||||||||||||
|
Of which:
|
||||||||||||||||
|
Held by consolidated subsidiaries but not available for the Group
|
— | — | — | |||||||||||||
The accompanying Notes 1 to 60 and Appendices I to XI are
an integral part of the consolidated statement of cash flows for
the year ended December 31, 2010.
F-11
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA, S.A.
AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
REPORT FOR THE YEAR ENDED DECEMBER 31, 2010
AND COMPANIES COMPOSING THE BANCO BILBAO VIZCAYA ARGENTARIA GROUP
REPORT FOR THE YEAR ENDED DECEMBER 31, 2010
| 1. | INTRODUCTION, BASIS OF PRESENTATION OF THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS AND OTHER INFORMATION |
1.1 INTRODUCTION
Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter, the
“Bank” or “BBVA”) is a private-law entity,
subject to the rules and regulations governing banking
institutions operating in Spain. The Bank conducts its business
through branches and offices located throughout Spain and abroad.
The Bylaws and other public information about the Bank are
available for consultation at its registered address (Plaza
San Nicolás, 4 Bilbao).
In addition to the transactions it carries out directly, the
Bank heads a group of subsidiaries, jointly-controlled and
associated entities which perform a wide range of activities and
which together with the Bank constitute the Banco Bilbao Vizcaya
Argentaria Group (hereinafter, “the Group” or
“BBVA Group”). In addition to its own individual
financial statements, the Bank is therefore obliged to prepare
the Group’s annual consolidated financial statements.
As of December 31, 2010, the Group was made up of
302 companies accounted for under the full consolidation
method and 7 under the proportionate consolidation method. A
further 68 companies are accounted for using the equity
method (see Notes 3 and 17 and Appendices II to VII of
these financial consolidated statements).
The Group’s consolidated financial statements for the years
ending December 31, 2009 and 2008 were approved by the
shareholders at the Bank’s Annual General Meeting
(“AGM”) held on March 12, 2010 and March 13,
2009, respectively.
The 2010 consolidated financial statements of the Group and the
2010 financial statements of the Bank have been approved by the
shareholders at the Annual General Meeting (“AGM”)
held on March 11, 2011.
| 1.2. | BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS |
The Group’s accompanying consolidated financial statements
for 2010 are presented in accordance with the International
Financial Reporting Standards endorsed by the European Union
(“EU-IFRS”) applicable at year-end 2010, and
additionally considering the Bank of Spain Circular 4/2004, of
December 22, 2004 (and as amended thereafter). This Bank of
Spain Circular is the regulation that implements and adapts the
EU-IFRS for Spanish banks.
The consolidated financial statements for the year ended
December 31, 2010 were prepared by applying the principles
of consolidation, accounting policies and valuation criteria
described in Note 2, so that they present fairly the
Group’s consolidated equity and financial position as of
December 31, 2010, together with the consolidated results
of its operations and cash flows generated during 2010. These
consolidated financial statements were prepared on the basis of
the accounting records kept by the Bank and each of the other
entities in the Group, and include the adjustments and
reclassifications required to harmonize the accounting policies
and valuation criteria used by the Group (see Note 2.2).
All accounting policies and valuation criteria with a
significant effect in the consolidated financial statements were
applied in their preparation.
The amounts reflected in the accompanying consolidated financial
statements are presented in millions of euros, except as stated
otherwise due to the need for a smaller unit. Therefore, there
may be occasions when a balance does not appear in the financial
statements because it is in units of euros. In addition, the
percentage changes are calculated using thousands of euros. The
accounting balances have been rounded to present the amounts in
millions of euros. As a result, the amounts appearing in some
tables may not be the arithmetical sum of the preceding figures.
F-12
Table of Contents
| 1.3. | SEASONAL NATURE OF INCOME AND EXPENSES |
The nature of the most significant activities and transactions
carried out by the Group is mainly related to traditional
activities carried out by financial institutions. Therefore,
they are not significantly affected by seasonal factors.
| 1.4. | RESPONSIBILITY FOR THE INFORMATION AND FOR THE ESTIMATES MADE |
The information contained in these BBVA Group consolidated
financial statements is the responsibility of the Group’s
Directors.
Estimates were occasionally made by the Bank and the
consolidated companies in preparing these consolidated financial
statements in order to quantify some of the assets, liabilities,
income, expenses and commitments reported. These estimates
relate mainly to the following:
| • | Impairment on certain financial assets (see Notes 7, 8, 12, 13, 14 and 17). | |
| • | The assumptions used to quantify other provisions (see Note 25) and for the actuarial calculation of post-employment benefit liabilities and commitments (see Note 26). | |
| • | The useful life and impairment losses of tangible and intangible assets (see Notes 16, 19, 20 and 22). | |
| • | The valuation of consolidation goodwill (see Notes 17 and 20). | |
| • | The fair value of certain unlisted financial assets and liabilities (see Notes 7, 8, 10, 11, 12 and 15). |
Although these estimates were made on the basis of the best
information available as of December 31, 2010 on the events
analyzed, events that take place in the future might make it
necessary to change them (upwards or downwards) in the coming
years.
With regard to the impairment losses on financial assets and
assets acquired in debt payments, of particular importance is
the entry into force on September 30, 2010, of Bank of
Spain Circular 3/2010 of June 29. This Circular has
modified Circular 4/2004 with respect to provision of these
impairment losses to be carried out by Spanish credit
institutions. The Bank of Spain has modified and updated certain
parameters established in Annex IX of said Circular to
adjust them to the experience and information of the Spanish
banking sector as a whole following the financial crisis of the
past few years.
The new requirements included in the Circular have changed the
estimates for impairment losses on some financial assets and
assets acquired in payment of debts carried out by the Bank and
its consolidated entities. Given that they have been considered
as changes in estimates, in accordance with applicable
standards, the impact of these changes has been recognized in
the consolidated income statement for 2010 for a total of
€198 million.
| 1.5. | BBVA GROUP INTERNAL CONTROL OVER FINANCIAL REPORTING MODEL |
The BBVA Group Internal Control over Financial Reporting Model
(“ICFR Model”) includes a set of processes and
procedures that the Group’s Management has designed to
reasonably guarantee fulfillment of the Group’s set control
targets. These control targets have been set to ensure the
reliability and integrity of the consolidated financial
information, as well as the efficiency and effectiveness of
transactions and fulfillment of applicable standards.
The ICFR Model is based on the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”)
international standards. The five components that COSO
establishes to determine whether an internal control system is
effective and efficient are:
| • | Evaluate all of the risks that could arise during the preparation of the financial information. | |
| • | Design the necessary control activities to mitigate the most critical risks. | |
| • | Monitor the control activities to ensure they are fulfilled and they are effective over time. | |
| • | Establish the right reporting circuits to detect and report system weaknesses or flaws. |
F-13
Table of Contents
| • | Set up a suitable control area to track all of these activities. |
The BBVA Group ICFR Model is summarized in the following chart:
ICFR Model is implemented in the Group’s main entities
using a common and uniform methodology.
Among the main characteristics of the Group ICFR Model are as
follows:
| • | The BBVA Group has opted for a direct model of individually assigned responsibilities through a more ambitious model of certification aimed to ensure that the internal control extends to a greater range of hierarchical levels and contributes to the culture of control within the Group. | |
| • | The internal control system is dynamic and evolves continuously over time in a way that reflects the reality of the business of the Group at all times, together with the risks affecting it and the controls mitigating these risks. | |
| • | A complete documentation of the processes, risks and control activities is prepared within its scope, including detailed descriptions of the transactions, criteria for evaluation and revisions applied. |
To determine the scope of the ICFR Model annual evaluation, the
main companies, accounts and most significant processes are
identified based on quantitative criteria (probability of
occurrence, economic impact and materiality) and qualitative
criteria (related to typology, complexity, nature of risks and
the business structure), ensuring coverage of critical risks for
the BBVA Group consolidated financial statements.
As well as the evaluation that the Internal Control Units
performs, ICFR Model is subject to regular evaluations by the
Internal Audit Department and is supervised by the Group’s
Audit and Compliance Committee.
As a foreign private issuer in the United States, the BBVA Group
submits Annual Reports on Form 20F to the Securities and
Exchange Commission (SEC) and thus complies with the
requirements pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002.
In the evaluation by the Internal Audit Department and the
Internal Control Units, no weaknesses were detected that could
have a material or significant impact on the BBVA Group
consolidated financial statements for the year 2010.
| 1.6. | MORTGAGE MARKET POLICIES AND PROCEDURES |
The additional disclosures required by Bank of Spain Circular
7/2010, applying Royal Decree 716/2009 of April 24, 2009
(which developed certain aspects of Act 2/1981, of 25 March
1981, on the regulation of the mortgage market and other
mortgage and financial market regulations) is detailed in the
Bank’s individual financial statements for the year ended
December 31, 2010.
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| 2. | PRINCIPLES OF CONSOLIDATION, ACCOUNTING POLICIES AND MEASUREMENT BASES APPLIED AND IFRS RECENT PRONOUNCEMENTS |
The Glossary (see Appendix XI) includes the definition
of financial and economic terms used in this Note 2 and
subsequent explanatory notes.
| 2.1. | PRINCIPLES OF CONSOLIDATION |
The accounting principles and valuation criteria used to prepare
the Group’s consolidated financial may differ from those
used by certain companies in the Group. For this reason, the
required adjustments and reclassifications were made on
consolidation to harmonize the principles and criteria used and
to make them compliant with
EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004.
The results of subsidiaries acquired during the year are
included taking into account only the period from the date of
acquisition to year-end. The results of companies disposed of
during any year are included only taking into account the period
from the start of the year to the date of disposal.
The Group consolidated companies are classified into three
types: subsidiaries, jointly controlled entities and associates
entities.
Subsidiaries
Subsidiaries (see the Glossary) are those companies which the
Group has the capacity to control. Control is presumed to exist
when the parent owns, either directly or indirectly through
other subsidiaries, more than one half of an entity’s
voting power, unless, in exceptional cases, it can be clearly
demonstrated such ownership of it does not constitute control
of it.
The financial statements of the subsidiaries are consolidated
with those of the Bank using the global integration method.
The share of minority interests from subsidiaries in the
Group’s consolidated equity is presented under the heading
“Non-controlling interest” in the accompanying
consolidated balance sheets and their share in the profit or
loss for the year is presented under the heading “Net
income attributed to non-controlling interests” in the
accompanying consolidated income statements (see Note 32).
Note 3 include information related to the main companies in
the Group as of December 31, 2010. Appendix II
includes the most significant information on these companies.
Jointly
controlled entities
These are entities that, while not being subsidiaries, fulfill
the definition of “joint business” (see the Glossary).
Since the implementation of EU-IFRS, the Group has applied the
following policy in relation to investments in jointly
controlled entities:
| • | Jointly-controlled financial entity: Since it is a financial entity, the best way of reflecting its activities within the Group’s consolidated financial statements is considered to be the proportionate method of consolidation. |
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As of December 31, 2010, 2009 and 2008, the contribution of
jointly controlled financial entities to the main figures in the
Group’s consolidated financial statements under the
proportionate consolidation method, calculated on the basis of
the Group’s holding in them, is shown in the table below:
|
Contribution to the Group by Entities
|
||||||||||||
|
Accounted for Under the Proportionate Method
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Assets
|
1,040 | 869 | 331 | |||||||||
|
Liabilities
|
891 | 732 | 217 | |||||||||
|
Equity
|
28 | 38 | 27 | |||||||||
|
Net income
|
19 | 17 | 11 | |||||||||
Additional disclosure is not provided as these investments are
not significant.
Appendix III shows the main figures for jointly controlled
entities consolidated by the Group under the proportionate
method.
| • | Jointly-controlled non-financial entity: It is considered that the effect of distributing the balance sheet and income statement amounts belonging to jointly controlled non-financial entities would distort the information provided to investors. For this reason, the equity method is considered the most appropriate way of reflecting these investments. |
Appendix IV shows the main figures for jointly controlled
entities consolidated using the equity method. Note 17
details the impact, if any, that application of the
proportionate consolidation method on these entities would have
had on the consolidated balance sheet and income statement.
Associate
entities
Associates are companies in which the Group is able to exercise
significant influence, without having total or joint control.
Significant influence is deemed to exist when the Group owns 20%
or more of the voting rights of an investee directly or
indirectly.
However, certain entities in which the Group owns 20% or more of
the voting rights are not included as Group associates, since it
is considered that the Group does not have the capacity to
exercise significant influence over these entities. Investments
in these entities, which do not represent significant amounts
for the Group, are classified as
available-for-sale
financial assets.
Moreover, some investments in entities in which the Group holds
less than 20% of the voting rights are accounted for as Group
associates, as the Group is considered to have the power to
exercise significant influence over these entities.
Investments in associates are accounted for using the equity
method (see Note 17). Appendix IV shows the most
significant information related to the associates consolidated
using the equity method.
| 2.2. | ACCOUNTING POLICIES AND VALUATION CRITERIA APPLIED |
Accounting policies and valuation criteria used in preparing
these consolidated financial statements were as follows:
| 2.2.1. | FINANCIAL INSTRUMENTS |
| a) | Measurement of financial instruments and recognition of changes in fair value |
All financial instruments are initially accounted for at fair
value which, unless there is evidence to the contrary, shall be
the transaction price.
All the changes during the year, except in trading derivatives,
arising from the accrual of interests and similar items are
recognized under the headings “Interest and similar
income” or “Interest and similar expenses”, as
appropriate, in the accompanying consolidated income statement
for this year (see Note 39). The dividends accrued
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in the year are recognized under the heading “Dividend
income” in the accompanying consolidated income statement
for the year (see Note 40).
The changes in fair value after the initial recognition, for
reasons other than those included in preceding paragraph, are
described below according to the categories of financial assets
and liabilities:
–
“Financial assets held for trading” and “Other
financial assets and liabilities designated at fair value
through profit or loss”
Assets and liabilities recognized under these headings in the
accompanying consolidated balance sheets are valued at fair
value.
Changes arising from the measurement at fair value (gains or
losses) are recognized as their net value under the heading
“Net gains (losses) on financial assets and
liabilities” in the accompanying consolidated income
statements (see Note 44). Changes resulting from variations
in foreign exchange rates are recognized under the heading
“Net exchange differences” in the accompanying
consolidated income statements.
The fair value of the financial derivatives included in the held
for trading portfolios is calculated by their daily quoted price
if there is an active market. If, under exceptional
circumstances, their quoted price cannot be established on a
given date, these derivatives are measured using methods similar
to those used in
over-the-counter
(“OTC”) markets.
The fair value of OTC derivatives (“present value” or
“theoretical price”) is equal to the sum of future
cash flows arising from the instrument, discounted at the
measurement date; these derivatives are valued using methods
recognized by the financial markets: the net present value (NPV)
method, option price calculation models, etc.(see Note 8).
–
“Available-for-sale
financial assets”
Assets and liabilities recognized under these headings in the
accompanying consolidated balance sheets are measured at fair
value.
Changes arising from the measurement at fair value (gains or
losses) are recognized temporarily, for their amount net of tax
effect, under the heading “Valuation adjustments -
Available-for-sale
financial assets” in the accompanying consolidated balance
sheets.
Valuation adjustments arising from non-monetary items by changes
in foreign exchange rates are recognized temporarily under the
heading “Valuation adjustments — Exchange
differences” in the accompanying consolidated balance
sheets. Valuation adjustments arising from monetary items by
changes in foreign exchange rates are recognized under the
heading “Net exchange differences” in the accompanying
consolidated income statements.
The amounts recognized under the headings “Valuation
adjustments —
Available-for-sale
financial assets” and “Valuation
adjustments — Exchange differences” continue to
form part of the Group’s consolidated equity until the
asset is derecognized from the consolidated balance sheet or
until an impairment loss is recognized in it. If these assets
are sold, these amounts are recognized under the headings
“Net gains (losses) on financial assets and
liabilities” or “Net exchange differences”, as
appropriate, in the consolidated income statement for the year
in which they are derecognized.
The gains from sales of other equity instruments considered
strategic investments registered under
“Available-for-sale
financial assets” are recognized under the heading
“Gains (losses) in non-current assets
held-for-sale
not classified as discontinued operations” in the
consolidated income statement, although they had not been
classified in a previous balance sheet as non-current assets
held for sale (see note 52).
The net impairment losses in the
“Available-for-sale
financial assets” during the year are recognized under the
heading “Impairment losses on financial assets
(net) — Other financial instruments not at fair value
through profit or loss” in the consolidated income
statements for that year.
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–
“Loans and receivables”,
“Held-to-maturity
investments” and “Financial liabilities at amortized
cost”
Assets and liabilities recognized under these headings in the
accompanying consolidated balance sheets are measured at
“amortized cost” using the “effective interest
rate” method, as the consolidated entities has the
intention to hold such financial instruments to maturity.
Net impairment losses of assets under these headings arising in
a particular year are recognized under the heading
“Impairment losses on financial assets (net) —
Loans and receivables” or “Impairment losses on
financial assets (net) — Other financial instruments
not valued at fair value through profit or loss” in the
income statement for that year.
–
“Hedging derivatives” and “Fair value changes of
the hedged items in portfolio hedges of interest rate
risk”
Assets and liabilities recognized under these headings in the
accompanying consolidated balance sheets are measured at fair
value.
Changes produced subsequent to the designation of the hedging
relationship in the measurement of financial instruments
designated as hedged items as well as financial instruments
under hedge accounting are recognized according to the following
criteria:
| • | In fair value hedges, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are recognized under the heading “Net gains (losses) on financial assets and liabilities” in the consolidated income statement, with a balancing item under the headings where hedging items (“Hedging derivatives”) and the hedged items are recognized, as applicable. |
In fair value hedges of interest rate risk of a portfolio of
financial instruments (portfolio-hedges), the gains or losses
that arise in the measurement of the hedging instrument are
recognized in the consolidated income statement, and the gains
or losses that arise from the change in the fair value of the
hedged item (attributable to the hedged risk) are recognized in
the consolidated income statement, using, as a balancing item,
the headings “Fair value changes of the hedged items in
portfolio hedges of interest rate risk” in the consolidated
balance sheets, as applicable.
| • | In cash flow hedges, the gain or loss on the hedging instruments relating to the effective portion are recognized temporarily under the heading “Valuation adjustments — Cash flow hedging”. These valuation changes are recognized in the accompanying consolidated income statement at the time when the gain or loss in the hedged instrument affects profit or loss, when the forecast transaction takes place or at the maturity date of the hedged item. Almost all of the hedges used by the Group are for interest rate risks. Therefore, the valuation changes are recognized under the headings “Interest and similar income” or “Interest and similar expenses” as appropriate, in the accompanying consolidated income statement (see Note 39). Differences in the measurement of the hedging items corresponding to the ineffective portions of cash flow hedges are recognized directly in the heading “Net gains (losses) on financial assets and liabilities” in the accompanying consolidated income statement. | |
| • | In the hedges of net investments in foreign operations, the differences produced in the effective portions of hedging items are recognized temporarily under the heading “Valuation adjustments — Hedging of net investments in foreign transactions” in the consolidated balance sheets. These differences in valuation are recognized under the heading “Net exchange differences” in the consolidated income statement when the investment in a foreign operation is disposed of or derecognized. |
–
Other financial instruments
The following exceptions have to be highlighted with respect to
the above general criteria:
| • | Equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have those instruments as their underlying asset and are settled by delivery of those instruments are measured at acquisition cost adjusted, where appropriate, for any impairment loss. |
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| • | Valuation adjustments arising from financial instruments classified at balance sheet date as non-current assets held for sale are recognized with a balancing entry under the heading “Valuation adjustments — Non-current assets held for sale” in the accompanying consolidated balance sheets. |
| b) | Impairment on financial assets |
Definition
of impaired financial assets
A financial asset is considered to be impaired — and
therefore its carrying amount is adjusted to reflect the effect
of its impairment — when there is objective evidence
that events have occurred which:
| • | In the case of debt instruments (loans and debt securities), give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged. | |
| • | In the case of equity instruments, mean that the carrying amount of these instruments cannot be recovered. |
As a general rule, the carrying amount of impaired financial
instruments is adjusted with a charge to the consolidated income
statement for the period in which the impairment becomes known.
The recoveries of previously recognized impairment losses are
registered, if appropriate, in the consolidated income statement
for the year in which the impairment is reversed or reduced,
with an exception: any recovery of previously recognized
impairment losses for an investment in an equity instrument
classified as financial assets available for sale is not
recognized through consolidated financial statements, but under
the heading “Valuation Adjustments —
Available-for-sale
financial assets” in the consolidated balance sheet.
The amounts in balance sheet are considered to be impaired, and
accrual of the interest thereon is suspended, when there are
reasonable doubts that the balances will be recovered in full
and/or
the
related interest will be collected for the amounts and on the
dates initially agreed upon, taking into account the guarantees
received by the consolidated entities to assure (in part or in
full) the performance of transactions. Amounts collected in
relation to impaired loans and receivables are used to recognize
the related accrued interest and any excess amount is used to
reduce the principal not yet paid.
When the recovery of any recognized amount is considered to be
remote, this amount is removed from the consolidated balance
sheet, without prejudice to any actions taken by the
consolidated entities in order to collect the amount until their
rights extinguish in full through expiry, forgiveness or for
other reasons.
Calculation
of impairment on financial assets
The impairment on financial assets is determined by type of
instrument and the category in which they are recognized. The
BBVA Group recognizes impairment charges directly against the
impaired asset when the likelihood of recovery is deemed remote,
and uses an offsetting or allowance account when it records
non-performing loan provisions.
| • | Debt securities at amortized cost |
The amount of impairment losses of debt securities at amortized
cost is measured depending on whether the impairment losses are
determined individually or collectively.
–
Impairment losses determined individually
The amount of the impairment losses incurred on these
instruments relates to the positive difference between their
respective carrying amounts and the present values of their
expected future cash flows.
The following is to be taken into consideration when estimating
the future cash flows of debt instruments:
| • | All the amounts that are expected to be obtained over the residual life of the instrument; including, where appropriate, those which may result from the collaterals and other credit enhancements provided for the instrument (after deducting the costs required for foreclosure and subsequent sale). Impairment losses include an estimate for the possibility of collecting accrued, past due and uncollected interest. | |
| • | The various types of risk to which each instrument is subject. |
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| • | The circumstances in which collections will foreseeably be made. |
These cash flows are discounted using the original effective
interest rate. If a financial instrument has a variable interest
rate, the discount rate for measuring any impairment loss is the
current effective rate determined under the contract.
As an exception to the rule described above, the market value of
quoted debt instruments is deemed to be a fair estimate of the
present value of their future cash flows.
In respect to impairment losses resulting from the
materialization of insolvency risk of the obligors (credit
risk), a debt instrument is impaired:
| • | When there is evidence of a reduction in the obligor’s capacity to pay, whether manifestly by default or for other reasons; and/or | |
| • | When country-risk is risk materializes, understood as the risk among debtors who are resident in a particular country as a result of factors other than normal commercial risk. |
The group has policies, methods and procedures for hedging its
credit risk, for both insolvency attributable to counterparties
and country-risk.
These policies, methods and procedures are applied to the
arrangement, study and documentation of debt instruments, risks
and contingent commitments, as well as the detection of their
deterioration and in the calculation of the amounts needed to
cover their credit risk.
–
Impairment losses determined collectively
The quantification of losses inherent in deterioration is
calculated collectively, both in the case of assets classified
as impaired and for the portfolio of current assets that are not
currently impaired, but for which an imminent loss is expected.
Inherent loss, calculated using statistical procedures, is
deemed equivalent to the portion of losses incurred at the date
of preparing the consolidated financial statements that has yet
to be allocated to specific transactions.
The Group estimates collectively the inherent loss of credit
risk corresponding to operations realized by Spanish financial
entities of the Group (approximately 68.7% on “Loans and
receivables” of the Group as of December 31, 2010),
using the parameters set by Annex IX of the Circular
4
/
2004
from Bank of Spain on the base of its experience and the Spanish
banking sector information in the quantification of impairment
losses and provisions for insolvencies for credit risk.
Notwithstanding the above, the Group can avail of the
proprietary historic records used in its internal ratings models
(IRBs), approved by the Bank of Spain, albeit only for the
purposes of estimating regulatory capital under the new Basel
Accord (BIS II). It uses these internal ratings models to
calculate the economic capital required in its activities and
uses the expected loss concept to quantify the cost of credit
risk for incorporation into its calculation of the risk-adjusted
return on capital of its operations.
The provisions required under Circular 4/2004 from Bank of Spain
standards fall within the range of provisions calculated using
the Group’s internal ratings models.
To estimate the collective loss of credit risk corresponding to
operations registered in foreign subsidiaries, are applied
methods and similar criteria, taking like reference the Bank of
Spain parameters but adapting the default’s calendars to
the particular circumstances of the country. However, in Mexico
for consumer loans, credit cards and mortgages portfolios, as
well as for credit investment maintained by the Group in the
United States are using internal models for calculating the
impairment losses based on historical experience of the Group
(approximately 13.9% of the “Loans and receivables” of
the Group as of December 31, 2010).
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Following is a description of the methodology used to estimate
the collective loss of credit risk corresponding to operations
with resident in Spain:
1.
Impaired financial assets
As a general rule, impaired debt instruments, provided that they
do not have any of the guarantees mentioned below, will be
provisioned by applying the percentages indicated below over the
amount of the outstanding risk pending, according to the oldest
past-due amount, or the date on which the assets were classified
as impaired, if earlier:
Allowance
Percentages for Impairment Loans
|
Age of the Past-Due Amount
|
Allowance Percentage | |||
|
Up to 6 months
|
25 | % | ||
|
Over 6 months and up to 9 months
|
50 | % | ||
|
Over 9 months and up to 12 months
|
75 | % | ||
|
Over 12 months
|
100 | % | ||
The impairment on debt instruments that have one or more of the
guarantees stipulated below will be calculated by applying the
above percentages to the amount of the outstanding risk pending
that exceeds the value of guarantees, in accordance with the
following methodology:
Transactions
secured by real estate
For the purposes of calculating impairment on financial assets
classified as impaired, the value of the real rights received as
security will be calculated according to the type of asset
secured by the real right, using the following criteria,
provided they are first call and duly constituted and registered
in favor of the bank.
| a. | Completed home that is the primary residence of the borrower. |
Includes homes with a current certificate of habitability or
occupation, issued by the corresponding administrative
authority, in which the borrower habitually lives and has the
strongest personal ties. The calculation of the value of the
rights received as collateral shall be 80% of the cost of the
completed home and the appraisal value of its current state,
whichever is lower. For these purposes, the cost will be the
purchase price declared by the borrower in the public deed. If
the deed is manifestly old, the cost may be obtained by
adjusting the original cost by an indicator that accurately
reflects the average change in price of existing homes between
the date of the deed and that of the calculation.
| b. | Rural buildings in use, and completed offices, premises and multi-purpose buildings. |
Includes land not declared as urbanized, and on which
construction is not authorized for uses other than agricultural,
forest or livestock, as appropriate; as well as multi-purpose
buildings, whether or not they are linked to an economic use,
that do not include construction or legal characteristics or
elements that limit or make difficult their multi-purpose use
and thus their easy conversion into cash. The calculation of the
value of the rights received as collateral shall be 70% of the
cost of the completed property or multi-purpose buildings and
the appraisal value of its current state, whichever is lower.
For these purposes, the cost shall be deemed to be the purchase
price declared in the public deed. If the property was
constructed by the borrower himself, the cost shall be
calculated by the price of acquisition of the land declared in
the public deed plus the value of work certificates, and
including any other necessary expenses and accrued taxes
| c. | Finished homes (rest). |
Includes finished homes that, at the date referred to by the
consolidated annual accounts, have the corresponding current
certificate of habitability or occupancy issued by the
corresponding administrative authority, but that do not qualify
for consideration under section a. above. The value of the
rights received as collateral shall be 60% of the cost of the
completed home and the appraisal value of its current state,
whichever is lower.
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The cost will be the purchase price declared by the borrower in
the public deed.
In the case of finance for real estate construction, the cost
will include the amount declared on the purchase deed for the
land, together with any necessary expenses actually paid for its
development, excluding commercial and financial expenses, plus
the sum of the costs of construction as accredited by partial
certificates for the work issued by experts with appropriate
professional qualifications, including that corresponding to the
end of the work. In the case of groups of homes that form part
of developments partially sold to third parties, the cost shall
be that which can be rationally imputed to the homes making up
the collateral.
| d. | Land, lots and other real estate assets. |
The value of the rights received as collateral shall be 50% of
the cost of the lot or real-estate asset affected and the
appraisal value of its current state, whichever is lower. For
these purposes, the cost is made up of the purchase price
declared by in the public deed, plus the necessary expenses that
have actually been incurred by the borrower for the
consideration of the land or lot in question as consolidated
urban land, as well as those stipulated in section c. above.
Transactions
secured by other collateral (not real estate)
Transactions that have as collateral any of the pledges
indicated below shall be hedged by applying the following
criteria:
| a. | Partial cash guarantees |
Transactions that have partial cash guarantees shall be hedged
by applying the coverage percentages stipulated as general
criteria to the difference between the amount for which they are
registered in the asset and the current value of the deposits.
| b. | Partial pledges |
Transactions that have partial pledges on shares in monetary
financial institutions or securities representing debt issued by
government or credit institutions rated in the “negligible
risk” class, or other financial instruments traded on asset
markets, shall be hedged by applying the hedging percentages
stipulated as a general rule to the difference between the
amount for which they are registered in the asset and 90% of the
fair value of these financial instruments.
2.
Not individually impaired assets
The debt instruments, whoever the obligor and whatever the
guarantee or collateral, that do not have individually objective
of impairment are collectively assesses, including the assets in
a group with similar credit risk characteristics, including
sector of activity of the debtor or the type of guarantee.
The allowance percentages of hedge are as follows:
Allowance
Percentages for Non-Impaired transaction collectively
assesses
|
Type of Risk
|
Allowance Percentage Range | |
|
Negligible risk
|
0% | |
|
Low risk
|
0.06% - 0.75% | |
|
Medium-low risk
|
0.15% - 1.88% | |
|
Medium risk
|
0.18% - 2.25% | |
|
Medium-high risk
|
0.20% - 2.50% | |
|
High risk
|
0.25% - 3.13% |
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3.
Country Risk Allowance or Provision
Country risk is understood as the risk associated with customers
resident in a specific country due to circumstances other than
normal commercial risk. Country risk comprises sovereign risk,
transfer risk and other risks arising from international
financial activity. On the basis of the economic performance,
political situation, regulatory and institutional framework, and
payment capacity and record, the Group classifies the
transactions in different groups, assigning to each group the
provisions for insolvencies percentages, which are derived from
those analyses.
However, due to the dimension Group, and to risk-country
management, the provision levels are not significant in relation
to the balance of the provisions by constituted insolvencies (as
of December 31, 2010, this provision represents a 0.37% in
the provision for insolvencies of the Group).
–
Impairment of other debt instruments
The impairment losses on debt securities included in the
“Available-for-sale
financial asset” portfolio are equal to the positive
difference between their acquisition cost (net of any principal
repayment), after deducting any impairment loss previously
recognized in the consolidated income statement and their fair
value.
When there is objective evidence that the negative differences
arising on measurement of these assets are due to impairment,
they are no longer considered as “Valuation
adjustments —
Available-for-sale
financial assets” and are recognized in the consolidated
income statement. If all, or part of the impairment losses are
subsequently recovered, the amount is recognized in the
consolidated income statement for the year in which the recovery
occurred.
–
Impairment of equity instruments
The amount of the impairment in the equity instruments is
determined by the category where is recognized:
| • | Equity instruments measured at fair value: The criteria for quantifying and recognizing impairment losses on equity instruments are similar to those for other debt instruments, with the exception that any recovery of previously recognized impairment losses for an investment in an equity instrument classified as available for sale which are not recognized through profit or loss but recognized under the heading “Valuation adjustments — Available-for-sale financial assets” in the accompanying consolidated balance sheet (Note 31). | |
| • | Equity instruments measured at cost: The impairment losses on equity instruments measured at acquisition cost are equal to the difference between their carrying amount and the present value of expected future cash flows discounted at the market rate of return for similar securities. These impairment losses are determined taking into account the equity of the investee (except for valuation adjustments due to cash flow hedges) for the last approved (consolidated) balance sheet, adjusted for the unrealized gains at the measurement date. |
Impairment losses are recognized in the consolidated income
statement for the year in which they arise as a direct reduction
of the cost of the instrument. These losses may only be reversed
subsequently in the event of the sale of these assets.
| 2.2.2. | TRANSFERS AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES |
The accounting treatment of transfers of financial assets
depends on the extent to which the risks and rewards associated
with the transferred assets are transferred to third parties.
Financial assets are only derecognized from the consolidated
balance sheet when the rights to the cash flows they generate
expire or when their implicit risks and benefits have been
substantially transferred out to third parties. Similarly,
financial liabilities are derecognized from the consolidated
balance sheet only if their obligations are extinguished or
acquired (with a view to subsequent cancellation or renewed
placement).
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When the risks and benefits of transferred assets are
substantially transferred to third parties, the financial asset
transferred is derecognized from the consolidated balance sheet,
and any right or obligation retained or created as a result of
the transfer is simultaneously recognized.
The Group is considered to have transferred substantially all
the risks and benefits if such risks and benefits account for
the majority of the risks and benefits involved in ownership of
the transferred assets.
If substantially all the risks and benefits associated with the
transferred financial asset are retained:
| • | The transferred financial asset is not derecognized and continues to be measured in the consolidated balance sheet using the same criteria as those used before the transfer. | |
| • | A financial liability is recognized at the amount of compensation received, which is subsequently measured at amortized cost and included under the heading “Financial liabilities at amortized cost — Debt certificates” in the accompanying consolidated balance sheet (see Note 23). As these liabilities do not constitute a current obligation, when measuring such a financial liability the Group deducts those financial instruments owned by it which constitute financing for the entity to which the financial assets have been transferred, to the extent that these instruments are deemed to specifically finance the assets transferred. | |
| • | Both the income generated on the transferred (but not derecognized) financial asset and the expenses of the new financial liability are recognized in the accompanying consolidated income statements. |
Purchase
and sale commitments
Financial instruments sold with a repurchase agreement are not
derecognized from the consolidated balance sheets and the amount
received from the sale is considered financing from third
parties.
Financial instruments acquired with an agreement to subsequently
resell them are not recognized in the accompanying consolidated
balance sheets and the amount paid for the purchase is
considered credit given to third parties.
Securitization
In the specific instance of the securitization funds to which
the Group’s entities transfer their loan portfolios, the
following indications of the existence of control are considered
for the purpose of analyzing the possibility of consolidation:
| • | The securitization funds’ activities are undertaken in the name of the entity in accordance with its specific business requirements, with a view to generating benefits or gains from the securitization funds’ operations. | |
| • | The entity retains decision-making power with a view to securing most of the gains derived from the securitization funds’ activities or has delegated this power in some kind of “auto-pilot” mechanism (the securitization funds are structured so that all the decisions and activities to be performed are pre-defined at the time of their creation). | |
| • | The entity is entitled to receive the bulk of the profits from the securitization funds and is accordingly exposed to the risks inherent in their business activities. The entity retains the bulk of the securitization funds’ residual profit. | |
| • | The entity retains the bulk of the securitization funds’ asset risks. |
If there is control based on the preceding guidelines, the
securitization funds are integrated into the consolidated Group.
The consolidated Group is deemed to transfer substantially all
risks and rewards if its exposure to the potential variation in
the future net cash flows of the securitized assets following
the transfer is not significant. In this instance, the
consolidated Group may derecognize the securitized assets.
The BBVA Group has applied the most stringent prevailing
criteria in determining whether or not it retains the risks and
rewards on such assets for all securitizations performed since
1 January 2004. As a result of this analysis,
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the Group has concluded that none of the securitizations
undertaken since that date meet the prerequisites for
derecognizing the underlying assets from the consolidated
balance sheets (see Note 13.3 and
Appendix VII) as it retains substantially all the
risks embodied by expected loan losses or associated with the
possible variation in net cash flows, as it retains the
subordinated loans and lines of credit extended by the BBVA
Group to these securitization funds.
| 2.2.3. | FINANCIAL GUARANTEES |
Financial guarantees are considered those contracts that require
their issuer to make specific payments to reimburse the holder
for a loss incurred when a specific borrower breaches its
payment obligations on the terms — whether original or
subsequently modified — of a debt instrument,
irrespective of the legal form it may take. These guarantees may
take the form of a deposit, financial guarantee, insurance
contract or credit derivative, among others.
Financial guarantees, irrespective of the guarantor,
instrumentation or other circumstances, are reviewed
periodically so as to determine the credit risk to which they
are exposed and, if appropriate, to consider whether a provision
is required for them. The credit risk is determined by
application of criteria similar to those established for
quantifying impairment losses on debt instruments measured at
amortized cost (see Note 2.2.1).
The provisions made for financial guarantees classified as
substandard are recognized under the heading
“Provisions — Provisions for contingent exposures
and commitments” in the liability side in the accompanying
consolidated balance sheets (see Note 25). These provisions
are recognized and reversed with a charge or credit,
respectively, to “Provisions” in the accompanying
consolidated income statements (see Note 48).
Income from guarantee instruments is registered under the
heading “Fee and commission income” in the
consolidated income statement and is calculated by applying the
rate established in the related contract to the nominal amount
of the guarantee (see Note 42).
| 2.2.4. | NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
The heading “Non-current assets
held-for-sale”
in the accompanying consolidated balance sheets recognized the
carrying amount of financial or non-financial assets that are
not part of operating activities of the Group. The recovery of
this carrying amount is expected to take place through the price
obtained on its disposal (see Note 16). The assets included
under this heading are assets where an active sale plan has been
initiated and approved at the appropriate level of management
and it is highly probable they will be sold in their current
condition within one year from the date on which they are
classified as such.
This heading includes individual items and groups of items
(“disposal groups”) and disposal groups that form part
of a major business unit and are being held for sale as part of
a disposal plan (“discontinued operations”). The
individual items include the assets received by the subsidiaries
from their debtors in full or partial settlement of the
debtors’ payment obligations (assets foreclosed or donated
in repayment of debt and recovery of lease finance
transactions), unless the Group has decided to make continued
use of these assets. The Group has units that specialize in real
estate management and the sale of this type of asset.
Symmetrically, the heading “Liabilities associated with
non-current assets held for sale” in the accompanying
consolidated balance sheets reflects the balances payable
arising from disposal groups and discontinued operations.
Non-current assets held for sale are generally measured at fair
value less sale costs or their carrying amount upon
classification within this category, whichever is the lower.
Non-current assets held for sale are not depreciated while
included under this heading.
The fair value of non-current assets held for sale from
foreclosures or recoveries is determined taking in consideration
the valuations performed by companies of authorized values in
each of the geographical areas in which the assets are located.
The BBVA Group requires that these valuations be no more than
one year old, or less if there are other signs of impairment
losses. In the case of Spain, appraisal companies entrusted with
the appraisal of
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these assets are the main independent valuation and appraisal
companies authorized by the Bank of Spain, that are not related
parties with the BBVA Group.
As a general rule, gains and losses generated on the disposal of
assets and liabilities classified as non-current held for sale,
and related impairment losses and subsequent recoveries, where
pertinent, are recognized in
“Gains/(losses)
on non-current assets held for sale not classified as
discontinued operations” in the accompanying consolidated
income statements (see Note 52). The remaining income and
expense items associated with these assets and liabilities are
classified within the relevant consolidated income statement
headings.
| 2.2.5. | TANGIBLE ASSETS |
Tangible
assets — Property, plants and equipment for own
use
The heading “Tangible assets — Property, plants
and equipment — For own use” relates to the
assets under ownership or acquired under lease finance, intended
for future or current use by the Group and that it expects hold
for more than one year. It also includes tangible assets
received by the consolidated entities in full or part settlement
of financial assets representing receivables from third parties
and those assets expected to be held for continuing use.
Property, plants and equipment for own use are presented in the
consolidated balance sheets at acquisition cost, less any
accumulated depreciation and, where appropriate, any estimated
impairment losses resulting from comparing this net value of
each item with its corresponding recoverable value.
Depreciation is calculated, using the straight-line method, on
the basis of the acquisition cost of the assets less their
residual value; the land on which the buildings and other
structures stand is considered to have an indefinite life and is
therefore not depreciated.
The tangible asset depreciation charges are recognized in the
accompanying consolidated income statements under the heading
“Depreciation and amortization” (see
Note 47) and are based on the application of the
following depreciation rates (determined on the basis of the
average years of estimated useful life of the various assets):
Amortization
Rates for Tangible Assets
|
Type of Assets
|
Annual Percentage | |
|
Buildings for own use
|
1.33% - 4.00% | |
|
Furniture
|
8% - 10% | |
|
Fixtures
|
6% - 12% | |
|
Office supplies and hardware
|
8% - 25% |
The BBVA Group’s criteria for determining the recoverable
amount of these assets is based on
up-to-date
independent appraisals that are no more than 3-5 years old
at most, unless there are other indications of impairment.
At each accounting close, the Group entities analyze whether
there are internal or external indicators that a tangible asset
may be impaired. When there is evidence of impairment, the
entity then analyzes whether this impairment actually exists by
comparing the asset’s carrying amount with its recoverable
amount. When the carrying amount exceeds the recoverable amount,
the carrying amount is written down to the recoverable amount
and depreciation charges going forward are adjusted to reflect
the asset’s remaining useful life.
Similarly, if there is any indication that the value of a
tangible asset has been recovered, the consolidated entities
will estimate the recoverable amounts of the asset and recognize
it in the consolidated income statement, recording the reversal
of the impairment loss registered in previous years and thus
adjusting future depreciation charges. In no circumstances may
the reversal of an impairment loss on an asset raise its
carrying amount above that which it would have if no impairment
losses had been recognized in prior years.
Upkeep and maintenance expenses relating to tangible assets held
for own use are recognized as an expense in the year they are
incurred and recognized in the accompanying consolidated income
statements under the heading “Administration
costs — General and administrative expenses -
Property, fixtures and equipment” (see Note 46.2).
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Other
assets leased out under an operating lease
The criteria used to recognize the acquisition cost of assets
leased out under operating leases, to calculate their
depreciation and their respective estimated useful lives and to
record the impairment losses on them, are the same as those
described in relation to tangible assets for own use.
Investment
properties
The heading “Tangible assets — Investment
properties” in the accompanying consolidated balance sheets
reflects the net values of the land (purchase cost minus the
corresponding accumulated repayment, and if appropriate,
estimated impairment losses), buildings and other structures
held either to earn rentals or for capital appreciation through
sale and are neither expected to be sold off in the ordinary
course of business nor are destined for own use (see
Note 19).
The criteria used to recognize the acquisition cost of
investment properties, calculate their depreciation and their
respective estimated useful lives and record the impairment
losses on them, are the same as those described in relation to
tangible assets for continued use.
The criteria used by the BBVA Group to determine their
recoverable value is based on independent appraisals no more
than 1 year old, unless there are other indications of
impairment.
| 2.2.6. | INVENTORIES |
The balance of the heading “Other assets —
Inventories” in the accompanying consolidated balance
sheets mainly reflects the land and other properties that
Group’s real estate companies hold for sale as part of
their property development activities (see Note 22).
The BBVA Group recognized inventories at their cost or net
realizable value, whichever is lower:
| • | The cost value of inventories includes the costs incurred for their acquisition and transformation, as well as other direct and indirect costs incurred in giving them their current condition and location. |
The cost value of real estate assets accounted for as
inventories is comprised of: the acquisition cost of the land,
the cost of urban planning and construction, non-recoverable
taxes and costs corresponding to construction supervision,
coordination and management. The financial expenses incurred
during the year increase by the cost value provided that the
inventories require more than a year to be in a condition to be
sold.
| • | The net realizable value is the estimated selling price of inventories in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. |
In the case of real estate assets accounted for as inventories,
the BBVA Group’s criteria for obtaining their net
realizable value is mainly based on independent appraisals of no
more than one year old, or less if there are other indications
of impairment In the case of Spain, appraisal companies
entrusted with the appraisal of these assets are the main
independent valuation and appraisal companies included in the
Bank of Spain’s official register.
The amount of any inventory valuation adjustment for reasons
such as damage, obsolescence, reduction in sale price to its net
realizable value, as well as losses for other reasons and, if
appropriate, subsequent recoveries of value up to the limit of
the initial cost value, are registered under the heading
“Impairment losses on other assets (net) — Other
assets” in the accompanying consolidated income statements
(see Note 50) for the year in which they are incurred.
In the sale transactions, the carrying amount of inventories is
derecognized from the balance sheet and recognized as an expense
under the heading “Other operating expenses —
Changes in inventories” in the year which the income from
its sale is recognized. This income is recognized under the
heading “Other operating income — Financial
income from non-financial services” in the consolidated
income statements (see Note 45).
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| 2.2.7. | BUSINESS COMBINATIONS |
The result of a business combination is that the Group obtains
control of one or more entities. It is accounted for appliyng
the acquisition method.
The acquisition method records business combinations from the
point of view of the acquirer, who has to recognize the assets
acquired and the liabilities and contingent liabilities assumed,
including those that the acquired entity had not recognized. The
adquisition method can be summed up as a measurement of the cost
of the business combination and its allocation to the assets,
liabilities and contingent liabilities measured according to
their fair value, at the purchase date.
In addition, and pursuant to the new IFRS 3, the purchasing
entity shall recognize an asset in the balance sheet under the
heading “Intangible Asset — Goodwill” when
there is a positive difference on the date of purchase between
the sum of the fair value of the price paid, the amount of all
the non-controlling interests and the fair value of stock
previously held in the acquired entity; and the fair value of
the assets acquired and liabilities assumed. If this difference
is negative, it shall be recognized directly in the income
statement under the heading “Negative Goodwill in business
combinations”. The non-controlling interests mentioned may
be valued in two ways: at their fair value, or at the
proportional percentage of net assets identified in the acquired
entity. The form of valuating the non-controlling holdings may
be chosen in each business combination.
The purchase of non-controlling interests subsequent to the
takeover of the entity is recognized as capital transactions. In
other words, the difference between the price paid and the
carrying amount of the percentage of non-controlling interests
acquired is charged directly to equity.
| 2.2.8. | INTANGIBLE ASSETS |
Goodwill
Goodwill represents payment in advance by the acquiring entity
for the future economic benefits from assets that cannot be
individually identified and separately recognized. It is only
recognized as goodwill when the business combinations are
acquired at a price. Goodwill is never amortized. It is subject
periodically to an impairment analysis, and impaired goodwill is
written off if appropriate.
For the purposes of the impairment analysis, goodwill is
allocated to one or more cash-generating units expected to
benefit from the synergies arising from business combinations.
The cash-generating units represent the Group’s smallest
identifiable asset groups that generate cash flows for the Group
and that are largely independent of the flows generated from
other assets or groups of assets. Each unit or units to which
goodwill is allocated:
| • | Is the lowest level at which the entity manages goodwill internally. | |
| • | Is not larger than an operating segment. |
The cash-generating units to which goodwill has been allocated
are tested for impairment by including the allocated goodwill in
their carrying amount. This analysis is performed at least
annually and always if there is any indication of impairment.
For the purpose of determining the impairment of a
cash-generating unit to which a part of goodwill has been
allocated, the carrying amount of that unit, adjusted by the
theoretical amount of the goodwill attributable to the
non-controlling interests, in the event they are not valued at
fair value, is compared with its recoverable amount.
The recoverable amount of a cash-generating unit is equal to the
higher value between the fair value less costs to sell and its
value in use. Value in use is calculated as the discounted value
of the cash flow projections that the Division estimates and is
based on the latest budgets approved for the next three years.
The principal hypotheses are a sustainable growth rate to
extrapolate the cash flows indefinitely, and the discount rate
used to discount the cash flows is equal to the cost of the
capital assigned to each cash-generating unit, which is made up
of the risk-free rate plus a risk premium.
If the carrying amount of the cash-generating unit exceeds the
related recoverable amount, the Group recognizes an impairment
loss; the resulting loss is apportioned by reducing, first, the
carrying amount of the
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goodwill allocated to that unit and, second, if there are still
impairment losses remaining to be recognized, the carrying
amount of the rest of the assets. This is done by allocating the
remaining loss in proportion to the carrying amount of each of
the assets in the unit. In the event the non-controlling
interests are not valued at fair value, the deterioration of
goodwill attributable to minority interests will be recognized.
No impairment of goodwill attributable to the minority interests
may be recognized.
In any case, impairment losses on goodwill can never be
reversed. Impairment losses on goodwill are recognized under the
heading “Impairment losses on other assets
(net) — Goodwill and other intangible assets” in
the accompanying consolidated income statements (see
Note 50).
Other
intangible assets
These assets may have an indefinite useful life if, based on an
analysis of all relevant factors, it is concluded that there is
no foreseeable limit to the year over which the asset is
expected to generate net cash flows for the consolidated
entities. In all other cases they have a finite useful life.
The Group has not recognized any intangible assets with an
indefinite useful life.
Intangible assets with a finite useful life are amortized
according to this useful life, using methods similar to those
used to depreciate tangible assets. The depreciation charge of
these assets is recognized in the accompanying consolidated
income statements under the heading “Depreciation and
amortization” (see Note 47).
The consolidated entities recognize any impairment loss on the
carrying amount of these assets with charge to the heading
“Impairment losses on other assets (net) —
Goodwill and other intangible assets” in the accompanying
consolidated income statements (see Note 50). The criteria
used to recognize the impairment losses on these assets and,
where applicable, the recovery of impairment losses recognized
in prior years are similar to those used for tangible assets.
| 2.2.9. | INSURANCE AND REINSURANCE CONTRACTS |
The assets of the Group’s insurance companies are
recognized according to their nature under the corresponding
headings of the accompanying consolidated balance sheets and
their registration and valuation is carried out according to the
criteria in this Note 2.
The heading “Reinsurance assets” in the accompanying
consolidated balance sheets includes the amounts that the
consolidated entities are entitled to receive under the
reinsurance contracts entered into by them with third parties
and, more specifically, the share of the reinsurer in the
technical provisions recognized by the consolidated insurance
entities (see Note 18).
The heading “Liabilities under insurance contracts” in
the accompanying consolidated balance sheets includes the
technical provisions for direct insurance and inward reinsurance
recognized by the consolidated entities to cover claims arising
from insurance contracts in force at period-end (see
Note 24).
The income or expense reported by the Group’s insurance
companies on their insurance activities is recognized, attending
to it nature in the corresponding items of the accompanying
consolidated income statements.
In the insurance activity carried out by the Group’s
insurance companies, the amount of the premiums from insurance
contracts written are credited to income and the cost of any
claims that may be met when they are finally settled are charged
to the income statement. Both the amounts charged and not paid
and the costs incurred and not paid at the date in question are
accrued at the end of each year.
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The most significant items that are subject to previsions by
consolidated insurance entities in relation to direct insurance
contracts that they arranged (see Note 24) are as
follows:
| • | Life insurance provisions: Represents the value of the net obligations undertaken with the life insurance policyholder. These provisions include: |
| - | Provisions for unearned premiums. These are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until the closing date has to be allocated to the year from the closing date to the end of the policy period. | |
| - | Mathematical reserves: Represents the value of the life insurance obligations of the insurance companies at the year-end, net of the policyholder’s obligations. |
| • | Non-life insurance provisions: |
| - | Provisions for unearned premiums. These provisions are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until year-end that has to be allocated to the period between the year-end and the end of the policy period. | |
| - | Provisions for unexpired risks: the provision for unexpired risks supplements the provision for unearned premiums by the amount by which that provision is not sufficient to reflect the assessed risks and expenses to be covered by the insurance companies in the policy period not elapsed at the year-end. |
| • | Provision for claims: This reflects the total amount of the outstanding obligations arising from claims incurred prior to the year-end. Insurance companies calculate this provision as the difference between the total estimated or certain cost of the claims not yet reported, settled or paid, and the total amounts already paid in relation to these claims. | |
| • | Provision for bonuses and rebates: this provision includes the amount of the bonuses accruing to policyholders, insurees or beneficiaries and the premiums to be returned to policyholders or insurees, as the case may be, based on the behavior of the risk insured, to the extent that such amounts have not been individually assigned to each of them. | |
| • | Technical provisions for reinsurance ceded: calculated by applying the criteria indicated above for direct insurance, taking account of the assignment conditions established in the reinsurance contracts in force. | |
| • | Other technical provisions: insurance companies have recognized provisions to cover the probable mismatches in the market reinvestment interest rates with respect to those used in the valuation of the technical provisions. |
The Group controls and monitors the exposure of the insurance
companies to financial risk and, to this end, uses internal
methods and tools that enable it to measure credit risk and
market risk and to establish the limits for these risks.
| 2.2.10. | TAX ASSETS AND LIABILITIES |
Corporation tax expense in Spain and the expense for similar
taxes applicable to the consolidated entities abroad are
recognized in the consolidated income statement, except when
they result from transactions on which the profits or losses are
recognized directly in equity, in which case the related tax
effect is also recognized in equity.
The current income tax expense is calculated by aggregating the
current tax arising from the application of the related tax rate
to the taxable profit (or tax loss) for the year (after
deducting the tax credits allowable for tax purposes) and the
change in deferred tax assets and liabilities recognized in the
consolidated income statement.
Deferred tax assets and liabilities include temporary
differences, measured at the amount expected to be payable or
recoverable on future fiscal years for the differences between
the carrying amount of assets and liabilities and their tax
bases, and tax loss and tax credit carry forwards. These amounts
are measured applying to each temporary difference the tax rates
that are expected to apply when the asset is realized or the
liability settled (Note 21).
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The “Tax Assets” chapter of the accompanying
consolidated balance sheets includes the amount of all the
assets of a tax nature, and distinguishes between:
“Current” (amounts recoverable by tax in the next
twelve months) and “Deferred” (including taxes
recoverable in future years, including loss carryforwards or tax
credits for deductions and tax rebates pending application).
The “Tax Liabilities” chapter of the accompanying
consolidated balance sheets includes the amount of all the
liabilities of a tax nature, except for provisions for taxes,
broken down into: “Current” (income tax payable on
taxable profit for the year and other taxes payable in the next
twelve months) and “Deferred” (income taxes payable in
subsequent years).
Deferred tax liabilities in relation to taxable temporary
differences associated with investments in subsidiaries,
associates or jointly controlled entities are recognized as
such, except where the Group can control the timing of the
reversal of the temporary difference and it is unlikely that it
will reverse in the foreseeable future.
Deferred tax assets are recognized to the extent that it is
considered probably that the consolidated entities will have
sufficient taxable profits in the future against which the
deferred tax assets can be utilized and are not from the initial
recognition (except in the case of a combination of business) of
other assets or liabilities in a transaction that does not
affect the fiscal outcome or the accounting result.
The deferred tax assets and liabilities recognized are
reassessed by the consolidated entities at each balance sheet
date in order to ascertain whether they are still current, and
the appropriate adjustments are made on the basis of the
findings of the analyses performed.
The income and expenses directly recognized in equity that do
not increase or decrease taxable income are accounted as
temporary differences.
| 2.2.11. | PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES |
The heading “Provisions” in the accompanying
consolidated balance sheets includes amounts recognized to cover
the Group’s current obligations arising as a result of past
events. These are certain in terms of nature but uncertain in
terms of amount
and/or
cancellation date. The settlement of these obligations is deemed
likely to entail an outflow of resources embodying economic
benefits (see Note 25). The obligations may arise in
connection with legal or contractual provisions, valid
expectations formed by Group companies relative to third parties
in relation to the assumption of certain responsibilities or
through virtually certain developments of particular aspects of
applicable regulation, specifically draft legislation to which
the Group will certainly be subject.
Provisions are recognized in the balance sheet when each and
every one of the following requirements is met: The Group has an
existing obligation resulting from a past event and, at the
consolidated balance sheet date, it is more likely than not that
the obligation will have to be settled; it is probable that to
settle the obligation the entity will have to give up resources
embodying economic benefits; and a reliable estimate can be made
of the amount of the obligation. Among other items they include
provisions for commitments to employees mentioned in
section 2.2.12, as well as provisions for tax and legal
litigation.
Contingent assets are possible assets that arise from past
events and whose existence is conditional on, and will be
confirmed only by the occurrence or non-occurrence of, events
beyond the control of the Group. Contingent assets are not
recognized in the consolidated balance sheet or in the
consolidated income statement; however, they are disclosed in
the notes to financial statements, provided that it is probable
that these assets will give rise to an increase in resources
embodying economic benefits (see Note 36).
Contingent liabilities are possible obligations of the Group
that arise from past events and whose existence is conditional
on the occurrence or non-occurrence of one or more future events
beyond the control of the entity. They also include the existing
obligations of the entity when it is not probable that an
outflow of resources embodying economic benefits will be
required to settle them or when, in extremely rare cases, their
amount cannot be measured with sufficient reliability.
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| 2.2.12. | POST-EMPLOYMENT BENEFITS AND OTHER LONG-TERM COMMITMENTS TO EMPLOYEES |
Below is a description of the most significant accounting
criteria relating to the commitments to employees, related to
post-employment benefits and other long term commitments, of
certain Group companies in Spain and abroad (see Note 26).
Commitments
valuation: assumptions and actuarial gains/losses
recognition
The present values of the commitments are quantified on a
case-by-case
basis. Costs are calculated using the projected unit credit
method, which sees cach period of service as giving rise to an
additional unit of benefit/commitment and measures each unit
separately to build up the final obligation.
In adopting the actuarial assumptions, the following are taken
into account:
| • | They are unbiased, in that they are not unduly aggressive nor excessively conservative. | |
| • | They are mutually compatible, reflecting the economic relationships between factors such as inflation, rates of salary increase, discount rates and expected return of assets. The expected return of plan assets in the post-employment benefits is estimated taking into account the market expectations and the distribution of such assets in the different portfolios. | |
| • | The future levels of salaries and benefits are based on market expectations at the balance sheet date for the period over which the obligations are to be settled. | |
| • | The discount rate used is determined by reference to market yields at the balance sheet date on high quality corporate bonds or debentures. |
The Group recognizes all actuarial differences under the heading
“Provisions (net)” (see Note 48) in the
accompanying consolidated income statements in the period in
which they arise in connection with commitments assumed by the
Group for its staff’s early retirement schemes, benefits
awarded for seniority and other similar concepts.
The Group recognizes the actuarial gains or losses arising on
all other defined benefit post-employment commitments directly
under the heading “Reserves” (see
Note 29) in the accompanying consolidated balance
sheets.
The Group does not apply the option of deferring actuarial gains
and losses to any of its employee commitments using the
so-called corridor approach.
Post-employment
benefits
• Pensions
Post-employment benefits include defined-contribution and
defined-benefit commitments.
– Defined-contribution
commitments
The amounts of these commitments are determined as a percentage
of certain remuneration items
and/or
as a
pre-established annual amount. The contributions made each
period by the Group’s companies for defined-contribution
commitments, are recognized with a charge to the heading
“Personnel expenses- Contributions to external pension
funds” in the accompanying consolidated income statements
(see Note 46).
– Defined-benefit
commitments
Some of the Group’s companies have defined-benefit
commitments for permanent disability and death for certain
current employees and early retirees; and defined-benefit
retirement commitments applicable only to certain groups of
serving employees, or early retired employees and retired
employees. Defined-benefit commitments are funded by insurance
contracts and internal provisions.
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The amounts recognized in the heading
“Provisions — Provisions for pensions and similar
obligations” (see Note 25) are the differences
between the present values of the vested obligations for
defined-benefit commitments at balance sheet date, adjusted by
the past service cost and the fair value of plan assets, if
applicable, which are to be used directly to settle employee
benefit obligations.
These commitments are charged to the heading “Provisions
(net) — Pension funds and similar obligations” in
the accompanying consolidated income statements (see
Note 48).
The current contributions made by the Group’s companies for
defined-benefit commitments covering current employees are
charged to the heading “Administration cost —
Personnel expenses” in the accompanying consolidated income
statements (see Note 46).
• Early
retirements
The Group offered some employees in Spain the possibility of
taking early retirement before the age stipulated in the
collective labor agreement then in force. The corresponding
provisions by the Group were recognized with a charge to the
heading “Provisions (net) — Provisions for
pensions and similar obligations” in the accompanying
consolidated income statements (see note 48). The present
values for early retirement are quantified on a
case-by-case
basis and they are recognized in the heading
Provisions — Provisions for pensions and similar
obligations” in the accompanying consolidated balance
sheets (see Note 25).
The commitments to early retirees include the compensation and
indemnities and contributions to external pension funds payable
during the year of early retirement. The commitments relating to
this group of employees after they have reached normal
retirement age are included in the previous section
“Pensions”.
• Other
post-employment welfare benefits
Some of the Group’s companies have welfare benefit
commitments whose effects extend beyond the retirement of the
employees entitled to the benefits. These commitments relate to
certain current employees and retirees, depending upon the
employee group to which they belong.
The present values of the vested obligations for post-employment
welfare benefits are quantified on a
case-by-case
basis. They are recognized in the heading
“Provisions — Provisions for pensions and similar
obligations” in the accompanying consolidated balance
sheets (see Note 25) and they are charged to the
heading “Personnel expenses — Other personnel
expenses” in the accompanying consolidated income
statements (see Note 46).
• Other
long-term commitments to employees
Some of the Group’s companies are obliged to deliver goods
and services. The most significant, in terms of the type of
compensation and the event giving rise to the commitments are as
follows: loans to employees, life insurance, study assistance
and long-service awards.
Some of these commitments are measured according to actuarial
studies, so that the present values of the vested obligations
for commitments with personnel are quantified on a
case-by-case
basis. They are recognized in the heading
“Provisions — Other provisions” in the
accompanying consolidated balance sheets (see Note 25).
The welfare benefits delivered by the Spanish companies to
active employees are recognized in the heading “Personnel
expenses — Other personnel expenses” in the
accompanying income statements (see Note 46).
Other commitments for current employees accrue and are settled
on a yearly basis, so it is not necessary to record a provision
in this connection.
| 2.2.13. | EQUITY-SETTLED SHARE-BASED PAYMENT TRANSACTIONS |
Equity-settled share-based payment transactions, when the
instruments granted do not vest until the counterparty completes
a specified period of service, shall be accounted for those
services as they are rendered by the counterparty during the
vesting period, with a corresponding increase in equity. The
entity measures the goods or
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services received and the corresponding increase in equity,
directly, at the fair value of the goods or services received,
unless that fair value cannot be estimated reliably. If the
entity cannot estimate reliably the fair value of the goods or
services received, the entity measures their value and the
corresponding increase in equity indirectly, by reference to the
fair value of the equity instruments granted, at grant date.
When the initial compensation agreement includes what may be
considered market conditions among its terms, any changes in
these conditions will not be reflected on the profit and loss
account, as these have already been accounted for in calculating
their initial fair value. Non-market vesting conditions are not
taken into account when estimating the initial fair value of
instruments, but they are taken into account when determining
the number of instruments to be granted. This will be recognized
on the income statement with the corresponding increase in
equity.
| 2.2.14. | TERMINATION BENEFITS |
Termination benefits must be recognized when the Group is
committed to severing its contractual relationship with its
employees and, to this end, has a formal detailed redundancy
plan. At the date these consolidated financial statements were
prepared, there was no plan to reduce staff in the Group’s
companies that would make it necessary to set aside provisions
for this item.
| 2.2.15. | TREASURY STOCK |
The amount of the equity instruments that the Group’s
entities own is recognized under “Stockholders’
funds — Treasury stock” in the accompanying
consolidated balance sheets. The balance of this heading relates
mainly to the Bank’s shares and share derivatives held by
some of its consolidated companies (see Note 30).
These financial assets are recognized at acquisition cost, and
the gains or losses arising on their disposal are credited or
debited, as appropriate, to the heading “Stockholders’
funds -Reserves” in the accompanying consolidated balance
sheets (see Note 29).
| 2.2.16. | FOREIGN CURRENCY TRANSACTIONS AND EXCHANGE DIFFERENCES |
The Group’s functional currency is the euro. Therefore, all
balances and transactions denominated in currencies other than
the euro are deemed to be denominated in “foreign
currency”. The balances in the financial statements of
consolidated entities whose functional currency is not the euro
are converted to euros as follows:
| • | Assets and liabilities: at the average spot exchange rates as of the date of each of the accompanying consolidated balance sheets. | |
| • | Income and expenses and cash flows: at the average exchange rates for each year presented. | |
| • | Equity items: at the historical exchange rates. |
The exchange differences arising from the conversion of foreign
currency balances to the functional currency of the consolidated
entities and their branches are generally recognized in the
“Exchange differences (net)” in the consolidated
income statement. Exceptionally, the exchange differences
arising on non-monetary items whose fair value is adjusted with
a balancing item in equity are recognized under the heading
“Valuation adjustments — Exchange
differences” in the consolidated balance sheet.
The exchange differences arising from the conversion to euros of
balances in the functional currencies of the consolidated
entities whose functional currency is not the euro are
recognized under the heading “Valuation
adjustments — Exchange differences” in the
consolidated balance sheet. Meanwhile, the differences arising
from the conversion to euros of the financial statements of
entities accounted for by the equity method are recognized under
the heading “Valuation adjustments — Entities
accounted for using the equity method” until the item to
which they relate is derecognized, at which time they are
recognized in the income statement.
The breakdown of the main balances in foreign currencies of the
accompanying consolidated balance sheets as of December 31,
2010, 2009 and 2008, with reference to the most significant
foreign currencies, are set forth in Appendix IX.
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| 2.2.17. | RECOGNITION OF INCOME AND EXPENSES |
The most significant criteria used by the Group to recognize its
income and expenses are as follows:
Interest
income and expenses and similar items
As a general rule, interest income and expenses and similar
items are recognized on the basis of their period of accrual
using the effective interest rate method. Specifically, the
financial fees and commissions that arise on the arrangement of
loans, basically origination and analysis fees, must be deferred
and recognized in the income statement over the expected life of
the loan. The direct costs incurred in arranging these
transactions can be deducted from the amount thus recognized.
Also dividends received from other companies are recognized as
income when the consolidated companies’ right to receive
them arises.
However, when a debt instrument is deemed to be impaired
individually or is included in the category of instruments that
are impaired because of amounts more than three months past-due,
the recognition of accrued interest in the consolidated income
statement is interrupted. This interest is recognized for
accounting purposes as income, as soon it is received, from the
recovery of the impairment loss.
Commissions,
fees and similar items
Income and expenses relating to commissions and similar fees are
recognized in the consolidated income statement using criteria
that vary according to the nature of such items. The most
significant income and expense items in this connection are:
| • | Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized when collected. | |
| • | Those arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services. | |
| • | Those relating to single acts, which are recognized when this single act is carried out. |
Non-financial
income and expenses
These are recognized for accounting purposes on an accrual basis.
Deferred
collections and payments
These are recognized for accounting purposes at the amount
resulting from discounting the expected cash flows at market
rates.
| 2.2.18. | SALES AND INCOME FROM THE PROVISION OF NON-FINANCIAL SERVICES |
The heading “Other operating income — Financial
income from non-financial services” in the accompanying
consolidated income statements includes the carrying amount of
the sales of assets and income from the services provided by the
consolidated Group companies that are not financial
institutions. In the case of the Group, these companies are
mainly real estate and services companies (see Note 45).
| 2.2.19. | LEASES |
Lease contracts are classified as finance from the start of the
transaction, if they transfer substantially all the risks and
rewards incidental to ownership of the asset forming the
subject-matter of the contract. Leases other than finance leases
are classified as operating leases.
When the consolidated entities act as the lessor of an asset in
finance leases, the aggregate present values of the lease
payments receivable from the lessee plus the guaranteed residual
value (normally the exercise price of the lessee’s purchase
option on expiration of the lease agreement) are recognized as
financing provided to third parties and, therefore, are included
under the heading “Loans and receivables” in the
accompanying consolidated balance sheets.
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When the consolidated entities act as lessors of an asset in
operating leases, the acquisition cost of the leased assets is
recognized under “Tangible assets — Property,
plants and equipment — Other assets leased out under
an operating lease” in the accompanying consolidated
balance sheets (see Note 19). These assets are depreciated
in line with the criteria adopted for items of tangible assets
for own use, while the income arising from the lease
arrangements is recognized in the accompanying consolidated
income statements on a straight line basis within “Other
operating income — Rest of other operating
income” (see Note 45).
If a fair value sale and leaseback results in an operating
lease, the profit or loss generated is recognized in the income
statement at the time of sale. If such a transaction gives rise
to a finance lease, the corresponding gains or losses are
amortized over the lease period.
The assets leased out under operating lease contracts to other
entities in the Group are treated in the consolidated financial
statements as for own use, and thus rental expense and income is
eliminated and the corresponding depreciation is registered.
| 2.2.20. | CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSES |
The consolidated statements of recognized income and expenses
reflect the income and expenses generated each year. It
distinguishes between those recognized as results in the
consolidated income statements from “Other recognized
income (expenses)” recognized directly in the total equity.
“Other recognized income (expenses)” include the
changes that have taken place in the year in the “Valuation
adjustments” broken down by item.
The sum of the changes to the heading “Valuation
adjustments” of the total equity and the net income of the
year forms the “Total recognized income/expenses of the
year”.
| 2.2.21. | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
The consolidated statements of changes in equity reflect all the
movements generated in each year in each of the headings of the
consolidated equity, including those from transactions
undertaken with shareholders when they act as such, and those
due to changes in accounting criteria or corrections of errors,
if any.
The applicable regulations establish that certain categories of
assets and liabilities are recognized at their fair value with a
charge to equity. These charges, known as “Valuation
adjustments” (see Note 31), are included in the
Group’s total consolidated equity net of tax effect, which
has been recognized as deferred tax assets or liabilities, as
appropriate.
| 2.2.22. | CONSOLIDATED STATEMENTS OF CASH FLOWS |
The indirect method has been used for the preparation of the
consolidated statement of cash flows. This method starts from
the entity’s consolidated net income and adjusts its amount
for the effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating cash receipts
or payments, and items of income or expense associated cash
flows classified as investment or finance.
For these purposes, in addition to cash on hand, cash
equivalents include very short term, highly liquid investments
subject to very low risk of impairment.
The composition of component of cash and equivalents with
respect to the headings of the consolidated balance sheets is
shown in the accompanying consolidated cash flow statements.
To prepare the consolidated cash flow statements, the following
items are taken into consideration:
| • | Cash flows: Inflows and outflows of cash and cash equivalents, the latter being short-term, highly liquid investments subject to a low risk of changes in value, such Cash and Deposit balances from central banks. | |
| • | Operating activities: The typical activities of credit institutions and other activities that cannot be classified as investing or financing activities. |
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| • | Investing activities: The acquisition, sale or other disposal of long-term assets and other investments not included in cash and cash equivalents. | |
| • | Financing activities: Activities that result in changes in the size and composition of equity and of liabilities that do not form part of operating activities. |
| 2.2.23. | ENTITIES AND BRANCHES LOCATED IN COUNTRIES WITH HYPERINFLATIONARY ECONOMIES |
In accordance with the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004 criteria, to determine
whether an economy has a high inflation rate the country’s
economic situation is examined, analyzing whether certain
circumstances are fulfilled, such as whether the population
prefers to keep its wealth or save in non-monetary assets or in
a relatively stable foreign currency, whether prices can be set
in that currency, whether interest rates, wages and prices are
pegged to a price index or whether the accumulated inflation
rate over three years reaches or exceeds 100%. The fact that any
of these circumstances is fulfilled will not be a decisive
factor in considering an economy hyperinflationary, but it does
provide some reasons to consider it as such.
Since the end of 2009, the Venezuelan economy has been
considered to be hyperinflationary as defined by the
aforementioned criteria. Accordingly, the financial statements
as of December 31, 2010 and 2009, of the Group’s
subsidiaries based in Venezuela (Note 3) are adjusted
to correct for the effects of inflation. Pursuant to the
requirements of IAS 29, the monetary headings (mainly loans and
credits) have not been re-expressed, while the non-monetary
headings (mainly tangible fixed assets) have been re-expressed
in accordance with the change in the country’s Consumer
Price Index.
The historical differences as of January 1, 2009 between
the re-expressed costs and the previous costs in the
non-monetary headings were credited to “Reserves” on
the accompanying consolidated balance sheet as of
December 31, 2009, while the differences for 2010 and 2009,
and the re-expression of the income statement for 2010 and 2009
were recognized in the consolidated income statement for 2010
and 2009.
The effects of inflation accounting in Venezuela in the
consolidated income statement corresponding to the year ended
December 31, 2010 were not significant.
In January 2010, the Venezuelan authorities announced the
devaluation of the Venezuelan bolivar with regard to the main
foreign currencies and that other economic measures will be
adopted. The effects of this devaluation on the consolidated
income statement for 2010 and consolidated equity as of
December 31, 2010, were not significant.
| 2.3 | RECENT IFRS PRONOUNCEMENTS |
| a) | STANDARDS AND INTERPRETATIONS EFFECTIVE IN 2010 |
The following modifications to the IFRS or their interpretations
(“IFRIC”) came into force in 2010. Their integration
in the Group has not had a significant impact on these
consolidated financial statements:
Second
IFRS annual improvements project
The IASB published its second annual improvements project, which
includes small amendments in the IFRS. These are mostly
applicable for the annual period starting after January 1,
2010.
The amendments are focused mainly on eliminating inconsistencies
between some IFRS and on clarifying terminology.
IFRS 2
Amended — “Share-based
payment”
The IASB published an amendment to IFRS 2 —
“Share-based payment” on how a subsidiary should to
account, in its individual financial statements, for share-based
payment arrangements of the group (for both creditors and
employees) in the event the payment is made with another Group
subsidiary or the parent company.
The amendments clarify that the entity receiving the goods and
services in a share-based payment transaction must, in its
financial statements, account for goods and services in
accordance with IFRS 2, regardless of which
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entity within the group makes the payment or of the payment
being made is in shares or in cash. Under IFRS 2, the Group
includes the parent company and its subsidiaries, in line with
that stipulated in IAS 27 — Consolidate and separate
financial statements.
Furthermore, the contents of IFRIC 8 — “Scope of
IFRS 2” and IFRIC 11- “Group and Treasury Share
Transactions” are incorporated into IFRS 2, thus nullifying
them.
IFRS 3
Revised — Business combinations, and Amendment to IAS
27 — Consolidated and separate financial
statements
The amendments to IFRS 3 and IAS 27 represent some significant
changes to various aspects related to accounting for business
combinations. They generally place more emphasis on using the
fair value. Some of the main changes are: acquisition costs will
be recognized as expense instead of the current practice of
considering them as a part of the cost of the business
combination; acquisitions achieved in stages, in which at the
date of acquisition the acquirer should remeasure its previously
held equity interest in the acquiree at fair value or the option
of measuring the non-controlling interests in the acquired
company at fair value, instead of the current practice of only
measuring the proportional share of the fair value of the
acquired net assets.
In the year ended December 31, 2010, no significant
business combination has required the application of the
modifications established in the IFRS 3 and IAS 27 standards.
IAS 39
Amended — “Financial instruments: Recognition and
valuation. Eligible hedged items”
The amendment to IAS 39 introduces new requirements on eligible
hedged items.
The amendment stipulates that:
| • | Inflation may not be designated as a hedged item unless it is identifiable and the inflation portion is a contractually specified portion of cash flows of an inflation-linked financial instrument, and the rest of the cash flows are not affected by the inflation-linked portion. | |
| • | When changes in cash flows or the fair value of an item are hedged above or below a specified price or other variable (a one-side risk) via a purchased option, the intrinsic value and time value components of the option must be separated and only the intrinsic value may be designated as a hedging instrument. |
IFRIC
17 — “Distributions of non-cash assets to
owners”
This new interpretation stipulates that all distributions of
non-cash assets to owners must be valued at fair value,
clarifying that:
| • | The dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity. | |
| • | An entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. |
IFRIC
18 — “Transfer of assets from
customers”
This clarifies the requirements for agreements in which an
entity receives an item of property, plant, and equipment from a
customer which the entity must then use either to connect the
customer to a network or to provide the customer with ongoing
access to a supply of goods or services, or both.
The basic principle of IFRIC 18 is that when the item of
property, plant and equipment meets the definition of an asset
from the perspective of the recipient, the recipient must
recognize the asset at its fair value on the date of the
transfer with a balancing entry in ordinary income in accordance
with IAS 18.
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| b) | STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE AS OF DECEMBER 31, 2010 |
New International Financial Reporting Standards together with
their interpretations (IFRIC) had been published at the date of
close of these consolidated financial statements. These were not
obligatory as of December 31, 2010. Although in some cases
the IASB permits early adoption before they enter into force,
the Group has not done so as of this date.
The future impacts that the adoption of these standards could
have not been analyzed to date.
IAS 24
Revised — “Related party
disclosures”
This amendment to IAS 24 refers to the disclosures of related
parties in the financial statements. There are two main new
features. One of them introduces a partial exemption for some
disclosures when the relationship is with companies that depend
on or are related to the State (or an equivalent governmental
institution) and the definition of related party is revised,
establishing some relations that were not previously explicit in
the standard.
This amendment will apply for years beginning after
January 1, 2011. Early adoption is permitted.
IAS 32
Amended — “Financial instruments:
Presentation — Classification of preferred
subscription rights”
The amendment to IAS 32 clarifies the classification of
preferred subscription rights (instruments that entitle the
holder to acquire instruments from the entity at a fixed price)
when they are in a currency other than the issuer’s
functional currency. The proposed amendment establishes that the
rights to acquire a fixed number of own equity instruments for a
fixed amount will be classified as equity regardless of the
currency of the exercise price and whether the entity gives the
tag-along rights to all of the existing shareholders (in
accordance with current standards they must be posted as
liability derivatives).
This amendment will apply for years beginning after
February 1, 2010. Early adoption is permitted.
IFRIC
14 Amended — “Prepayment of Minimum Funding
Contributions”
The IASB issued an amendment to IFRIC 14 to correct the fact
that, under the current IFRIC 14, in certain circumstances it is
not permitted to recognize some prepayments of minimum funding
contributions as assets.
This amendment will apply for years beginning after
January 1, 2011. Early adoption is permitted.
IFRIC
19 — “Settlement of financial liabilities through
equity instruments”
In the current market situation, some entities are renegotiating
conditions regarding financial liabilities with their creditors.
There are cases in which creditors agree to receive equity
instruments that the debtor has issued to cancel part or all of
the financial liabilities. IFRIC 19 clarifies the posting of
these transactions from the perspective of the issuer of the
instrument, and states that these securities must be valued at
fair value. If this value cannot be calculated, they will be
valued at the fair value of the cancelled liability. The
difference between the cancelled liability and the issued
instruments will be recognized in the income statement.
This amendment will apply for years beginning after July 1,
2010. Early adoption is permitted.
IFRS
9 — “Financial Instruments”
On November 12, 2009, the IASB published IFRS 9 —
Financial Instruments as the first stage of its plan to replace
IAS 39 — Financial Instruments: Recognition and
Valuation. IFRS 9, which introduces new requirements for the
classification and valuation of financial assets, is mandatoty
from January 1, 2013 onwards, although early adoption is
permitted from December 31, 2009 onwards. The European
Commission has decided not to adopt IFRS 9 for the time being.
The possibility of early adoption of this first part of the
standard ended for European entities.
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Third
annual improvements project for the IFRS
The IASB has published its third annual improvements project,
which includes small amendments in the IFRS. These will mostly
be applicable for annual periods starting after January 1,
2011.
The amendments are focused mainly on eliminating inconsistencies
between some IFRS and on clarifying terminology.
IFRS 7
Amended — Disclosures — Transfers of
Financial Assets
The amendments to IFRS 7 modify the disclosures that have to be
presented on transfers and derecognition in the balance sheets
of financial assets.
IFRS 7 as amended establishes that entities that transfer
financial assets must disclose information that enables people
to a) understand the relationship between the transferred
financial assets that are derecognized in their entirety and the
associated liabilities; and b) evaluate the nature of, and
the risks associated with, the entity’s continuing
involvement in transferred and derecognized financial assets.
Additional disclosures are required for asset transfer
transactions when the transfers have not been uniform throughout
the reporting period.
This amendment will apply annually beginning after July 1,
2011. Early adoption is permitted.
IAS 12
Amended — Income Taxes — Deferred Taxation:
Recovery of Underlying Assets
The IAS 12 establishes that the deferred tax assets and
liabilities will be calculated by using the tax base and the tax
rate corresponding according to the form in which the entity
expects to recover or cancel the corresponding asset or
liability: by the use of the asset or by its sale.
The IASB has published a modification to IAS 12 —
Deferred Taxes. This includes the assumption when calculating
the assets and liabilities for deferred taxes that the recovery
of the underlying asset will be carried out through its sale in
investment property valued at fair value under NIC 40 Investment
Property. However, an exception is admitted if the investment is
depreciable and is managed according to a business model whose
objective is to use the profits from the investment over time,
and not from its sale.
At the same time, IAS 12 includes the content of sic 21 Deferred
Taxes — Recovery of revalued non-depreciable assets,
which is withdrawn.
This amendment should be appled retrospectively for annual
periods beginning on January 1, 2012. Early adoption is
permitted.
| 3. | BANCO BILBAO VIZCAYA ARGENTARIA GROUP |
The BBVA Group is an international diversified financial group
with a significant presence in retail banking, wholesale
banking, asset management and private banking. The Group also
engages in business activity in other sectors, such as
insurance, real estate and operational leasing.
Appendix II shows relevant information on the Group’s
subsidiaries as of December 31, 2010. Appendix III
shows relevant information on the consolidated jointly
controlled entities accounted for using the proportionate
consolidation method, as of December 31, 2010.
Appendix IV provides additional information on investments
and jointly controlled companies consolidated using the equity
method in the BBVA Group. Appendix V shows the main changes
in investments over 2010. Appendix VI gives details of the
subsidiaries under the full consolidation method and which,
based on the information available, were more than 10% owned by
non-Group shareholders as of December 31, 2010.
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The following table sets forth information related to the
Group’s total assets as of 31 December 2010, 2009 and
2008 and the Group’s income attributed to parent company
for 2010, 2009 and 2008, broken down by the companies in the
group according to their activity:
|
Net Income
|
||||||||||||||||
|
Total Assets
|
% of the
|
Attributed to
|
% of the Net
|
|||||||||||||
|
Contribution to Consolidated Group.
|
Contributed to
|
Total Assets of
|
Parent
|
Income Attributed
|
||||||||||||
|
Entities by Main Activities 2010
|
the Group | the Group | Company | to Parent Company | ||||||||||||
| Millions of euros/percentages | ||||||||||||||||
|
Banks
|
521,701 | 94.38 | % | 3,749 | 81.39 | % | ||||||||||
|
Financial services
|
8,070 | 1.46 | % | 247 | 5.36 | % | ||||||||||
|
Portfolio, securities dealers and mutual funds management
companies
|
3,372 | 0.61 | % | (239 | ) | (5.19 | )% | |||||||||
|
Insurance and pension fund managing companies
|
17,034 | 3.08 | % | 826 | 17.93 | % | ||||||||||
|
Real Estate, services and other entities
|
2,561 | 0.46 | % | 23 | 0.50 | % | ||||||||||
|
Total
|
552,738 | 100.00 | % | 4,606 | 100.00 | % | ||||||||||
|
% of the Net
|
||||||||||||||||
|
Total Assets
|
% of the
|
Net Income
|
Income
|
|||||||||||||
|
Contribution to Consolidated Group.
|
Contributed to
|
Total Assest of
|
Attributed to Parent
|
Attributed to
|
||||||||||||
|
Entities by Main Activities 2009
|
the Group | the Group | Company | Parent Company | ||||||||||||
| Millions of euros/percentage | ||||||||||||||||
|
Banks
|
505,398 | 94.46 | % | 3,435 | 81.58 | % | ||||||||||
|
Financial services
|
7,980 | 1.49 | % | 343 | 8.16 | % | ||||||||||
|
Portfolio, securities dealers and mutual funds management
companies
|
3,053 | 0.57 | % | (243 | ) | (5.77 | )% | |||||||||
|
Insurance and pension fund managing companies
|
16,168 | 3.02 | % | 755 | 17.94 | % | ||||||||||
|
Real Estate, services and other entities
|
2,466 | 0.46 | % | (80 | ) | (1.91 | )% | |||||||||
|
Total
|
535,065 | 100.00 | % | 4,210 | 100.00 | % | ||||||||||
|
% of the Net
|
||||||||||||||||
|
Total Assets
|
% of the
|
Net Income
|
Income
|
|||||||||||||
|
Contribution to Consolidated Group.
|
Contributed to
|
Total Assest of
|
Attributed to Parent
|
Attributed to
|
||||||||||||
|
Entities by Main Activities 2008
|
the Group | the Group | Company | Parent Company | ||||||||||||
| Millions of euros/percentage | ||||||||||||||||
|
Banks
|
498,030 | 91.78 | % | 3,535 | 70.41 | % | ||||||||||
|
Financial services
|
15,608 | 2.88 | % | 393 | 7.84 | % | ||||||||||
|
Portfolio, securities dealers and mutual funds management
companies
|
11,423 | 2.10 | % | 466 | 9.28 | % | ||||||||||
|
Insurance and pension fund managing companies
|
14,997 | 2.76 | % | 646 | 12.86 | % | ||||||||||
|
Real Estate, services and other entities
|
2,592 | 0.48 | % | (20 | ) | (0.40 | )% | |||||||||
|
Total
|
542,650 | 100.00 | % | 5,020 | 100.00 | % | ||||||||||
The Group’s activity is mainly located in Spain, Mexico,
the United States and Latin America, with an active presence in
Europe and Asia (see Note 17).
F-41
Table of Contents
As of December 31, 2010, 2009 and 2008, the total assets
broken down by countries in which the Group operates, were as
follows:
|
Total Assets by Countries
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Spain
|
365,019 | 370,622 | 380,486 | |||||||||
|
Mexico
|
73,837 | 61,655 | 61,023 | |||||||||
|
The United States
|
52,166 | 49,576 | 49,698 | |||||||||
|
Chile
|
13,309 | 10,253 | 9,389 | |||||||||
|
Venezuela
|
8,613 | 11,410 | 9,652 | |||||||||
|
Colombia
|
8,702 | 6,532 | 6,552 | |||||||||
|
Peru
|
10,135 | 7,311 | 7,683 | |||||||||
|
Argentina
|
6,075 | 5,030 | 5,137 | |||||||||
|
Rest
|
14,882 | 12,676 | 13,030 | |||||||||
|
Total
|
552,738 | 535,065 | 542,650 | |||||||||
For the year ended December 31, 2010, 2009 and 2008, the
“Interest and similar income” of the Group’s most
significant subsidiaries, broken down by countries where Group
operates, were as follows:
|
Interest and Similar Income by Countries
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Spain
|
9,426 | 12,046 | 16,892 | |||||||||
|
Mexico
|
5,543 | 5,354 | 6,721 | |||||||||
|
The United States
|
2,050 | 1,991 | 2,174 | |||||||||
|
Chile
|
850 | 522 | 986 | |||||||||
|
Venezuela
|
975 | 1,553 | 1,116 | |||||||||
|
Colombia
|
694 | 750 | 811 | |||||||||
|
Peru
|
597 | 563 | 520 | |||||||||
|
Argentina
|
563 | 549 | 541 | |||||||||
|
Rest
|
436 | 447 | 643 | |||||||||
|
Total
|
21,134 | 23,775 | 30,404 | |||||||||
–
Spain
The Group’s activity in Spain is principally through BBVA,
which is the parent company of the BBVA Group. Appendix I
shows BBVA’s individual financial statements as of
December 31, 2010, 2009 and 2008.
The following table sets forth BBVA’s total assets and
income before tax as a proportion of the total assets and
consolidated income before tax of the Group, as of
December 31, 2010, 2009 and 2008, after the corresponding
consolidation process adjustments:
|
Contribution of BBVA, S.A. to Total Assets and
|
||||||||||||||||
|
Income before Taxes of BBVA Group
|
2010 | 2009 | 2008 | |||||||||||||
|
% BBVA Assets over Group Assets
|
64 | % | 67 | % | 63 | % | ||||||||||
|
% BBVA Income before tax over consolidated income before tax
|
32 | % | 49 | % | 28 | % | ||||||||||
The Group also has other companies in Spain’s banking
sector, insurance sector, real estate sector and service and
operating lease companies.
–
Rest of Europe
The BBVA Group is present in the United Kingdom, France,
Belgium, Germany, Italy, Portugal, Ireland and Switzerland.
F-42
Table of Contents
–
Mexico
The Group’s presence in Mexico since 1995. It operates
mainly through Grupo Financiero BBVA Bancomer, both in the
banking sector through BBVA Bancomer, S.A. and in the insurance
and pensions business through Seguros Bancomer S.A. de C.V.,
Pensiones Bancomer S.A. de C.V. and Administradora de Fondos
para el Retiro Bancomer, S.A. de C.V.
–
The United States and Puerto Rico
In recent years, the Group has expanded its presence in the
United States through the acquisition of several financial
groups operating in various southern states. In 2007 the Group
acquired Compass Bancshares Inc. and State National Bancshares
Inc., taking control of these entities and the companies in
their groups. The merger between the three banks based in Texas
owned by the Bank (Laredo National Bank, Inc., Texas National
Bank, and State National Bank) and Compass Bank, Inc. took place
in 2008.
In 2009, through its subsidiary BBVA Compass, the Group acquired
certain assets and liabilities of Guaranty Bank, Inc.
(hereinafter, “Guaranty Bank”) from the Federal
Deposit Insurance Corporation (hereinafter, “FDIC”).
The BBVA group also has a significant presence in Puerto Rico
through its subsidiary BBVA Puerto Rico, S.A.
–
Latin America
The Group’s activity in Latin America is mainly focused on
the banking, insurance and pensions sectors, in the following
countries: Chile, Venezuela, Colombia, Peru, Argentina, Panama,
Paraguay and Uruguay. It is also active in Bolivia and Ecuador
in the pensions sector.
The Group owns more than 50% of some of the companies in these
countries. Appendix II shows a list of the companies which,
although less than 50% owned by the BBVA Group, as of
December 31, 2010, are fully consolidated at this date as a
result of agreements between the Group and the other
shareholders giving the Group effective control of these
entities (see Note 2.1).
–
Asia
The Group’s activity in Asia is carried out through
operational branches (in Tokyo, Hong Kong and Singapore) and
representative offices (in Beijing, Shanghai, Seoul, Mumbai and
Taipei). The BBVA Group also has several agreements with the
CITIC Group (CITIC) for a strategic alliance in the Chinese
market (see Note 17). The investment in the CITIC Group
includes the investment in Citic International Financial
Holdings Limited (“CIFH”) and China National Citic
Bank (“CNCB”).
Changes
in the Group
The principal noteworthy acquisitions and sales of subsidiaries
and associate entities in 2010, 2009 and 2008 were as follows:
In
2010
•
Purchase of an additional 4.93% of the share capital of
CNCB
On April 1, 2010, after obtaining the corresponding
authorizations, the purchase of an additional 4.93% of
CNCB’s capital was finalized for €1,197 million.
As of December 31, 2010, BBVA had a 29.68% holding in CIFH
and 15% in CNCB.
•
Purchase of Credit Uruguay Banco
In May 2010, the Group announced that it has reached an
agreement to acquire, through its subsidiary BBVA Uruguay, the
Credit Uruguay Banco, from a French financial group. On
January 18, 2011, after obtaining the corresponding
authorizations, the purchase of Credit Uruguay Banco was
completed for approximately €78 million.
F-43
Table of Contents
•
Agreement for the acquisition of a holding in the bank
Garanti
In November 2010, BBVA signed an agreement with the primary
shareholders of the Turkish bank, Turkiye Garanti Bankasi, AS
(hereinafter, “Garanti Bank”): the Turkish group Dogus
and the General Electric group for the acquisition of a 24.89%
holding of the common stock of Garanti Bank, for a total price
of $5,838 million, which is equivalent to a payment of
approximately €4,195 million (*).
The agreement with the Dogus group includes an agreement for the
joint management of the bank and the appointment of some of the
members of its board of directors. In addition, BBVA has the
option of purchasing an additional 1% of Garanti Bank five years
after the initial purchase. At the date these annual
consolidated financial statements were prepared, this
transaction was subject to the pertinent authorizations of the
competent bodies.
In
2009
•
Purchase of assets and liabilities of Guaranty Bank
On August 21, 2009, through its subsidiary BBVA Compass,
the Group acquired certain Guaranty Bank assets and liabilities
from FDIC through a public auction for qualified investors.
BBVA Compass acquired assets, mostly loans, for approximately
$11,441 million (approximately €8,016 million)
and assumed liabilities, mostly customer deposits, for
$12,854 million (approximately €9,006 million).
These acquired assets and liabilities represented 1.5% and 1.8%
of the Group’s total assets and liabilities, respectively,
on the acquisition date.
In addition, the purchase included a loss-sharing agreement with
the U.S. supervisory body FDIC under which the latter
undertook to assume 80% of the losses of the loans purchased by
the BBVA Group up to the first $2,285 million, and up to
95% of the losses if they exceeded this amount. This commitment
has a maximum term of 5 or 10 years, based on the
portfolios.
•
Takeovers of Banco de Crédito Local de España, S.A.
and BBVA Factoring E.F.C., S.A.
The Directors of the subsidiaries Banco de Crédito Local de
España, S.A. (Unipersonal), and BBVA Factoring E.F.C., S.A.
(Unipersonal), in meetings of their respective boards of
directors held on January 26, 2009, and of Banco Bilbao
Vizcaya Argentaria, S.A. in its board of directors meeting held
on January 27, 2009, approved respective projects for the
takeover of both companies by BBVA and the subsequent transfer
of all their equity interest to BBVA, which acquired all the
rights and obligations of the companies it had purchased through
universal succession.
The merger agreement was submitted for approval at the general
meetings of the shareholders and sole shareholder of the
companies involved.
Both takeovers were entered into the Companies Register on
June 5, 2009, and thus on this date the companies acquired
were dissolved, although for accounting purposes the takeover
was carried out on January 1, 2009.
In
2008
There were no significant changes in the Group in 2008, except
the above mentioned merger of three banks in Texas (Laredo
National Bank, Inc., Texas National Bank, Inc., and State
National Bank, Inc.) with Compass Bank, Inc., and the increase
of ownership interest in the CITIC Group (see Note 17).
| 4. | APPLICATION OF EARNINGS |
In 2010, the Board of Directors of Banco Bilbao Vizcaya
Argentaria, S.A. resolved to distribute the first, second and
third amounts against the 2010 dividends of the income,
amounting to a total of €0.270 gross per share. The
aggregate amount of the interim dividends declared as of
December 31, 2010, net of the amount collected by the Group
companies, was €1,067 million and was recognized under
the heading “Stockholders’ funds —
(*) Calculated at the exchange rate as of October 29,
2010 at $/€ = 1.3916.
F-44
Table of Contents
Dividends and remuneration” in the accompanying
consolidated balance sheet. The provisional financial statements
prepared in 2010 by Banco Bilbao Vizcaya Argentaria, S.A. in
accordance with legal requirements evidencing the existence of
sufficient liquidity for the distribution of the amounts to the
interim dividend were as follows:
|
31-05-2010
|
31-08-2010
|
30-11-2010
|
||||||||||
|
Available Amount for Interim Dividend Payments
|
First | Second | Third | |||||||||
| Millions of euros | ||||||||||||
|
Profit at each of the dates indicated, after the provision for
income tax
|
1,432 | 3,072 | 3,088 | |||||||||
|
Less —
|
||||||||||||
|
Estimated provision for Legal Reserve
|
— | — | 73 | |||||||||
|
Interim dividends paid
|
— | 337 | 675 | |||||||||
|
Maximum amount distributable
|
1,432 | 2,735 | 2,340 | |||||||||
|
Amount of proposed interim dividend
|
337 | 337 | 404 | |||||||||
The application of earnings during 2010 was as follows:
|
Millions of
|
||||
|
Application of Earnings 2010
|
euros | |||
|
Net income for year of 2010(*)
|
2,904 | |||
|
Distribution:
|
||||
|
Dividends
|
1,079 | |||
|
Legal reserve
|
73 | |||
|
Voluntary reserves
|
1,752 | |||
| (*) | Net income of BBVA, S.A. (Apendix I) |
The dividends per share in 2010 were as follows:
|
First
|
Second
|
Third
|
||||||||||||||
|
Dividends per Share
|
Interim | Interim | Interim | Total | ||||||||||||
| Euros per share | ||||||||||||||||
|
2010
|
0.090 | 0.090 | 0.090 | 0.270 | ||||||||||||
The dividends paid per share in 2010 and 2009 were as follows:
| 2010 | 2009 | |||||||||||||||||||||||
|
Euros
|
Amount
|
Euros
|
Amount
|
|||||||||||||||||||||
|
% Over
|
per
|
(Millions of
|
% Over
|
Per
|
(Millions of
|
|||||||||||||||||||
|
Dividends Paid (*)
|
Nominal | Share | Euros) | Nominal | Share | Euros) | ||||||||||||||||||
|
Ordinary shares
|
67 | % | 0.330 | 1,237 | 86 | % | 0.420 | 1,574 | ||||||||||||||||
|
Rest of shares
|
— | — | — | — | — | — | ||||||||||||||||||
|
Total dividends paid
|
67 | % | 0.330 | 1,237 | 86 | % | 0.420 | 1,574 | ||||||||||||||||
|
Dividends with charge to income
|
67 | % | 0.330 | 1,237 | 86 | % | 0.420 | 1,574 | ||||||||||||||||
|
Dividends with charge to reserve or share premium
|
— | — | — | — | — | — | ||||||||||||||||||
|
Dividends in kind
|
— | — | — | — | — | — | ||||||||||||||||||
| (*) | The total dividens paid under the cash-flows criteria, are the total amount paid in cash each year to shareholders, regardless of the year there were accued. |
F-45
Table of Contents
New
scheme for payment to shareholders
At the Ordinary General Meeting of Shareholders, the Board of
Directors will propose two capital increases under the heading
of voluntary reserves within the framework of the new scheme of
payment to shareholders (“Dividend Option”).
The “Dividend Option” scheme enables shareholders to
choose between different alternatives for their remuneration:
either receiving shares issued through an increase in released
capital or in cash by selling the rights assigned in said
increase.
This new scheme presents the opportunity for the shareholder to
choose to perceive the entirety of his payment in cash or in new
issued shares, while the Group continues to respects the terms
of payment to shareholders. In this regard, the first of these
payments under Dividend Option is expected to occur in April
2011, to substitute the traditional final dividend, for which an
increase in released capital is planned for an approximate
amount of €690 million.
| 5. | EARNINGS PER SHARE |
Basic and diluted earnings per share are calculated according to
the criteria established by IAS 33:
| • | Basic earnings per share are determined by dividing the “Net income attributed to parent company” by the weighted average number of shares outstanding, excluding the average number of treasury stocks maintained throughout the year. | |
| • | Diluted earnings per share is calculated by using a method similar to that used to calculate basic earnings per share; the weighted average number of shares outstanding, and the net income attributed to the parent company if appropriate, is adjusted to take into account the potential dilutive effect of certain financial instruments that could generate the issue of new Bank shares (share option commitments with employees, warrants on parent company shares, convertible debt instruments) or for discontinued operations. |
Two transactions were carried out in 2010 and 2009 that affect
the calculation of basic and diluted earnings per share:
| • | In 2010 the Bank has carried out a capital increase with the pre-emptive subscription right for former shareholders (see Note 27). According to IAS 33, the calculation of the basic and diluted earnings per share should be adjusted retrospectively for all years before the issue by using a corrective factor that will be applied to the denominator (a weighted average number of shares outstanding). Said corrective factor is the result of dividing the fair value per share immediately before the exercise of rights by the theoretical ex-rights fair value per share. For these purposes the basic and diluted earnings per share have been recalculated for 2009 and 2008 from the following table. | |
| • | In 2009, the Bank issued subordinated convertible bonds amounting to €2,000 million (see Note 23.4). Since the conversion is mandatory on the date of their final maturity, in accordance with the IAS 33 criteria, the following adjustments must be applied to both the calculation of the diluted earnings per share as well as the basic earnings per share. |
| • | In the numerator, the net income attributed to the parent company is increased by the amount of the annual coupon of the subordinated convertible bond. | |
| • | In the denominator, the weighted average number of shares outstanding is increased by the estimated number of shares after the conversion if done that day. |
F-46
Table of Contents
As a result, as can be seen in the following table, for 2010,
2009 and 2008 the amount of the basic earnings per share and
diluted earnings per share coincide, as since the diluting
effect of the conversion is mandatory, it should also be applied
to the calculation of the basic earnings per share.
The calculation of earnings per share in 2010, 2009 and 2008 is
as follows:
|
Basic and Diluted Earnings per Share
|
2010 | 2009 | 2008 | |||||||||
|
Numerator for basic and diluted earnigs per share (million of
euros)
|
||||||||||||
|
Net income attributed to parent company
|
4,606 | 4,210 | 5,020 | |||||||||
|
+ADJUSTMENT: Mandatory convertible bonds interest expenses
|
70 | 18 | — | |||||||||
|
Net income adjusted (millions of euros)(A)
|
4,676 | 4,228 | 5,020 | |||||||||
|
Denominator for basic earnings per share (number of shares
outstanding)
|
||||||||||||
|
Weighted average number of shares outstanding(1)
|
3,762 | 3,719 | 3,706 | |||||||||
|
Weighted average number of shares outstanding x corrective
factor(2)
|
— | 3,860 | 3,846 | |||||||||
|
+ADJUSTMENT: Average number of estimated shares to be converted
|
221 | 39 | — | |||||||||
|
Adjusted number of shares(B)
|
3,983 | 3,899 | 3,846 | |||||||||
|
Basic earnings per share (Euros per share)A/B
|
1.17 | 1.08 | 1.31 | |||||||||
|
Diluted earnings per share (Euros per share)A/B
|
1.17 | 1.08 | 1.31 | |||||||||
| (1) | Weighted average number of shares outstanding (millions of euros), excluded weighted average of treasury shares during the period | |
| (2) | Corrective factor, due to the capital increase with pre-emptive subscription right, applied for the previous years. |
As of December 31, 2010, 2009 and 2008, except for the
aforementioned convertible bonds, there were no other financial
instruments, share option commitments with employees or
discontinued transactions that could potentially affect the
calculation of the diluted earnings per share for the years
presented.
| 6. | BASIS AND METHODOLOGY FOR SEGMENT REPORTING |
Segment reporting represents a basic tool in the oversight and
management of the Group’s various businesses. The Group
compiles reporting information on as disaggregated a level as
possible, and all data relating to the businesses these units
manage is recognized in full. These disaggregated units are then
amalgamated in accordance with the organizational structure
preordained by the Group into higher level units and,
ultimately, the business segments themselves. Similarly, all the
companies making up the Group are also assigned to the different
segments according to their activity.
Once the composition of each business segment has been defined,
certain management criteria are applied, noteworthy among which
are the following:
| • | Economic capital: Capital is allocated to each business based on capital at risk (CaR) criteria, in turn predicated on unexpected loss at a specific confidence level, determined as a function of the Group’s target capital ratio. This target level is applied at two levels: the first is adjusted core capital, which determines the allocated capital. The Bank uses this amount as a basis for calculating the return generated on the equity in each business (ROE). The second level is total capital, which determines the additional allocation in terms of subordinate debt and preferred securities. The calculation of the CaR combines credit risk, market risk, structural risk associated with the balance sheet equity positions, operational risk, fixed assets risks and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel II Capital Accord, with economic criteria prevailing over regulatory ones. |
F-47
Table of Contents
Due to its sensitivity to risk, CaR is an element linked to
management policies of the businesses themselves. It
standardizes capital allocation between them in accordance with
the risks incurred and makes it easier to compare profitability.
In other words, it is calculated in a way that is standard and
integrated for all kinds of risks and for each operation,
balance or risk position, allowing its risk-adjusted return to
be assessed and an aggregate to be calculated for the return by
client, product, segment, unit or business area.
| • | Internal transfer prices: The calculation of the net interest income of each business is performed using rates adjusted for the maturities and rate reset clauses in effect on the various assets and liabilities making up each unit’s balance sheet. The allocation of profits across business units is performed at market prices. | |
| • | Allocation of operating expenses: Both direct and indirect expenses are allocated to the segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate/institutional expenses incurred on behalf of the overall Group. In this regard, we should note that the primary change in criteria during 2010 related to the assignment of expenses refers to the allocation of rent expenses in Spain and Portugal. This was formerly carried out based on a percentage over the book value of the real estate property and based on the area occupied. As of 2010, this allocation will be carried out at market value. | |
| • | Cross selling: On certain occasions, consolidation adjustments are made to eliminate overlap accounted for in the results of one or more units as result of cross-selling focus. |
Description
of the Group’s business segments
The business areas described below are considered the
Group’s business segments. The composition of the
Group’s business areas as of 31 December 2010 was as
follows:
| • | Spain and Portugal: This area handles the financial and non-financial needs of private individual customers (Retail Network), including the higher net-worth market segment (BBVA Banca Privada, private banking), as well as the business segment (professionals, the self-employed, retailers, the farming community and SMEs) in the Spanish market. It also manages business with SMEs, corporations and public and private institutions and developers in Spain through the Corporate and Business Banking unit (“CBB”). Other specialized units handle online banking, consumer finance (the Consumer Finance Unit), the bancassurance business (BBVA Seguros) and BBVA Portugal. | |
| • | Mexico: Includes the banking, pensions and insurance businesses in the country. | |
| • | United States: encompasses the Group’s business in the United States and in the Commonwealth of Puerto Rico. | |
| • | South America: Includes the banking, pensions and insurance businesses in South America. | |
| • | Wholesale Banking and Asset Management (WB&AM): handles the Group’s wholesale businesses and asset management in all the geographical areas where it operates. For the purposes of this financial report, the business and earnings of the units in the Americas are registered in their respective areas (Mexico, South America and the United States). WB&AM is organized around three main business units: Corporate and Investment Banking (“C&IB”), Global Markets (“GM”) and Asset Management (“AM”). It also includes the Industrial and Real Estate Holdings unit and the Group’s holdings in the CITIC financial group. |
C&IB coordinates the origination, distribution and
management of a complete catalogue of corporate and investment
banking products (corporate finance, structured finance,
structured trade finance, equity capital markets and debt
capital markets), and global transactional services. Large
corporate customers are offered a specialized coverage by sector
(industry bankers).
This unit handles the origination, structuring, distribution and
risk management of market products, which are traded through
several markets.
Asset Management is BBVA’s provider of asset management
solutions. It designs and manages mutual funds, pension funds
and the third-party fund platform Quality Funds. The unit has
solutions tailored for each customer segment, based on constant
product innovation as the key to success.
F-48
Table of Contents
Industrial and Real Estate Holdings diversifies the area by
developing long-maturing projects that create value in the
medium and long-term through the active management of industrial
equity holdings and real estate projects (Duch).
As well as the areas indicated, all the areas also have
allocations of other businesses that include eliminations and
other items not assigned to the units.
Finally, the Corporate Activities unit includes all the business
not included in the business areas. Basically, this segment
records the costs from head offices with a strictly corporate
function and makes allocations to corporate and miscellaneous
provisions, such as early retirement. It also includes the
Financial Management unit, which performs management functions
for the Group as a whole, essentially management of asset and
liability positions in euro-denominated interest rates and in
exchange rates, as well as liquidity and capital management
functions. The management of asset and liability interest-rate
risks in currencies other than the euro is recognized in the
corresponding business areas. It also includes the Industrial
and Financial Holdings unit and the Group’s
non-international real estate businesses.
In 2010, certain changes were made in the criteria applied in
2009 in terms of the composition of some of the different
business areas, such as:
| • | United States and WB&AM: In order to give a global view of the Group’s business in the United States, we decided to include the New York branch, formerly in WB&AM, in the United States area. This change is consistent with BBVA’s current method of reporting its business units. | |
| • | South America: The adjustment for the hyperinflation is included in 2010 in the accounting statements for Banco Provincial (Venezuela); this will also be carried out for the 2009 statements to make them comparable. At the close of 2009, when the Venezuelan economy was for the first time considered hyperinflationary for accounting purposes, this impact was registered in Corporate Activities, with the aim of making comparison with 2008 easier and in order not to distort the quarterly series for 2009 itself. |
Likewise, a modification has been made in the allocation of
certain costs from the corporate headquarters to the business
areas that affect rent expenses and sales of IT services, though
to a lesser extent. This has meant that the data for 2009 and
2008 has been reworked to ensure that the different years are
comparable
The total breakdown of the Group’s assets by business areas
as of December 31, 2010, 2009 and 2008 was as follows:
|
Total Assets by Bussiness Areas
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Spain and Portugal
|
217,191 | 215,823 | 220,464 | |||||||||
|
Mexico
|
75,152 | 62,855 | 60,774 | |||||||||
|
South America
|
51,663 | 44,378 | 41,600 | |||||||||
|
The United States
|
57,613 | 77,896 | 74,124 | |||||||||
|
WB&AM
|
121,522 | 106,563 | 124,058 | |||||||||
|
Corporate Activities
|
29,597 | 27,550 | 21,630 | |||||||||
|
Total
|
552,738 | 535,065 | 542,650 | |||||||||
F-49
Table of Contents
The detail of the consolidated net income for the years 2010,
2009 and 2008 for each business area was as follows:
|
Net Income attributed by Bussiness Areas
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Spain and Portugal
|
2,070 | 2,275 | 2,473 | |||||||||
|
Mexico
|
1,707 | 1,357 | 1,930 | |||||||||
|
South America
|
889 | 780 | 727 | |||||||||
|
The United States
|
236 | (950 | ) | 308 | ||||||||
|
WB&AM
|
950 | 853 | 722 | |||||||||
|
Corporate Activities
|
(1,246 | ) | (105 | ) | (1,140 | ) | ||||||
|
Subtotal
|
4,606 | 4,210 | 5,020 | |||||||||
|
Non-assigned income
|
— | — | — | |||||||||
|
Elimination of interim income (between segments)
|
— | — | — | |||||||||
|
Other gains (losses)
|
389 | 385 | 365 | |||||||||
|
Income tax and/or income from discontinued operations
|
1,427 | 1,141 | 1,541 | |||||||||
|
INCOME BEFORE TAX
|
6,422 | 5,736 | 6,926 | |||||||||
For the years 2010, 2009 and 2008 the detail of the ordinary
income for each operating segment, which is made up of the
“Interest and similar income”, “Dividend
income”, “Fee and commission income”, “Net
gains (losses) on financial assets and liabilities” and
“Other operating income”, is as follows:
|
Total Ordinary Income by Bussiness Areas
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Spain and Portugal
|
10,151 | 10,974 | 12,787 | |||||||||
|
Mexico
|
8,271 | 7,669 | 9,166 | |||||||||
|
South America
|
5,684 | 5,755 | 5,970 | |||||||||
|
The United States
|
3,067 | 3,191 | 3,932 | |||||||||
|
WB&AM
|
1,987 | 2,887 | 4,739 | |||||||||
|
Corporate Activities
|
2,869 | 3,339 | 4,683 | |||||||||
|
Adjustments and eliminations of ordinary income between segments
|
— | — | — | |||||||||
|
TOTAL
|
32,029 | 33,815 | 41,277 | |||||||||
| 7. | RISK EXPOSURE |
Dealing in financial instruments can entail the assumption or
transfer of one or more classes of risk by financial
institutions. The risks related to financial instruments are:
| • | Credit risk: Credit risk defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. | |
| • | Market risks: These are defined as the risks arising from the maintenance of financial instruments whose value may be affected by changes in market conditions. It includes three types of risk: |
| • | Foreign-exchange risk: this is the risk resulting from variations in foreign exchange rates. | |
| • | Interest rate risk: this arises from variations in market interest rates. | |
| • | Price risk: This is the risk resulting from variations in market prices, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on the market. | |
| • | Liquidity risk: This is the possibility that a company cannot meet its payment commitments duly, or, to do so, must resort to borrowing funds under onerous conditions, or risking its image and the reputation of the entity. |
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Principles
and policies
The general guiding principles followed by the BBVA Group to
define and monitor its risk profile are set out below:
| • | The risk management function is unique, independent and global. | |
| • | The assumed risks must be compatible with the target capital adequacy and must be identified, measured and assessed. Monitoring and management procedures and sound control and mitigation systems must likewise be in place. | |
| • | All risks must be managed integrally during their life cycle, being treated differently depending on their type and with active portfolio management based on a common measurement (economic capital). | |
| • | It is each business area’s responsibility to propose and maintain its own risk profile, within their independence in the corporate action framework (defined as the set of risk policies and procedures), using a proper risk infrastructure. | |
| • | The risk infrastructure must be suitable in terms of people, tools, databases, information systems and procedures so that there is a clear definition of roles and responsibilities, ensuring efficient assignment of resources among the corporate area and the risk units in business areas. |
Building on these principles, the Group has developed an
integrated risk management system that is structured around
three main components: (i) a corporate risk governance
regime, with adequate segregation of duties and responsibilities
(ii) a set of tools, circuits and procedures that
constitute the various different risk management regimes, and
(iii) an internal control system.
C
orporate
governance system
The Group has a corporate governance system which is in keeping
with international recommendations and trends, adapted to
requirements set by regulators in each country and to the most
advanced practices in the markets in which it pursues its
business.
In the field of risks the Board of Directors is responsible for
establishing the general principles that define the
Institution’s risk objectives, approving the risk control
and management policy and the regular monitoring of the internal
systems of information and control.
To perform this function correctly the board is supported by the
Executive Committee and a Risk Committee, the main mission of
the latter being to assist the board in undertaking its
functions associated with risk control and management.
Under Article 36 of the Board Regulations, the Risk
Committee is assigned the following functions for these purposes:
| • | To analyze and evaluate proposals related to the Group’s risk management and oversight policies and strategies. |
| • | To monitor the match between risks accepted and the profile established. | |
| • | To assess and approve, where applicable, any risks whose size could compromise the Group’s capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks. | |
| • | To check that the Group possesses the means, systems, structures and resources in accordance with best practices to allow the implementation of its risk management strategy. |
The risk management function is distributed into the Risk Units
of the business areas and the Corporate Area, which defines the
policy, strategies, methodologies and global infrastructure. The
risk units in the business areas propose and maintain the risk
profile of each client independently, but within the corporate
framework for action.
The Corporate Risk Area combines the view by risk type with a
global view. It is made up of the Corporate Risk Management
unit, which covers the different types of risk, the Technical
Secretary responsible for technical comparison, which works
alongside the transversal units: such as Structural
Management & Asset Allocation, Risk
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Assessment Methodologies and Technology, and Validation and
Control, which include internal control and operational risks.
Using this structure, the risk management system insures the
following: first, the integration, control and management of all
the Group’s risks; second, the application of standardized
risk principles, policies and metrics throughout the entire
Group; and third, the necessary insight into each geographical
region and each business.
This organizational scheme is complemented by different
committees, which include the following:
| • | The Global Asset Allocation Committee is made up of the Group’s President and COO, the financial director, the corporate strategy and development director and the Global Risk Management director. This committee plans the process of risk acceptance by proposing an objective risk objective, which is submitted to the Board’s Risk Committee. | |
| • | The task of the Global Internal Control and Operational Risk Committee is to undertake a review at the level of the Group and of each of its units, of the control environment and the running of the Internal Control and Operational Risk Models, and likewise to monitor and locate the main operational risks the Group is subject to, including those that are transversal in nature. This Committee is therefore the highest operational risk management body in the Group. | |
| • | This Risk Management Committee is made up of the risk managers from the Risk Units from the business areas and those of the Corporate Risk Area. This body meets monthly and is responsible for establishing the Group’s risk strategy (especially as regards policies and structure of the operation of the Group), presenting the risk strategy to the Group’s governing bodies for their approval, monitoring the management and control of risks in the Group and, if necessary, adopting the necessary actions. | |
| • | The Global Risk Management Committee is made up of the corporate directors of the Group’s risk unit and those responsible for risks in the different countries. The Committee meets every week to review the Group’s risk strategy, and review and agree on the main risk projects and initiatives in the business areas. | |
| • | The Risk Management Committee is made up of the following permanent members: the Global Risk Management director, the Corporate Risk Management director and the Technical Secretary. The rest of the committee members deal with the operations that have to be analyzed in each of its sessions. The members analyze and decide on those financial programs and operations that are within its remit and discuss those that are not, and if necessary transfer them for approval to the Risk Committee. | |
| • | The Assets and Liabilities Committee (“ALCO”) is responsible for actively managing structural interest rate and foreign exchange risk positions, global liquidity and the Group’s capital resources. | |
| • | The Technology and Methodologies Committee is a forum that decides on the hedging needs of models and infrastructures in the Business Areas within the framework of the operational model of Global Risk Management. | |
| • | The functions of the New Products Committee are to assess, and if appropriate to approve, the introduction of new products before the start of activity; to undertake subsequent control and monitoring for newly authorized products; and to foster business in an orderly way to enable it to develop in a controlled environment. |
T
ools,
circuits and procedures
The Group has implemented an integral risk management system
designed to cater for the needs arising in relation to the
various types of risk. This has prompted it to equip the
management processes for each risk with measurement tools for
risk acceptance, assessment and monitoring and to define the
appropriate circuits and procedures, which are reflected in
manuals that also include management criteria.
Specifically, the Group’s risk management main activities
are as follows: calculation of the risk exposures of the various
portfolios, considering any related mitigating factors (netting,
collateral, etc.); calculation of the probability of default (
“PD”), loss severity and expected loss of each
portfolio, and assignment of the PD to the new transactions
(ratings and scorings);
values-at-risk
measurement of the portfolios based on various scenarios using
F-52
Table of Contents
historical simulations; establishment of limits to the potential
losses based on the various risks incurred; determination of the
possible impacts of the structural risks on the income
statement; setting of limits and alerts to safeguard the
Group’s liquidity; identification and quantification of
operational risks by business line to enable the mitigation of
these risks through corrective measures; and definition of
efficient circuits and procedures which contribute to the
efficient achievement of the targets set.
I
nternal
control model
The Group’s Internal Control Model is based on the best
practices described in the following documents:
“
Enterprise Risk Management
—
Integrated Framework
” by the COSO
(
Committee of Sponsoring Organizations of the Treadway
Commission
) and “
Framework for Internal Control
Systems in Banking Organizations
” by the Bank for
International Settlements (BIS).
The Internal Control Model therefore comes within the Integral
Risk Management Framework. Said framework is understood as the
process within an organization involving its board of directors,
its management and all its staff, which is designed to identify
potential risks facing the institution and which enables them to
be managed within the limits defined, in such a way as to
reasonably assure that the organization meets its business
targets.
This Integral Risk Management Framework is made up of
Specialized Units (Risks, Compliance, Accounting and
Consolidation, Legal Services), the Internal Control Function
and Operational Risk and Internal Audit.
The Internal Control Model is underpinned by, amongst others,
the following principles:
| • | The “process” is the articulating axis of the Internal Control Model. | |
| • | Risk identification, assessment and mitigation activities must be unique for each process. | |
| • | It is the Group’s units that are responsible for internal control. | |
| • | The systems, tools and information flows that support internal control and operational risk activities must be unique or, in any event, they must be wholly administered by a single unit. | |
| • | The specialized units promote policies and draw up internal regulations, the second-level development and application of which is the responsibility of the Corporate Internal Control and Operational Risk Unit. |
One of the essential elements in the model is the
Institution-level Controls, a top-level control layer, the
aim of which is to reduce the overall risk inherent in its
business activities.
Each unit’s Internal Control and Operational Risk
Management is responsible for implementing the control model
within its scope of responsibility and managing the existing
risk by proposing improvements to processes.
Given that some units have a global scope of responsibility,
there are transversal control functions which supplement the
previously mentioned control mechanisms.
Lastly, the Internal Control and Operational Risk Committee in
each unit is responsible for approving suitable mitigation plans
for each existing risk or shortfall. This committee structure
culminates at the Group’s Global Internal Control and
Operational Risk Committee.
Risk
concentration
In the trading area, limits are approved each year by the
Board’s Risk Committee on exposures to trading, structural
interest rate, structural currency, equity and liquidity risk at
the banking entities and in the asset management, pension and
insurance businesses. These limits factor in many variables,
including economic capital and earnings volatility criteria, and
are reinforced with alert triggers and a stop-loss scheme.
In relation to credit risk, maximum exposure limits are set by
customer and country; generic limits are also set for maximum
exposure to specific deals and products. Upper limits are
allocated based on iso-risk curves, determined as the sum of
expected losses and economic capital, and its ratings-based
equivalence in terms of gross nominal exposure.
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Table of Contents
There is also an additional guideline in terms of oversight of
maximum risk concentration up to and at the level of 10% of
equity: stringent requirements in terms of in-depth knowledge of
the counterparty, its operating markets and sectors.
For retail portfolios, potential concentrations of risk are
analyzed by geographical area or by certain specific risk
profiles in relation to overall risk and earnings volatility;
where appropriate, the opportune measures are taken, imposing
cut-offs using scoring tools, via recovery management and
mitigating exposure using pricing strategy, among other
approaches.
7.1
CREDIT RISK
Credit risk is defined as the risk that one party to a financial
instrument will cause a financial loss for the other party by
failing to discharge a contractual obligation due to the
insolvency or incapacity of the natural or legal persons
involved.
F-54
Table of Contents
Maximum
credit risk exposure
The Group’s maximum credit risk exposure as of
December 31, 2010, 2009 and 2008, without recognizing the
availability of collateral or other credit enhancements to
guarantee compliance, is broken down by financial instrument and
counterparties in the table below:
|
Maximum Credit Risk Exposure
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Financial assets held for trading
|
10 | 24,358 | 34,672 | 26,556 | ||||||||||||
|
Debt securities
|
24,358 | 34,672 | 26,556 | |||||||||||||
|
Government
|
20,397 | 31,290 | 20,778 | |||||||||||||
|
Credit institutions
|
2,274 | 1,384 | 2,825 | |||||||||||||
|
Other sectors
|
1,687 | 1,998 | 2,953 | |||||||||||||
|
Other financial assets designated at fair value through
profit or loss
|
11 | 691 | 639 | 516 | ||||||||||||
|
Debt securities
|
691 | 639 | 516 | |||||||||||||
|
Government
|
70 | 60 | 38 | |||||||||||||
|
Credit institutions
|
87 | 83 | 24 | |||||||||||||
|
Other sectors
|
534 | 496 | 454 | |||||||||||||
|
Available-for-sale
financial assets
|
12 | 50,602 | 57,067 | 39,961 | ||||||||||||
|
Debt securities
|
50,602 | 57,067 | 39,961 | |||||||||||||
|
Government
|
33,074 | 38,345 | 19,576 | |||||||||||||
|
Credit institutions
|
11,235 | 12,646 | 13,377 | |||||||||||||
|
Other sectors
|
6,293 | 6,076 | 7,008 | |||||||||||||
|
Loans and receivables
|
13 | 373,037 | 353,741 | 375,387 | ||||||||||||
|
Loans and advances to credit institutions
|
23,604 | 22,200 | 33,679 | |||||||||||||
|
Loans and advances to customers
|
347,210 | 331,087 | 341,322 | |||||||||||||
|
Government
|
31,224 | 26,219 | 22,503 | |||||||||||||
|
Agriculture
|
3,977 | 3,924 | 4,109 | |||||||||||||
|
Industry
|
36,578 | 42,799 | 46,576 | |||||||||||||
|
Real estate and construction
|
55,854 | 55,766 | 54,522 | |||||||||||||
|
Trade and finance
|
45,689 | 40,714 | 44,885 | |||||||||||||
|
Loans to individuals
|
135,868 | 126,488 | 127,890 | |||||||||||||
|
Finance leases
|
8,141 | 8,222 | 9,385 | |||||||||||||
|
Other
|
29,879 | 26,955 | 31,452 | |||||||||||||
|
Debt securities
|
2,223 | 454 | 386 | |||||||||||||
|
Government
|
2,040 | 342 | 290 | |||||||||||||
|
Credit institutions
|
6 | 4 | 4 | |||||||||||||
|
Other sectors
|
177 | 108 | 92 | |||||||||||||
|
Held-to-maturity
investments
|
14 | 9,946 | 5,438 | 5,285 | ||||||||||||
|
Government
|
8,792 | 4,064 | 3,844 | |||||||||||||
|
Credit institutions
|
552 | 754 | 800 | |||||||||||||
|
Other sectors
|
602 | 620 | 641 | |||||||||||||
|
Derivatives (trading and hedging)
|
10-15 | 44,762 | 42,836 | 46,887 | ||||||||||||
|
Subtotal
|
503,396 | 494,393 | 494,591 | |||||||||||||
|
Valuation adjustments
|
299 | 436 | 942 | |||||||||||||
|
Total balance
|
503,695 | 494,829 | 495,533 | |||||||||||||
|
Financial guarantees
|
36,441 | 33,185 | 35,952 | |||||||||||||
|
Drawable by third parties
|
86,790 | 84,925 | 92,663 | |||||||||||||
|
Government
|
4,135 | 4,567 | 4,221 | |||||||||||||
|
Credit institutions
|
2,303 | 2,257 | 2,021 | |||||||||||||
|
Other sectors
|
80,352 | 78,101 | 86,421 | |||||||||||||
|
Other contingent exposures
|
3,784 | 7,398 | 6,234 | |||||||||||||
|
Total off-balance
|
34 | 127,015 | 125,508 | 134,849 | ||||||||||||
|
Total maximum credit exposure
|
630,710 | 620,337 | 630,382 | |||||||||||||
For financial assets recognized in the accompanying consolidated
balance sheets, credit risk exposure is equal to the carrying
amount, except for trading and hedging derivatives. The maximum
exposure to credit risk on financial guarantees is the maximum
that BBVA would be liable for if these guarantees were called in.
For trading and hedging derivatives, this information reflects
the maximum credit risk exposure better than the amount shown on
the balance sheet because it does not only include the market
value on the date of the transactions
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Table of Contents
(the carrying amount only shows this figure); it also estimates
the potential risk of these transactions on their due date.
Regarding the renegotiated financial assets as of
December 31, 2010, the BBVA Group did not perform any
renegotiations that resulted in the need to reclassify doubtful
risks as outstanding risks. The amount of financial assets that
would be irregular had their conditions not been renegotiated is
not significant with respect to the Group’s total loan
portfolio as of December 31, 2010.
Mitigation
of credit risk, collateral and other credit enhancements,
including risk hedging and mitigation policies
In most cases, maximum exposure to credit risk is reduced by
collateral, credit enhancements and other actions which mitigate
the Group’s exposure.
The Group applies a credit risk hedging and mitigation policy
deriving from a banking approach focused on relationship
banking. On this basis, the provision of guarantees is a
necessary but not sufficient instrument when taking risks;
therefore for the Group to assume risks, it needs to verify the
payment or resource generation capacity to ensure the
amortization of the risk incurred.
The above is carried out through a prudent risk management
policy which consists of analyzing the financial risk in a
transaction, based on the repayment or resource generation
capacity of the credit recipient, the provision of guarantees in
any of the generally accepted ways (cash collateral, pledged
assets, personal guarantees, covenants or hedges) appropriate to
the risk undertaken, and lastly on the recovery risk (the
asset’s liquidity).
The procedures for the management and valuation of collaterals
are set out in the internal Manual on Credit Risk Management
Policies, which the Group actively uses in the arrangement of
transactions and in the monitoring of both these and customers.
This Manual lays down the basic principles of credit risk
management, which includes the management of the collateral
assigned in transactions with customers. Accordingly, the risk
management model jointly values the existence of an adequate
cash flow generation by the obligor that enables him to service
the debt, together with the existence of suitable and sufficient
guarantees that ensure the recovery of the credit when the
obligor’s circumstances render him unable to meet their
obligations.
The procedures used for the valuation of the collateral are
consistent with the market’s best practices, which involve
the use of appraisal for real estate guarantees, market price
for shares, quoted value of shares in a mutual fund, etc.
All collaterals assigned are to be properly instrumented and
recognized in the corresponding register, as well as receive the
approval of the Group’s Legal Units.
The following is a description of the main collateral for each
financial instrument class:
| • | Financial assets held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument. In trading derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. | |
| • | Other financial assets designated at fair value through profit or loss: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. | |
| • | Available for sale financial assets: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. | |
| • | Loans and receivables: |
| • | Loans and advances to credit institutions: These have the counterparty’s personal guarantee. | |
| • | Total lending to customers: Most of these operations are backed by personal guarantees extended by the counterparty. The collateral received to secure loans and advances to other debtors includes mortgages, |
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Table of Contents
| cash guarantees and other collateral such as pledged securities. Other kinds of credit enhancements may be put in place such as guarantees. |
| • | Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. |
| • | Held-to-maturity investments: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. | |
| • | Hedging derivatives: Credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are settled at their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. | |
| • | Financial guarantees, other contingent exposures and drawable by third parties: These have the counterparty’s personal guarantee. |
The Group’s collateralized credit risk as of
December 31, 2010, 2009 and 2008, excluding balances deemed
impaired, is broken down in the table below:
|
Collateralized Credit Risk
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Mortgage loans
|
132,628 | 127,957 | 125,540 | |||||||||
|
Operating assets mortgage loans
|
3,638 | 4,050 | 3,896 | |||||||||
|
Home mortgages
|
108,224 | 99,493 | 96,772 | |||||||||
|
Rest of mortgages
|
20,766 | 24,414 | 24,872 | |||||||||
|
Secured loans, except mortgage
|
18,154 | 20,917 | 19,982 | |||||||||
|
Cash guarantees
|
281 | 231 | 250 | |||||||||
|
Secured loan (pledged securities)
|
563 | 692 | 458 | |||||||||
|
Rest of secured loans
|
17,310 | 19,994 | 19,274 | |||||||||
|
Total
|
150,782 | 148,874 | 145,522 | |||||||||
In addition, the derivatives carry contractual, legal
compensation rights that have effectively reduced credit risk by
€27,933 million as of December 31, 2010, by
€27,026 million as of December 31, 2009 and by
€29,377 million as of December 31, 2008.
As of December 31, 2010, specifically in relation to
mortgages, the average amount pending loan collection
represented 53,1% of the collateral pledged (54% as of
December 31, 2009 and 55% as of December 31, 2008).
Credit
quality of financial assets that are neither past due nor
impaired
BBVA has ratings tools that enable it to rank the credit quality
of its operations and customers based on a scoring system and to
map these ratings to probability of default (“PD”)
scales. To analyze the performance of PD, the Group has a series
of tracking tools and historical databases that house the
pertinent information generated internally.
The scoring tools vary by customer segment (companies, corporate
clients, SMEs, public authorities, etc.). Scoring is a decision
model that contributes to both the arrangement and management of
retail type loans: Consumer loans, mortgages, credit cards for
individuals, etc. Scoring is the tool used to decide to whom a
loan should be assigned, what amount should be assigned and what
strategies can help establish the price, because it is an
algorithm that sorts transactions in accordance with their
credit rating. The move towards advanced risk management makes
it possible to establish more proactive commercial relations
with customers. Proactive scoring establishes limits for
customers that are then used when granting transactions.
Rating tools, as opposed to scoring tools, do not assess
transactions but focus on customers instead: Companies,
corporate clients, SMEs, public authorities, etc. For wholesale
portfolios where the number of defaults is very low (sovereigns,
corporates, financial entities) the internal ratings models are
fleshed out by benchmarking the statistics maintained by
external rating agencies (Moody’s, Standard &
Poor’s and Fitch). To this end, each year the Bank compares
the PDs compiled by the agencies at each level of risk rating
and maps the measurements compiled by the various agencies to
the BBVA master rating scale.
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Table of Contents
Once the probability of default for the transactions or
customers has been determined, the so-called business cycle
adjustment starts. This involves generating a risk metric
outside the context estimate, seeking to gather information that
represents behavior for an entire economic cycle. This
probability is linked to the Group’s master rating scale.
BBVA maintains a master rating scale with a view to facilitating
the uniform classification of the Group’s various asset
risk portfolios. The table below shows the abridged scale which
groups outstanding risk into 17 categories as of
December 31, 2010:
| Probability of Default (Basic Points) | ||||||||||||
|
Internal Rating
|
Minimum from
|
|||||||||||
|
Reduced List (17 Groups)
|
Average | >= | Maximum | |||||||||
|
AAA
|
1 | — | 2 | |||||||||
|
AA+
|
2 | 2 | 3 | |||||||||
|
AA
|
3 | 3 | 4 | |||||||||
|
AA−
|
4 | 4 | 5 | |||||||||
|
A+
|
5 | 5 | 6 | |||||||||
|
A
|
8 | 6 | 9 | |||||||||
|
A−
|
10 | 9 | 11 | |||||||||
|
BBB+
|
14 | 11 | 17 | |||||||||
|
BBB
|
20 | 17 | 24 | |||||||||
|
BBB-
|
31 | 24 | 39 | |||||||||
|
BB+
|
51 | 39 | 67 | |||||||||
|
BB
|
88 | 67 | 116 | |||||||||
|
BB-
|
150 | 116 | 194 | |||||||||
|
B+
|
255 | 194 | 335 | |||||||||
|
B
|
441 | 335 | 581 | |||||||||
|
B−
|
785 | 581 | 1,061 | |||||||||
|
C
|
2,122 | 1,061 | 4,243 | |||||||||
The table below outlines the distribution of exposure including
derivatives by internal ratings, to financial entities and
public institutions (excluding sovereign risk), of the
Group’s main institutions as of December 31, 2010,
2009 and 2008:
|
Credit Risk Distribution by Internal Rating
|
2010 | 2009 | 2008 | |||||||||
|
AAA/AA+/AA/AA−
|
26.94 | % | 19.55 | % | 23.78 | % | ||||||
|
A+/A/A−
|
27.49 | % | 28.78 | % | 26.59 | % | ||||||
|
BBB+
|
9.22 | % | 8.65 | % | 9.23 | % | ||||||
|
BBB
|
4.49 | % | 7.06 | % | 5.76 | % | ||||||
|
BBB-
|
5.50 | % | 6.91 | % | 9.48 | % | ||||||
|
BB+
|
5.10 | % | 4.46 | % | 8.25 | % | ||||||
|
BB
|
4.57 | % | 6.05 | % | 6.16 | % | ||||||
|
BB-
|
4.88 | % | 6.45 | % | 5.91 | % | ||||||
|
B+
|
4.84 | % | 5.38 | % | 3.08 | % | ||||||
|
B
|
4.81 | % | 3.34 | % | 1.44 | % | ||||||
|
B−
|
1.89 | % | 0.88 | % | 0.28 | % | ||||||
|
CCC/CC
|
0.27 | % | 2.49 | % | 0.03 | % | ||||||
|
Total
|
100.00 | % | 100.00 | % | 100.00 | % | ||||||
F-58
Table of Contents
Policies
and procedures for preventing excessive risk
concentration
In order to prevent the
build-up
of
excessive concentrations of credit risk at the individual,
country and sector levels, the Group maintains the risk
concentration indices updated at the individual and portfolio
levels tied to the various observable variables within the field
of credit risk management. The limit on the Group’s
exposure or share of a customer’s financial business
therefore depends on the customer’s credit rating, the
nature of the facility, and the Group’s presence in a given
market, based on the following guidelines:
| • | The need to balance the customer’s financing needs, broken down by type (commercial/financial, short/long-term, etc.). This approach provides a better operational mix that is still compatible with the needs of the bank’s clientele. | |
| • | Other determining factors are national legislation and the ratio between the size of customer lending and the Bank’s equity (to prevent risk from becoming overly concentrated among few customers). Additional factors taken into consideration include constraints related to market, customer, internal regulation and macroeconomic factors, etc. | |
| • | Meanwhile, correct portfolio management leads to identification of risk concentrations and enables appropriate action to be taken. |
Operations with customers or groups that entail an expected loss
plus economic capital of over €18 million are approved
at the highest level, i.e., by the Board Risk Committee. As a
reference, this is equivalent in terms of exposure to 10% of
eligible equity for AAA and to 1% for a BB rating, implying
oversight of the major individual risk concentrations by the
highest-level risk governance bodies as a function of credit
ratings.
There is additional guideline in terms of a maximum risk
concentration level of up to and including 10% of equity: up to
this level there are stringent requirements in terms of in-depth
knowledge of the client, its operating markets and sectors of
operation.
Sovereign
risk exposure
As of December 31, 2010, the sovereign risk exposure
amounted to €62,769 million. This exposure is included
in the following lines of the accompanying consolidated balance
sheet: “Financial Liabilities Held for trading”
(31.4%),
“Available-for-Sale
Financial Assets” (57.4%), “Loans and
Receivables” (3.2%) and
“Held-to-Maturity
Investments” (14.0%).
As of December 31, 2010, the breakdown of our sovereign
risk exposure in accordance with the classification of each
country by its ratings was as follows:
|
Exposure to Sovereign Counterparties by Ratings(*)
|
Millions of euros | % | ||||||
|
Higher than AA
|
35,293 | 56.23 | % | |||||
|
Of which:
|
||||||||
|
Spain
|
31,212 | 49.72 | % | |||||
|
AA or below
|
27,475 | 43.77 | % | |||||
|
Of which:
|
||||||||
|
Mexico
|
17,665 | 28.14 | % | |||||
|
Italy
|
4,229 | 6.74 | % | |||||
|
Portugal
|
58 | 0.09 | % | |||||
|
Grece
|
107 | 0.17 | % | |||||
|
Ireland
|
— | — | ||||||
|
Total
|
62,768 | 100.00 | % | |||||
| (*) | Global Ratings established by external rating agencies as of December 31, 2010. |
F-59
Table of Contents
Financial
assets past due but not impaired
The table below provides details of financial assets past due as
of December 31, 2010, 2009 and 2008, but not considered to
be impaired, listed by their first due date:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
|
Less than 1
|
Less than 1
|
Less than 1
|
||||||||||||||||||||||||||||||||||
|
Financial Assets Past
|
Months
|
1 to 2 Months
|
1 to 3 Months
|
Months
|
1 to 2 Months
|
1 to 3 Months
|
Months
|
1 to 2 Months
|
1 to 3 Months
|
|||||||||||||||||||||||||||
|
Due but Not Impaired
|
Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | Past-Due | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Loans and advances to credit institutions
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Loans and advances to customers
|
1,082 | 311 | 277 | 2,653 | 336 | 311 | 1,580 | 534 | 447 | |||||||||||||||||||||||||||
|
Government
|
122 | 27 | 27 | 45 | 32 | 19 | 30 | 10 | 12 | |||||||||||||||||||||||||||
|
Other sectors
|
960 | 284 | 250 | 2,608 | 304 | 292 | 1,550 | 524 | 435 | |||||||||||||||||||||||||||
|
Debt securities
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Total
|
1,082 | 311 | 277 | 2,653 | 336 | 311 | 1,580 | 534 | 447 | |||||||||||||||||||||||||||
Impaired
assets and impairment losses
The table below shows the composition of the balance of impaired
financial assets, broken down by heading in the balance sheet,
and the impaired contingent liabilities as of December 31,
2010, 2009 and 2008:
|
Impaired Risks. Breakdown by Type of Asset and by Sector
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
IMPAIRED RISKS ON BALANCE
|
||||||||||||
|
Available-for-sale
financial assets
|
140 | 212 | 188 | |||||||||
|
Debt securities
|
140 | 212 | 188 | |||||||||
|
Loans and receivables
|
15,472 | 15,311 | 8,540 | |||||||||
|
Loans and advances to credit institutions
|
101 | 100 | 95 | |||||||||
|
Loans and advances to customers
|
15,361 | 15,197 | 8,437 | |||||||||
|
Debt securities
|
10 | 14 | 8 | |||||||||
|
TOTAL IMPAIRED RISKS ON BALANCE(1)
|
15,612 | 15,523 | 8,728 | |||||||||
|
IMPAIRED RISKS OFF BALANCE(2)
|
||||||||||||
|
Impaired contingent liabilities
|
324 | 405 | 131 | |||||||||
|
TOTAL IMPAIRED RISKS(1)+(2)
|
15,936 | 15,928 | 8,859 | |||||||||
|
Of which:
|
||||||||||||
|
Goverment
|
123 | 87 | 102 | |||||||||
|
Credit institutions
|
129 | 172 | 165 | |||||||||
|
Other sectors
|
15,360 | 15,264 | 8,461 | |||||||||
|
Mortgage
|
8,627 | 7,932 | 3,047 | |||||||||
|
With partial secured loans
|
159 | 37 | 4 | |||||||||
|
Rest
|
6,574 | 7,295 | 5,410 | |||||||||
|
Impaired contingent liabilities
|
324 | 405 | 131 | |||||||||
|
TOTAL IMPAIRED RISKS
|
15,936 | 15,928 | 8,859 | |||||||||
F-60
Table of Contents
The changes in 2010, 2009 and 2008 in the impaired financial
assets and contingent liabilities were as follows:
|
Changes in Impaired Financial Assets and Contingent
Liabilities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
15,928 | 8,859 | 3,418 | |||||||||
|
Additions(1)
|
13,207 | 17,298 | 11,488 | |||||||||
|
Recoveries(2)
|
(9,138 | ) | (6,524 | ) | (3,668 | ) | ||||||
|
Net additions(1)+(2)
|
4,069 | 10,774 | 7,820 | |||||||||
|
Transfers to writeoff
|
(4,307 | ) | (3,737 | ) | (2,198 | ) | ||||||
|
Exchange differences and other
|
247 | 32 | (181 | ) | ||||||||
|
Balance at the end
|
15,936 | 15,928 | 8,859 | |||||||||
|
Recoveries on entries (%)
|
69 | 38 | 32 | |||||||||
Below are details of the impaired financial assets as on
December 31, 2010, classified by geographical location of
risk and by the time since their oldest past-due amount or the
period since they were deemed impaired:
|
Less than 6
|
6 to 9
|
9 to 12
|
More than
|
|||||||||||||||||
|
Months
|
Months
|
Months
|
12 Months
|
|||||||||||||||||
|
2010
|
Past-Due | Past-Due | Past-Due | Past-Due | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Spain
|
5,279 | 1,064 | 798 | 4,544 | 11,685 | |||||||||||||||
|
Rest of Europe
|
106 | 24 | 24 | 55 | 209 | |||||||||||||||
|
Latin America
|
1,473 | 112 | 100 | 397 | 2,082 | |||||||||||||||
|
The United States
|
1,110 | 84 | 111 | 331 | 1,636 | |||||||||||||||
|
Rest of the world
|
— | — | — | — | — | |||||||||||||||
|
Total
|
7,968 | 1,284 | 1,034 | 5,327 | 15,612 | |||||||||||||||
Below are details of the impaired financial assets as on
December 31, 2010, classified by type of loan in accordance
with its associated guarantee, and by the time since their
oldest past-due amount or the period since they were deemed
impaired:
|
Less than 6
|
6 to 9
|
9 to 12
|
More than
|
|||||||||||||||||
|
Months
|
Months
|
Months
|
12 Months
|
|||||||||||||||||
|
2010
|
Past-Due | Past-Due | Past-Due | Past-Due | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Unsecured loans
|
4,309 | 338 | 271 | 1,710 | 6,628 | |||||||||||||||
|
Mortgage
|
3,301 | 946 | 763 | 3,617 | 8,627 | |||||||||||||||
|
Residential mortgage
|
629 | 304 | 271 | 1,472 | 2,676 | |||||||||||||||
|
Commercial mortgage (rural properties in operation and offices,
and industrial buildings)
|
561 | 128 | 100 | 602 | 1,391 | |||||||||||||||
|
Rest of residential mortgage
|
701 | 132 | 99 | 593 | 1,525 | |||||||||||||||
|
Plots and other real state assets
|
1,410 | 382 | 293 | 950 | 3,035 | |||||||||||||||
|
Other partially secured loans
|
159 | — | — | — | 159 | |||||||||||||||
|
Others
|
199 | — | — | — | 198 | |||||||||||||||
|
Total
|
7,968 | 1,284 | 1,034 | 5,327 | 15,612 | |||||||||||||||
The table below shows the finance income accrued on impaired
financial assets as of December 31, 2010, 2009 and 2008:
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Financial Income from Impaired Assets
|
1,717 | 1,485 | 1,042 | |||||||||
F-61
Table of Contents
This income is not recognized in the accompanying consolidated
income statements due to the existence of doubts as to the
collection of these assets.
Note 2.2.1.b gives a description of the
individual analysis of impaired financial assets, including the
factors the entity takes into account in determining that they
are impaired and the extension of guarantees and other credit
enhancements.
The following shows the changes in impaired financial assets
written off from the balance sheet for the years ended
December 31, 2010, 2009 and 2008 because the possibility of
their recovery was deemed remote:
|
Changes in Impaired Financial Assets Written-Off from the
Balance Sheet
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
9,834 | 6,872 | 5,622 | |||||||||
|
Increase:
|
4,788 | 3,880 | 1,976 | |||||||||
|
Decrease:
|
(1,448 | ) | (1,172 | ) | (567 | ) | ||||||
|
Re-financing or restructuring
|
(1 | ) | — | — | ||||||||
|
Cash recovery
|
(253 | ) | (188 | ) | (199 | ) | ||||||
|
Foreclosed assets
|
(5 | ) | (48 | ) | (13 | ) | ||||||
|
Sales of written-off
|
(342 | ) | (590 | ) | (261 | ) | ||||||
|
Other causes
|
(847 | ) | (346 | ) | (94 | ) | ||||||
|
Net exchange differences
|
193 | 253 | (159 | ) | ||||||||
|
Balance at the end
|
13,367 | 9,833 | 6,872 | |||||||||
The Group’s Non-Performing Assets (“NPA”) ratios
for the headings “Loans and advances to customers” and
“Contingent liabilities” as of December 31, 2010,
2009 and 2008 were as follows:
| Percentage (%) | ||||||||||||
|
NPA Ratio
|
2010 | 2009 | 2008 | |||||||||
|
BBVA Group
|
4.1 | 4.3 | 2.3 | |||||||||
A breakdown of impairment losses by type of financial instrument
registered in the accompanying consolidated income statement and
the recoveries of impaired financial assets is provided
Note 49.
The accumulated balance of impairment losses broken down by
portfolio as of December 31, 2010, 2009 and 2008 is as
follows:
|
Impairment Losses
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Available-for-sale
portfolio
|
12 | 619 | 449 | 202 | ||||||||||||
|
Loans and receivables
|
13 | 9,473 | 8,805 | 7,505 | ||||||||||||
|
Loans and advances to customers
|
9,396 | 8,720 | 7,412 | |||||||||||||
|
Loans and advances to credit institutions
|
67 | 68 | 74 | |||||||||||||
|
Debt securities
|
10 | 17 | 19 | |||||||||||||
|
Held to maturity investment
|
14 | 1 | 1 | 4 | ||||||||||||
|
Total
|
10,093 | 9,255 | 7,711 | |||||||||||||
|
Of which:
|
||||||||||||||||
|
For impaired portfolio
|
7,362 | 6,380 | 3,480 | |||||||||||||
|
For currently non-impaired portfolio
|
2,731 | 2,875 | 4,231 | |||||||||||||
In addition to total amount of funds indicated above, as of
December 31, 2010, 2009 and 2008, the amount of the
provisions for contingent exposures and commitments rose to
€264, €243 and €421 million, respectively
(see Note 25).
F-62
Table of Contents
The changes in the accumulated impairment losses for the years
2010, 2009 and 2008 were as follows:
|
Changes in the Impairment Losses
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
9,255 | 7,711 | 7,194 | |||||||||
|
Increase in impairment losses charged to income
|
7,207 | 8,282 | 4,590 | |||||||||
|
Decrease in impairment losses credited to income
|
(2,236 | ) | (2,622 | ) | (1,457 | ) | ||||||
|
Transfers to written-off loans
|
(4,488 | ) | (3,878 | ) | (1,951 | ) | ||||||
|
Exchange differences and other
|
355 | (238 | ) | (662 | ) | |||||||
|
Balance at the end
|
10,093 | 9,255 | 7,711 | |||||||||
|
Of which:
|
||||||||||||
|
For impaired portfolio
|
7,362 | 6,380 | 3,480 | |||||||||
|
For currently non-impaired portfolio
|
2,731 | 2,875 | 4,231 | |||||||||
The majority of the impairment on financial assets corresponds
to the heading “Loans and receivables — Loans and
advances to customers”. The changes in the accumulated
impairment losses for the years 2010, 2009 and 2008 under this
heading were as follows:
|
Changes in the Impairment Losses of the Heading Loans and
Receivables - Loans and Advances to Customers
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
8,720 | 7,412 | 7,117 | |||||||||
|
Increase in impairment losses charged to income
|
7,014 | 7,983 | 4,434 | |||||||||
|
Decrease in impairment losses credited to income
|
(2,200 | ) | (2,603 | ) | (1,636 | ) | ||||||
|
Transfers to written-off loans
|
(4,423 | ) | (3,828 | ) | (1,950 | ) | ||||||
|
Exchange differences and other
|
285 | (244 | ) | (553 | ) | |||||||
|
Balance at the end
|
9,396 | 8,720 | 7,412 | |||||||||
|
Of which:
|
||||||||||||
|
For impaired portfolio
|
6,683 | 5,864 | 3,239 | |||||||||
|
For currently non-impaired portfolio
|
2,713 | 2,856 | 4,173 | |||||||||
7.2 MARKET
RISK
| a) | Market Risk |
Market risk is defined as the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market prices, resulting in changes in the different
assets and financial risk factors. The risk can be mitigated or
even eliminated through hedges using other products
(assets/liabilities or derivatives), or by undoing the
transaction/open position.
There are three main risk factories that affect market prices:
Interest rates, foreign exchange rates and equity.
| • | Interest rate risk: Defined as changes in the term structure of market interest rates for different currencies. | |
| • | Foreign-exchange risk: This is the risk resulting from changes in the foreign exchange rate for different currencies. | |
| • | Price risk: This is the risk resulting from variations in market prices, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on the market. |
In addition, for certain positions, other risks also need to be
considered: Credit spread risk, basis risk, volatility or
correlation risk.
F-63
Table of Contents
Value at Risk (
VaR
) is the basic variable for measuring
and controlling the Group’s market risk. This risk metric
estimates the maximum loss that may occur in a portfolio’s
market positions for a particular time horizon and given
confidence level. VaR is calculated in the Group at a 99%
confidence level and a
1-day
time
horizon.
The BBVA and BBVA Bancomer have received approval from the Bank
of Spain to use the internal model to calculate bank capital for
market risk.
In BBVA and BBVA Bancomer VaR is estimated using Historic
Simulation methodology. This methodology consists of observing
how the profits and losses of the current portfolio would
perform if the market conditions from a particular historic
period were in force, and from that information to infer the
maximum loss at a certain confidence level. It offers the
advantage of accurately reflecting the historical distribution
of the market variables and of not requiring any specific
distribution assumption. The historic period comprises two years.
With regard to market risk, limit structure determines a system
of VaR and economic capital at risk limits for each business
unit, with specific
sub-limits
by type of risk, activity and desk.
Validity tests are performed on the risk measurement models used
to estimate the maximum loss that could be incurred in the
positions assessed with a certain level of probability
(backtesting), as well as measurements of the impact of extreme
market events on risk positions (stress testing). The Group is
currently performing stress testing on historical and economic
crisis scenarios drawn up by its Economic Research Department.
Changes
in market risk in 2010
The BBVA Group’s market risk is higher in 2010 compared to
previous years. The average risk for 2010 stood at
€33 million (VaR calculation without smoothing). The
changes in the Group’s market risk can be basically
explained by the contribution of Global Market Europe, which has
seen its risk increase as a result mainly of greater market
volatility in interest rates and credit spreads, together with
greater exposure to interest-rate risk towards the end of the
year. Global Market Bancomer has contributed to a lesser extent
to the Group’s increased risk due to the growth in equity
risk throughout the year, particularly in the first quarter
through a one-off operation.
In 2010, the changes in market risk (VaR calculations without
smoothing with a 99% confidence level and a
1-day
horizon) were as follows:
F-64
Table of Contents
The breakdown of VaR by risk factor as of December 31,
2010, 2009 and 2008 was as follows:
|
VaR by Risk Factor
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Interest/Spread risk
|
29 | 38 | 24 | |||||||||
|
Currency risk
|
3 | 2 | 7 | |||||||||
|
Stock-market risk
|
4 | 9 | 1 | |||||||||
|
Vega/Correlation risk
|
12 | 15 | 15 | |||||||||
|
Diversification effect
|
(21 | ) | (33 | ) | (24 | ) | ||||||
|
Total
|
28 | 31 | 23 | |||||||||
|
VaR medium in the period
|
33 | 26 | 20 | |||||||||
|
VaR max in the period
|
41 | 33 | 35 | |||||||||
|
VaR min in the period
|
25 | 18 | 13 | |||||||||
| b) | Structural interest rate risk |
The aim of on-balance-sheet interest rate risk management is to
maintain the BBVA Group’s exposure to market interest rate
fluctuations at levels in keeping with its risk strategy and
profile. In pursuance of this, the Asset-Liability Committee
(“ALCO”) undertakes active balance sheet management
through operations intended to optimize the levels of risk borne
according to the expected earnings and enables the maximum
levels of accepted risk with which to be complied.
ALCO uses the interest rate risk measurements performed by the
Risk Area. Acting as an independent unit, the Risk Area
periodically quantifies the impact of interest rate fluctuations
on the BBVA Group’s net interest income and economic value.
In addition to measuring the sensitivity to 100-basis-point
changes in market interest rates, the Group performs probability
calculations that determine the economic capital (maximum loss
of economic value) and risk margin (maximum loss of operating
income) for structural interest rate risk in the BBVA’s
Group banking activity, excluding the Treasury area, based on
interest rate curve simulation models. The Group regularly
performs stress tests and sensitivity analysis to complement its
assessment of its interest rate risk profile.
All these risk measurements are subsequently analyzed and
monitored, and levels of risk assumed and the degree of
compliance with the limits authorized by the Executive Committee
are reported to the various managing bodies of the BBVA Group.
F-65
Table of Contents
Below are the average interest rate risk exposure levels in
terms of sensitivity of the main financial institutions of the
BBVA Group in 2010, in millions of euros:
|
Impact on Net Interest
|
Impact on Economic
|
|||||||||||||||
| Income(*) | Value(**) | |||||||||||||||
|
100 Basis-
|
100 Basis-
|
100 Basis-
|
100 Basis-
|
|||||||||||||
|
Point
|
Point
|
Point
|
Point
|
|||||||||||||
|
2010
|
Increase | Decrease | Increase | Decrease | ||||||||||||
|
Europe
|
−3.06 | % | +4.83 | % | +1.10 | % | −1.21 | % | ||||||||
|
BBVA Bancomer
|
+1.71 | % | −1.71 | % | −1.49 | % | +0.98 | % | ||||||||
|
BBVA Compass
|
+3.63 | % | −2.66 | % | +1.60 | % | −3.39 | % | ||||||||
|
BBVA Puerto Rico
|
+4.50 | % | −4.27 | % | +2.88 | % | −2.48 | % | ||||||||
|
BBVA Chile
|
−1.36 | % | +1.29 | % | −5.13 | % | +3.72 | % | ||||||||
|
BBVA Colombia
|
+1.32 | % | −1.33 | % | −2.51 | % | +2.50 | % | ||||||||
|
BBVA Banco Continental
|
+2.28 | % | −2.25 | % | −4.93 | % | +5.26 | % | ||||||||
|
BBVA Banco Provincial
|
+1.66 | % | −1.55 | % | −0.64 | % | +0.66 | % | ||||||||
|
BBVA Banco Francés
|
+0.47 | % | −0.48 | % | −2.02 | % | +2.12 | % | ||||||||
|
BBVA Group
|
+0.43 | % | +0.26 | % | +0.44 | % | −0.91 | % | ||||||||
| (*) | Percentage relating to “1 year” net Interest margin forecast in each entity. | |
| (**) | Percentage relating to each entity’s Capital Base. |
As part of the measurement process, the Group established the
assumptions regarding the movement and behavior of certain
items, such as those relating to products with no explicit or
contractual maturity. These assumptions are based on studies
that estimate the relationship between the interest rates on
these products and market rates and enable specific balances to
be classified into trend-based balances maturing at long term
and seasonal or volatile balances with short-term residual
maturity.
| c) | Structural currency risk |
Structural foreign exchange risk is basically caused by exposure
to variations in foreign exchange rates that arise in the
Group’s foreign subsidiaries and the provision of funds to
foreign branches financed in a different currency to that of the
investment.
The ALCO is responsible for arranging hedging transactions to
limit the capital impact of fluctuations in exchange rates,
based on their projected trend, and to guarantee the equivalent
euro value of the foreign currency earnings expected to be
obtained from these investments.
Structural currency risk management is based on the measurements
performed by the Risk Area. These measurements use a foreign
exchange rate scenario simulation model which quantifies
possible changes in value for a given confidence interval and a
pre-established time horizon. The Executive Committee authorizes
the system of limits and alerts for these risk measurements,
which include a limit on the economic capital or unexpected loss
arising from the foreign exchange risk of the foreign-currency
investments.
In 2010, the average asset exposure sensitivity to 1%
depreciation in exchange rates stood at €113 million,
with the following concentration: 45% in the Mexican peso, 28%
in South American currencies and 18% in the US dollar.
| d) | Structural equity risk |
The Group’s exposure to structural equity risk comes
largely from its holdings in industrial and financial companies
with medium- to long-term investment horizons, reduced by the
short net positions held in derivative instruments on the same
underlying assets, in order to limit portfolio sensitivity to
potential price cuts. The aggregate sensitivity of the
Group’s consolidated equity to a 1% fall in the price of
shares stood, on December 31, 2010, at
€47.5 million, while the sensitivity of the
consolidated earnings to the same change in price on the same
date is estimated at €3.3 million. The latter is
positive in the case of falls in prices as these are short net
positions in
F-66
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derivatives. This figure is determined by considering the
exposure on shares measured at market price or, if not
available, at fair value, including the net positions in options
on the same underlyings in delta equivalent terms. Treasury Area
portfolio positions are not included in the calculation.
The Risk Area measures and effectively monitors structural risk
in the equity portfolio. To do so, it estimates the sensitivity
figures and the capital necessary to cover possible unexpected
losses due to the variations in the value of the equity
portfolio at a confidence level that corresponds to the
institution’s target rating, and taking account of the
liquidity of the positions and the statistical performance of
the assets under consideration. These figures are supplemented
by periodic stress comparisons, back-testing and scenario
analyses.
| 7.3 | LIQUIDITY RISK |
The aim of liquidity risk management, tracking and control is to
ensure, in the short-term, that the payment commitments can be
duly met without having to resort to borrowing funds under
burdensome terms, or damaging the image and reputation of the
institution. In the medium term the aim is to ensure that the
financing structure is ideal and that it moves in the right
direction, in the context of the economic situation, the markets
and regulatory changes.
Liquidity management and structural finance in the BBVA Group
are based on the principle of the financial autonomy of its
subsidiaries. This management approach helps prevent or limit
liquidity risk by reducing the vulnerability of the BBVA Group
during high-risk periods.
Once the decentralization is considered by geographical
areas/subsidiaries, the management and monitoring of liquidity
risk is carried out comprehensively in each of the Group’s
units with both a short and long-term Approach. The short-term
liquidity approach has a time horizon of up to 366 days. It
is focused on the management of payments and collections from
Treasury and Markets and includes the operations specific to the
areas and the Bank’s possible liquidity requirements. The
second medium-term or medium-financing approach is focused on
financial management of all the balance sheet, with a time
horizon of one year or more.
The comprehensive management of liquidity is carried out by the
Assets and Liabilities Committee (ALCO) in each management unit.
The Financial Management unit, as part of the Financial
Division, analyzes the implications of the Bank’s various
projects in terms of finance and liquidity and its compatibility
with the target financing structure and the situation of the
financial markets. The Financial Management unit executes
proposals agreed by the ALCO in accordance with the agreed
budgets and manages liquidity risk using a broad scheme of
limits,
sub-limits
and alerts approved by the Permanent Delegate Committee. The
Risk Area uses these limits to carry out its mediation and
control work independently and provides the manager with the
support tools and metrics needed for decision-making. Each of
the local risk areas, which are independent from the local
manager, complies with the corporative principles of liquidity
risk control that are established by the Global Market Risk
(GRM) unit, which is the global structural risks unit for the
whole Group.
At the level of each entity, the managing areas request and
propose a scheme of quantitative and qualitative limits and
alerts that affect liquidity risk in the short and medium term.
Once agreed with GRM, controls and limits are proposed to the
Board of Directors through its delegate bodies, for approval at
least once a year. The proposals submitted by GRM are adapted to
the situation of the market according to the risk tolerance
level aimed for by the Group.
The implementation of a new Liquidity and Finance Manual, which
was approved in the last quarter of the year, has meant the
extension of schemes limiting the internal financing of business
units, the financial structure and financing concentration, as
well as establishing alerts in qualitative liquidity indicators.
GRM carries out regular measurements of risk incurred and the
monitoring of consumption of limits. It develops tools and
adapts valuation models, carries out regular stress tests and
reports to ALCO and the Group’s Management Committee on a
monthly basis about liquidity levels. It also reports more often
to the management areas themselves and to the GRM Management
Committee. The frequency of communication and the amount of
information under the current Contingency Plan is decided by the
Liquidity Committee on the proposal of the Technical Liquidity
Group (TLG). The TLG carries out the initial analysis of the
Bank’s short or long-term liquidity situation. The TLG is
made up of specialized staff from the Short-Term Cash Desk,
Financial Management and the
F-67
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Global Market Risk Unit (UCRAM-Structural Risk). If the alert
levels suggest a deterioration of the relative situation, the
TLG reports the matter to the Liquidity Committee, which is
composed of the managers of the related areas. If required, the
Liquidity Committee is responsible for calling the Financing
Committee, which is made up of the President and COO, the
Director of the Financial Area, the Director of the Risk Area,
the Director of Global Business and the Director of Business of
the country in question.
One of the most significant aspects that have had an effect on
the monitoring and management of liquidity risk in 2010 has been
the management and development of the sovereign risk crisis. In
this sense, the role of the central banks has been decisive in
calming markets during the Eurozone debt crisis and the ECB has
been proactive in guaranteeing the liquidity conditions of the
interbank markets. The BBVA Group has not needed to use the
extraordinary measures established by the Spanish and European
authorities to mitigate tension in bank financing.
On the regulatory side, the Basel Committee on Banking
Supervision (Bank for International Settlements) has proposed a
new liquidity regulatory scheme based on two ratios: the
Liquidity Coverage Ratio (LCR), to enter into force in 2015; and
the Net Stable Funding Ratio (NSFR), which will be implemented
in 2018. The Group participated in the corresponding impact
study (QIS) and has included the new regulatory challenges in
its new general framework for action in the field of Liquidity
and Finance.
7.4. RISK
CONCENTRATIONS
Below is presented a breakdown by geographical area, of the
balances of certain headings of financial instruments in the
accompanying consolidated balance sheets, disregarding any
valuation adjustments:
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
Latin
|
|||||||||||||||||||||||
|
2010
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
RISKS ON-BALANCE
|
||||||||||||||||||||||||
|
Financial assets held for trading
|
18,903 | 22,899 | 3,951 | 15,126 | 2,404 | 63,283 | ||||||||||||||||||
|
Debt securities
|
9,522 | 2,839 | 654 | 10,938 | 405 | 24,358 | ||||||||||||||||||
|
Equity instruments
|
3,041 | 888 | 148 | 861 | 322 | 5,260 | ||||||||||||||||||
|
Derivatives
|
6,340 | 19,172 | 3,149 | 3,327 | 1,677 | 33,665 | ||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
284 | 98 | 481 | 1,913 | 1 | 2,777 | ||||||||||||||||||
|
Debt securities
|
138 | 66 | 480 | 7 | — | 691 | ||||||||||||||||||
|
Equity instruments
|
146 | 32 | 1 | 1,906 | 1 | 2,086 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
25,230 | 7,689 | 7,581 | 14,449 | 1,234 | 56,183 | ||||||||||||||||||
|
Debt securities
|
20,725 | 7,470 | 6,903 | 14,317 | 1,187 | 50,602 | ||||||||||||||||||
|
Equity instruments
|
4,505 | 219 | 678 | 132 | 47 | 5,581 | ||||||||||||||||||
|
Loans and receivables
|
218,399 | 30,985 | 39,944 | 77,861 | 5,847 | 373,036 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
6,786 | 7,846 | 864 | 7,090 | 1,018 | 23,604 | ||||||||||||||||||
|
Loans and advances to customers
|
210,102 | 23,139 | 38,649 | 70,497 | 4,822 | 347,209 | ||||||||||||||||||
|
Debt securities
|
1,511 | — | 431 | 274 | 7 | 2,223 | ||||||||||||||||||
|
Held-to-maturity
investments
|
7,504 | 2,443 | — | — | — | 9,947 | ||||||||||||||||||
|
Hedging derivatives
|
234 | 2,922 | 131 | 281 | 35 | 3,603 | ||||||||||||||||||
|
Total
|
270,554 | 67,036 | 52,088 | 109,630 | 9,521 | 508,829 | ||||||||||||||||||
|
RISKS OFF-BALANCE
|
||||||||||||||||||||||||
|
Financial guarantees
|
20,175 | 6,773 | 3,069 | 4,959 | 1,465 | 36,441 | ||||||||||||||||||
|
Contingent exposures
|
35,784 | 19,144 | 17,604 | 17,132 | 910 | 90,574 | ||||||||||||||||||
|
Total
|
55,959 | 25,917 | 20,673 | 22,091 | 2,375 | 127,015 | ||||||||||||||||||
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Table of Contents
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
Latin
|
|||||||||||||||||||||||
|
2009
|
Spain | Spain | USA | America | Rest | Total | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
RISKS ON-BALANCE
|
||||||||||||||||||||||||
|
Financial assets held for trading
|
22,893 | 25,583 | 3,076 | 15,941 | 2,240 | 69,733 | ||||||||||||||||||
|
Debt securities
|
14,487 | 7,434 | 652 | 11,803 | 296 | 34,672 | ||||||||||||||||||
|
Equity instruments
|
3,268 | 624 | 35 | 1,662 | 194 | 5,783 | ||||||||||||||||||
|
Derivatives
|
5,138 | 17,525 | 2,389 | 2,476 | 1,750 | 29,278 | ||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
330 | 73 | 436 | 1,498 | — | 2,337 | ||||||||||||||||||
|
Debt securities
|
157 | 42 | 435 | 5 | — | 639 | ||||||||||||||||||
|
Equity instruments
|
173 | 31 | 1 | 1,493 | — | 1,698 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
30,177 | 11,660 | 7,828 | 12,585 | 1,266 | 63,516 | ||||||||||||||||||
|
Debt securities
|
24,838 | 11,429 | 7,082 | 12,494 | 1,223 | 57,066 | ||||||||||||||||||
|
Equity instruments
|
5,339 | 231 | 746 | 91 | 43 | 6,450 | ||||||||||||||||||
|
Loans and receivables
|
206,097 | 34,613 | 40,469 | 66,395 | 6,167 | 353,741 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
2,568 | 11,280 | 2,441 | 4,993 | 918 | 22,200 | ||||||||||||||||||
|
Loans and advances to customers
|
203,529 | 23,333 | 37,688 | 61,298 | 5,239 | 331,087 | ||||||||||||||||||
|
Debt securities
|
— | — | 340 | 104 | 10 | 454 | ||||||||||||||||||
|
Held-to-maturity
investments
|
2,625 | 2,812 | — | — | — | 5,437 | ||||||||||||||||||
|
Hedging derivatives
|
218 | 2,965 | 117 | 270 | 25 | 3,595 | ||||||||||||||||||
|
Total
|
262,340 | 77,706 | 51,926 | 96,689 | 9,698 | 498,359 | ||||||||||||||||||
|
RISKS OFF-BALANCE
|
||||||||||||||||||||||||
|
Financial guarantees
|
15,739 | 7,826 | 3,330 | 4,601 | 1,689 | 33,185 | ||||||||||||||||||
|
Contingent exposures
|
37,804 | 24,119 | 15,990 | 13,164 | 1,246 | 92,323 | ||||||||||||||||||
|
Total
|
53,543 | 31,945 | 19,320 | 17,765 | 2,935 | 125,508 | ||||||||||||||||||
F-69
Table of Contents
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
||||||||||||||||||||||||
|
2008
|
Spain | Spain | USA | Latin America | Rest | Total | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
RISK ON-BALANCE
|
||||||||||||||||||||||||
|
Financial assets held for trading
|
20,489 | 30,251 | 4,566 | 16,120 | 1,873 | 73,299 | ||||||||||||||||||
|
Debt securities
|
7,799 | 5,926 | 652 | 11,563 | 616 | 26,556 | ||||||||||||||||||
|
Equity instruments
|
2,332 | 1,376 | 80 | 1,071 | 938 | 5,797 | ||||||||||||||||||
|
Derivatives
|
10,358 | 22,949 | 3,834 | 3,486 | 319 | 40,946 | ||||||||||||||||||
|
Other financial assets designated at fair value through
profit or loss
|
245 | 24 | 442 | 1,042 | 1 | 1,754 | ||||||||||||||||||
|
Debt securities
|
63 | — | 441 | 12 | — | 516 | ||||||||||||||||||
|
Equity instruments
|
182 | 24 | 1 | 1,030 | 1 | 1,238 | ||||||||||||||||||
|
Available-for-sale
portfolio
|
15,233 | 10,460 | 9,633 | 8,449 | 2,999 | 46,774 | ||||||||||||||||||
|
Debt securities
|
11,811 | 9,970 | 8,889 | 8,368 | 924 | 39,962 | ||||||||||||||||||
|
Equity instruments
|
3,422 | 490 | 744 | 81 | 2,075 | 6,812 | ||||||||||||||||||
|
Loans and receivables
|
215,030 | 44,394 | 38,268 | 69,534 | 8,162 | 375,388 | ||||||||||||||||||
|
Loans and advances to credit institutions
|
6,556 | 15,848 | 2,479 | 7,466 | 1,330 | 33,679 | ||||||||||||||||||
|
Loans and advances to customers
|
208,474 | 28,546 | 35,498 | 61,978 | 6,826 | 341,322 | ||||||||||||||||||
|
Debt securities
|
— | — | 291 | 90 | 6 | 387 | ||||||||||||||||||
|
Held-to-maturity
investments
|
2,396 | 2,889 | — | — | — | 5,285 | ||||||||||||||||||
|
Hedging derivatives
|
439 | 2,789 | 270 | 309 | 26 | 3,833 | ||||||||||||||||||
|
Total
|
253,832 | 90,807 | 53,179 | 95,454 | 13,060 | 506,333 | ||||||||||||||||||
|
Europe,
|
||||||||||||||||||||||||
|
Excluding
|
||||||||||||||||||||||||
| Spain | Spain | USA | Latin America | Rest | Total | |||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
RISK OFF-BALANCE
|
||||||||||||||||||||||||
|
Financial guarantees
|
16,843 | 8,969 | 3,456 | 4,721 | 1,963 | 35,952 | ||||||||||||||||||
|
Contingent exposures
|
45,039 | 22,366 | 16,194 | 13,559 | 1,739 | 98,897 | ||||||||||||||||||
|
Total
|
61,882 | 31,335 | 19,650 | 18,280 | 3,702 | 134,849 | ||||||||||||||||||
The breakdown of the main balances in foreign currencies of the
accompanying consolidated balance sheets, with reference to the
most significant foreign currencies, is set forth in
Appendix IX.
F-70
Table of Contents
| 7.5. | RESIDUAL MATURITY |
Below is a breakdown by contractual maturity, of the balances of
certain headings in the accompanying consolidated balance
sheets, disregarding any valuation adjustments:
|
Up to
|
1 to
|
3 to
|
1 to
|
Over
|
||||||||||||||||||||||||
|
2010
|
Demand | 1 Month | 3 Months | 12 Months | 5 Years | 5 Years | Total | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
17,275 | 1,497 | 693 | 220 | 282 | — | 19,967 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
2,471 | 10,590 | 1,988 | 1,658 | 4,568 | 2,329 | 23,604 | |||||||||||||||||||||
|
Loans and advances to customers
|
16,543 | 33,397 | 21,127 | 49,004 | 85,800 | 141,338 | 347,209 | |||||||||||||||||||||
|
Debt securities
|
497 | 3,471 | 12,423 | 8,123 | 35,036 | 28,271 | 87,821 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 636 | 1,515 | 3,503 | 13,748 | 17,827 | 37,229 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
50 | 5,102 | 3,130 | 2,704 | — | 1 | 10,987 | |||||||||||||||||||||
|
Deposits from credit institutions
|
4,483 | 30,031 | 4,184 | 3,049 | 9,590 | 5,608 | 56,945 | |||||||||||||||||||||
|
Deposits from customers
|
111,090 | 69,625 | 21,040 | 45,110 | 21,158 | 6,818 | 274,841 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
96 | 5,243 | 10,964 | 7,159 | 42,907 | 15,843 | 82,212 | |||||||||||||||||||||
|
Subordinated liabilities
|
— | 537 | 3 | 248 | 2,732 | 13,251 | 16,771 | |||||||||||||||||||||
|
Other financial liabilities
|
4,177 | 1,207 | 175 | 433 | 647 | 1,564 | 8,203 | |||||||||||||||||||||
|
Short positions
|
— | 651 | — | 10 | — | 3,385 | 4,046 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 826 | 1,473 | 3,682 | 12,813 | 16,037 | 34,831 | |||||||||||||||||||||
|
Up to 1
|
1 to 3
|
3 to 12
|
1 to 5
|
Over 5
|
||||||||||||||||||||||||
|
2009
|
Demand | Month | Months | Months | Years | Years | Total | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
14,650 | 535 | 248 | 735 | 163 | — | 16,331 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
3,119 | 8,484 | 1,549 | 1,914 | 4,508 | 2,626 | 22,200 | |||||||||||||||||||||
|
Loans and advances to customers
|
4,313 | 31,155 | 19,939 | 40,816 | 94,686 | 140,178 | 331,087 | |||||||||||||||||||||
|
Debt securities
|
1,053 | 4,764 | 15,611 | 10,495 | 37,267 | 29,080 | 98,270 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 637 | 2,072 | 3,863 | 13,693 | 12,608 | 32,873 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
213 | 4,807 | 3,783 | 12,293 | — | — | 21,096 | |||||||||||||||||||||
|
Deposits from credit institutions
|
1,836 | 24,249 | 5,119 | 5,145 | 6,143 | 6,453 | 48,945 | |||||||||||||||||||||
|
Deposits from customers
|
106,942 | 55,482 | 34,329 | 32,012 | 18,325 | 6,293 | 253,383 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
— | 10,226 | 16,453 | 15,458 | 40,435 | 14,614 | 97,186 | |||||||||||||||||||||
|
Subordinated liabilities
|
— | 500 | 689 | 2 | 1,529 | 14,585 | 17,305 | |||||||||||||||||||||
|
Other financial liabilities
|
3,825 | 822 | 141 | 337 | 480 | 20 | 5,625 | |||||||||||||||||||||
|
Short positions
|
— | 448 | — | 16 | — | 3,366 | 3,830 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 735 | 1,669 | 3,802 | 13,585 | 10,517 | 30,308 | |||||||||||||||||||||
F-71
Table of Contents
|
Up to 1
|
1 to 3
|
3 to 12
|
1 to 5
|
Over 5
|
||||||||||||||||||||||||
|
2008
|
Demand | Month | Months | Months | Years | Years | Total | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
13,487 | 476 | 296 | 181 | 202 | — | 14,642 | |||||||||||||||||||||
|
Loans and advances to credit institutions
|
6,198 | 16,216 | 1,621 | 2,221 | 4,109 | 3,314 | 33,679 | |||||||||||||||||||||
|
Loans and advances to customers
|
13,905 | 36,049 | 23,973 | 45,320 | 91,030 | 131,045 | 341,322 | |||||||||||||||||||||
|
Debt securities
|
716 | 1,701 | 12,230 | 9,483 | 24,640 | 23,934 | 72,704 | |||||||||||||||||||||
|
Other assets
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 3,739 | 2,206 | 5,442 | 16,965 | 16,427 | 44,779 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Deposits from central banks
|
2,419 | 8,737 | 2,441 | 3,165 | — | — | 16,762 | |||||||||||||||||||||
|
Deposits from credit institutions
|
4,906 | 22,412 | 4,090 | 5,975 | 6,581 | 5,609 | 49,573 | |||||||||||||||||||||
|
Deposits from customers
|
101,141 | 68,804 | 27,025 | 35,176 | 16,440 | 5,137 | 253,723 | |||||||||||||||||||||
|
Debt certificates (including bonds)
|
— | 9,788 | 13,516 | 12,072 | 45,469 | 20,483 | 101,328 | |||||||||||||||||||||
|
Subordinated liabilities
|
69 | 913 | 1 | 872 | 3,582 | 10,812 | 16,249 | |||||||||||||||||||||
|
Other financial liabilities
|
5,000 | 1,152 | 385 | 203 | 1,371 | 342 | 8,453 | |||||||||||||||||||||
|
Short positions
|
— | 24 | — | 23 | — | 2,653 | 2,700 | |||||||||||||||||||||
|
Derivatives (trading and hedging)
|
— | 2,693 | 3,108 | 6,310 | 15,538 | 13,886 | 41,535 | |||||||||||||||||||||
| 7.6. | RISK IN THE REAL ESTATE AND CONSTRUCTION SECTOR IN SPAIN |
As of December 31, 2010, exposure to the construction
sector and real estate activities in Spain stood at
€31,708 million. Of that amount, risk from loans to
the construction sector and real estate activities accounted for
€16,608 million, representing 9% of loans and advances
to customers of the balance of business in Spain (excluding
Government and other government agencies) and 3% of the total
assets of the Consolidated Group.
Lending for Real Estate Development according to the purpose of
the loans as of December 31, 2010, is shown below:
|
Financing Allocated to
|
Drawn Over
|
|||||||||||
|
Construction and Real Estate
|
the Guarantee
|
Provision
|
||||||||||
|
Development and its Coverage
|
Gross Amount | Value | Coverage | |||||||||
| Millions of euros | ||||||||||||
|
Loans recorded by the Group’s credit institutions (Business
in Spain)
|
16,608 | 4,869 | 1,224 | |||||||||
|
Of which: Impaired assets
|
3,543 | 1,355 | 893 | |||||||||
|
Of which: Potencial problem assets
|
2,381 | 1,185 | 331 | |||||||||
|
Memorandum item:
|
||||||||||||
|
Total provision for currently non-impaired portfolio (Total
business)
|
n/a | n/a | 2,698 | |||||||||
|
Write-offs
|
23 | n/a | n/a | |||||||||
n/a: not applicable
F-72
Table of Contents
|
Memorandum Item:
|
||||
|
Consolidated Group Data (Carrying Amount)
|
2010 | |||
| Millions of euros | ||||
|
Total loans and advances to customers, excluding the Public
Sector (Business in Spain)
|
185,361 | |||
|
Total consolidated assets (total business)
|
552,738 | |||
Impaired assets and potencial problem assets rose to
€3,543 million and €2,381 million,
respectively, with a loan loss provision amounting to
€1,224 million.
The drawn over the guarantee value shown in the tables above
corresponds to the excess from the gross amount of each loan
over the value of the real rights that, if applicable, were
received as security, calculated according to Appendix IX
of Circular 4.2004 of the Bank of Spain. This means that
additional regulatory corrective factors ranging from 30% to
50%, based on the type of asset, have been applied to the
updated appraisal values. For the total portfolio, this amount
rose to €4,869 mill and to €1,355 million and
€1,185 million for the non-performing and substandard
loan portfolio, respectively. The updated appraisal values,
without the application of said corrective factors, rose to
€25,327 million, which broadly covers the amount of
the debt.
Of the €3,543 million in impaired assets,
€1,138 million (32%) correspond to loans whose
payments are
up-to-date
and whose placing in arrears has been anticipated in the
framework of the policy of prudence.
The following is a description of the real estate credit risk
based on the types of associated guarantees:
|
Credit: Gross amount (Business in Spain)
|
2010 | |||
| Millions of euros | ||||
|
Without secured loan
|
1,259 | |||
|
With secured loan
|
15,249 | |||
|
Terminated buildings
|
7,403 | |||
|
Homes
|
7,018 | |||
|
Other
|
385 | |||
|
Buildings under construction
|
3,531 | |||
|
Homes
|
3,320 | |||
|
Other
|
211 | |||
|
Land
|
4,315 | |||
|
Urbanized land
|
2,922 | |||
|
Rest of land
|
1,393 | |||
|
Rest
|
100 | |||
|
Total
|
16,608 | |||
A total of 66% of loans to developers are guaranteed with
buildings (62% are homes, 89% of which are first homes or public
housing), and only 26% in land, of which 68% is urbanized).
The information on the retail mortgage portfolio risk as of
December 31, 2010 is as follows:
|
Housing-Acquisition Loans to Households
|
||||
|
(Business in Spain)
|
2010 | |||
| Millions of euros | ||||
|
Without secured loan (gross amount)
|
— | |||
|
of which: Impaired
|
— | |||
|
With secured loan (gross amount)
|
80,027 | |||
|
of which: Impaired
|
2,324 | |||
|
Total
|
80,027 | |||
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Table of Contents
Information on the loan to value (LTV: ratio resulting from
dividing the risk as of that date over the amount of the last
available appraisal) of the retail mortgage portfolio risk shown
above is as follows:
|
LTV Breakdown
|
Over 50%
|
Over 80%
|
||||||||||||||
|
of Secured Loans to
|
but Less
|
but Less
|
||||||||||||||
|
Households for the
|
Less Than
|
than or
|
than or
|
|||||||||||||
|
Purchase of a Home
|
or Equal to
|
Equal to
|
Equal to
|
|||||||||||||
|
(Business in Spain)
|
50% | 80% | 100% | Over 100% | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Gross amount
|
20,109 | 44,362 | 14,399 | 1,157 | ||||||||||||
|
of which: Impaired
|
413 | 806 | 903 | 202 | ||||||||||||
Secured loans to households for the purchase of a home as of
December 31, 2010 have an average LTV of 51%.
The breakdown of foreclosed, acquired, purchased or exchanged
assets from debt from loans relating to business in Spain, as
well as the holdings and financing to non-consolidated companies
holding such assets is as follows:
|
Foreclosed Assets to the Consolidated
|
Carrying
|
Of which:
|
||||||||||
|
Group Entities (Business in Spain)
|
Amount | Coverage | ||||||||||
| Millions of euros | ||||||||||||
|
Real estate assets from loans to the construction and real
estate development sectors in Spain
|
2,214 | 1,045 | ||||||||||
|
Terminated buildings
|
598 | 202 | ||||||||||
|
Homes
|
341 | 110 | ||||||||||
|
Other
|
257 | 92 | ||||||||||
|
Buildings under construction
|
124 | 74 | ||||||||||
|
Homes
|
115 | 71 | ||||||||||
|
Other
|
9 | 3 | ||||||||||
|
Land
|
1,492 | 769 | ||||||||||
|
Urbanized land
|
724 | 392 | ||||||||||
|
Rest of land
|
768 | 377 | ||||||||||
|
Rest of real estate assets from mortgage financing for
households for the purchase of a home
|
682 | 193 | ||||||||||
|
Rest of foreclosed real estate assets
|
127 | 77 | ||||||||||
|
Equity instruments, investments and financing to
non-consolidated companies holding said assets
|
168 | 287 | ||||||||||
The net carrying amount of said assets rose to
€3,191 million with specific recognized provisions
amounting to €1,602 million, for a total coverage of
33%. Likewise, the net carrying amount of the real estate assets
rose to €3,023 million with a provision amounting to
€1,315 million, which implies a coverage of 30.3%.
| 8. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The fair value of a financial asset or a liability on a given
date is the amount for which it could be exchanged or settled,
respectively, between two knowledgeable, willing parties in an
arm’s length transaction in market conditions. The most
objective and common reference for the fair value of a financial
asset or a liability is the price that would be paid for it on
an organized, transparent and deep market (“quoted
price” or “market price”).
If there is no market price for a given financial asset or
liability, its fair value is estimated on the basis of the price
established in recent transactions involving similar instruments
and, in the absence thereof, by using mathematical measurement
models sufficiently tried and trusted by the international
financial community. The estimates used in such models take into
consideration the specific features of the asset or liability to
be measured and, in particular, the various types of risk
associated with the asset or liability. However, the limitations
inherent in the measurement models developed and the possible
inaccuracies of the assumptions required by these models may
mean that the fair value of an asset or liability that is
estimated does not coincide exactly with the price for which the
asset or liability could be exchanged or settled on the date of
its measurement.
F-74
Table of Contents
Determining
the fair value of financial instruments
Below is a comparison of the carrying amount of the Group’s
financial assets and liabilities in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008, and their respective fair values:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||
|
Carrying
|
Fair
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||||||||||||
|
Fair Value and Carrying Amount
|
Notes | Amount | Value | Amount | Value | Amount | Value | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
9 | 19,981 | 19,981 | 16,344 | 16,344 | 14,659 | 14,659 | |||||||||||||||||||||
|
Financial assets held for trading
|
10 | 63,283 | 63,283 | 69,733 | 69,733 | 73,299 | 73,299 | |||||||||||||||||||||
|
Other financial assets designated at fair value through profit
or loss
|
11 | 2,774 | 2,774 | 2,337 | 2,337 | 1,754 | 1,754 | |||||||||||||||||||||
|
Available-for-sale
financial assets
|
12 | 56,456 | 56,456 | 63,521 | 63,521 | 47,780 | 47,780 | |||||||||||||||||||||
|
Loans and receivables
|
13 | 364,707 | 371,359 | 346,117 | 354,933 | 369,494 | 381,845 | |||||||||||||||||||||
|
Held-to-maturity
investments
|
14 | 9,946 | 9,189 | 5,437 | 5,493 | 5,282 | 5,221 | |||||||||||||||||||||
|
Fair value changes of the hedges items in portfolio hedges of
interes rate risk
|
15 | 40 | 40 | — | — | — | — | |||||||||||||||||||||
|
Hedging derivatives
|
15 | 3,563 | 3,563 | 3,595 | 3,595 | 3,833 | 3,833 | |||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||
|
Financial assets held for trading
|
10 | 37,212 | 37,212 | 32,830 | 32,830 | 43,009 | 43,009 | |||||||||||||||||||||
|
Other financial liabilities designated at fair value through
profit or loss
|
11 | 1,607 | 1,607 | 1,367 | 1,367 | 1,033 | 1,033 | |||||||||||||||||||||
|
Financial liabilities at amortized cost
|
23 | 453,164 | 453,504 | 447,936 | 448,537 | 450,605 | 447,722 | |||||||||||||||||||||
|
Fair value changes of the hedged items in portfolio hedges of
interest rate risk
|
15 | (2 | ) | (2 | ) | — | — | — | — | |||||||||||||||||||
For financial instruments whose carrying amount is different
from its fair value, fair value was calculated in the following
manner:
| • | The fair value of “Cash and balances with central banks”, which are short term by their very nature, is equivalent to their carrying amount. | |
| • | The fair value of “Held-to-maturity investments” is equivalent to their quoted price in active markets. | |
| • | The fair values of “Loans and receivables” and “Financial liabilities at amortized cost” were estimated by discounting estimated cash flows using the market interest rates prevailing at each year-end. The “Fair value changes of the hedged items in portfolio hedges of interest rate risk” item registers the difference between the carrying amount of the hedged deposits lent, registered under “Loans and Receivables,” and the fair value calculated using internal models and observable variables of market data (see Note 15). |
For financial instruments whose carrying amount corresponds to
their fair value, the measurement processes used are set forth
below:
| • | Level 1: Measurement using market observable quoted prices for the financial instrument in question, secured from independent sources and linked to active markets. This level includes listed debt securities, listed equity instruments, some derivatives and mutual funds. | |
| • | Level 2: Measurement using valuation techniques the inputs for which are drawn from market observable data. |
F-75
Table of Contents
| • | Level 3: Measurement using valuation techniques, where some of the inputs are not taken from market observable data. Model selection and validation is undertaken at the independent business units. As of December 31, 2010, Level 3 financial instruments accounted for 0.28% of financial assets and 0.01% of financial liabilities. |
Model selection and validation is undertaken by control areas
outside the business units.
The following table shows the main financial instruments carried
at fair value in the accompanying consolidated balance sheets,
broken down by the valuation technique level used to determine
fair value:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||||
|
Fair Value by Levels
|
Notes | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||||||||||||||
|
Financial assets held for trading
|
10 | 28,914 | 33,568 | 802 | 39,608 | 29,236 | 889 | 29,096 | 43,257 | 946 | ||||||||||||||||||||||||||||||
|
Debt securities
|
22,930 | 921 | 508 | 33,043 | 1,157 | 471 | 22,227 | 4,015 | 314 | |||||||||||||||||||||||||||||||
|
Equity instruments
|
5,034 | 92 | 134 | 5,504 | 94 | 185 | 5,348 | 89 | 360 | |||||||||||||||||||||||||||||||
|
Trading derivatives
|
950 | 32,555 | 160 | 1,060 | 27,985 | 233 | 1,521 | 39,153 | 272 | |||||||||||||||||||||||||||||||
|
Other financial assets designated at fair value through
profit or loss
|
11 | 2,326 | 448 | — | 1,960 | 377 | — | 923 | 831 | — | ||||||||||||||||||||||||||||||
|
Debt securities
|
624 | 64 | — | 584 | 54 | — | 515 | 1 | — | |||||||||||||||||||||||||||||||
|
Equity instruments
|
1,702 | 384 | — | 1,376 | 323 | — | 408 | 830 | — | |||||||||||||||||||||||||||||||
|
Available-for-sale
financial assets
|
12 | 41,500 | 13,789 | 668 | 49,747 | 12,367 | 818 | 24,640 | 19,679 | 2,905 | ||||||||||||||||||||||||||||||
|
Debt securities
|
37,024 | 13,352 | 499 | 44,387 | 12,146 | 538 | 19,274 | 19,384 | 1,173 | |||||||||||||||||||||||||||||||
|
Equity instruments
|
4,476 | 437 | 169 | 5,360 | 221 | 280 | 5,366 | 295 | 1,732 | |||||||||||||||||||||||||||||||
|
Hedging derivatives
|
15 | 265 | 3,298 | — | 302 | 3,293 | — | 444 | 3,386 | 2 | ||||||||||||||||||||||||||||||
| LIABILITIES — | ||||||||||||||||||||||||||||||||||||||||
|
Financial liabilities held for trading
|
10 | 4,961 | 32,225 | 25 | 4,936 | 27,797 | 96 | 4,517 | 38,408 | 84 | ||||||||||||||||||||||||||||||
|
Trading derivatives
|
916 | 32,225 | 25 | 1,107 | 27,797 | 96 | 1,817 | 38,408 | 84 | |||||||||||||||||||||||||||||||
|
Short positions
|
4,046 | — | — | 3,830 | — | — | 2,700 | — | — | |||||||||||||||||||||||||||||||
|
Other financial liabilities designated at fair value through
profit or loss
|
11 | — | 1,607 | — | — | 1,367 | — | — | 1,033 | — | ||||||||||||||||||||||||||||||
|
Hedging derivatives
|
15 | 96 | 1,568 | — | 319 | 989 | — | 564 | 662 | — | ||||||||||||||||||||||||||||||
The heading
“Available-for-sale-financial
assets” in the accompanying consolidated balance sheet as
of December 31, 2010, 2009 and 2008, additionally includes
€499 million, €589 million and
€556 million, respectively, accounted for at cost as
indicated in the Section “Financial instruments at
cost”.
F-76
Table of Contents
The following table sets forth the main valuation techniques,
hypotheses and inputs used in the estimation of fair value of
the financial assets classified under in level 2 and 3 as
of December 31, 2010, based on the type of financial
instrument as of December 31, 2010:
F-77
Table of Contents
| (1) | Credit spread: The spread between the interest rate of a risk-free asset (e.g. Treasury securities) and the interest rate of any other security that is identical in every respect except for quality rating. Spreads are considered as Level 3 inputs when referring to illiquid issues. Based on spreads of similar entities. | |
| (2) | Correlation decay: The constant rate of decay that allows us to calculate how the correlation evolves between the different pairs of forward rates. | |
| (3) | Vol-of-Vol: Volatility of implicit volatility. This is a statistical measure of the changes of the spot volatility. | |
| (4) | Reversion Factor: The speed with which volatility reverts to its natural value. | |
| (5) | Volatility- Spot Correlation: A statistical measure of the linear relationship (correlation) between the spot price of a security and its volatility. |
F-78
Table of Contents
The changes in 2010 and 2009 in the balance of Level 3
financial assets and liabilities were as follows:
| 2010 | 2009 | |||||||||||||||
|
Financial Assets Level 3 Changes in the Period
|
Assets | Liabilities | Assets | Liabilities | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the beginning
|
1,707 | 96 | 3,853 | 84 | ||||||||||||
|
Valuation adjustments recognized in the income statement(*)
|
(123 | ) | 12 | (146 | ) | 6 | ||||||||||
|
Valuation adjustments not recognized in the income statement
|
(18 | ) | — | 33 | — | |||||||||||
|
Acquisitions, disposals and liquidations
|
(334 | ) | (100 | ) | (634 | ) | (1 | ) | ||||||||
|
Net transfers to Level 3
|
236 | — | (1,375 | ) | 7 | |||||||||||
|
Exchange differences
|
1 | 17 | (24 | ) | — | |||||||||||
|
Balance at the end
|
1,469 | 25 | 1,707 | 96 | ||||||||||||
| (*) | Profit or loss that are attributable to gains or losses relating to those assets and liabilities held at the end of the reporting period |
In 2010 the balance Level 3 financial assets did not
register any significant changes. Net transfers to Level 3
correspond to debt instruments of credit institutions whose
inputs used in the valuation are no longer observable. This
increase is compensated by sales, settlements and valuations of
equity instruments.
The financial assets transferred between the different levels of
valuation during 2010 were at the following amounts in the
consolidated balance sheets as of December 31, 2010:
|
From:
|
Level I | Level 2 | Level 3 | |||||||||||||||||||||||||
|
Transfer Between
Levels
|
To: | Level 2 | Level 3 | Level 1 | Level 3 | Level 1 | Level2 | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
ASSETS —
|
||||||||||||||||||||||||||||
|
Financial assets held for trading
|
107 | — | 4 | 118 | — | 55 | ||||||||||||||||||||||
|
Available-for-sale
financial assets
|
263 | 4 | 3 | 209 | — | 53 | ||||||||||||||||||||||
|
Hedging derivatives
|
— | — | — | — | — | — | ||||||||||||||||||||||
| LIABILITIES — | — | — | — | — | — | |||||||||||||||||||||||
As of December 31, 2010, the potential effect in the
consolidated income and consolidated equity on the valuation of
Level 3 financial instruments of a change in the main
assumptions if other reasonable models, more or less favorable,
were used, taking the highest or lowest value of the range
deemed probable, would have the following effect:
|
Potential Impact on Consolidated
|
||||||||||||||||
| Income Statement | Potential Impact on Total Equity | |||||||||||||||
|
Most Favorable
|
Least Favorable
|
Most Favorable
|
Least Favorable
|
|||||||||||||
|
Financial Assets Level 3 Sensitivity Analysis
|
Hypotheses | Hypotheses | Hypotheses | Hypotheses | ||||||||||||
| Millions of euros | ||||||||||||||||
|
ASSETS
—
|
||||||||||||||||
|
Financial assets held for trading
|
43 | (90 | ) | — | — | |||||||||||
|
Available-for-sale
financial assets
|
— | — | 13 | (4 | ) | |||||||||||
|
LIABILITIES —
|
||||||||||||||||
|
Financial liabilities held for trading
|
3 | (3 | ) | — | — | |||||||||||
|
Total
|
46 | (93 | ) | 13 | (4 | ) | ||||||||||
Loans
and financial liabilities at fair value through profit or
loss
As of December 31, 2010, 2009 and 2008, there were no loans
or financial liabilities at fair value other than those
recognized in the headings “Other financial assets
designated at fair value through profit and loss” and
“Other
F-79
Table of Contents
financial liabilities designated at fair value through profit
and loss” in the accompanying consolidated balance sheets.
Financial
instruments at cost
The Group had equity instruments, derivatives with equity
instruments as underlyings and certain discretionary profit
sharing arrangements that were recognized at cost in
Group’s consolidated balance sheet, as their fair value
could not be reliably determined. As of December 31, 2010,
2009 and 2008, the balance of these financial instruments
amounted to €499 million, €589 million and
€556 million, respectively. These instruments are
currently in the
available-for-sale
financial assets portfolio.
The fair value of these instruments could not be reliably
estimated because it corresponds to shares in companies not
quoted on organized exchanges, and any valuation technique that
could be used would contain significant unobservable inputs.
The table below outlines the financial assets and liabilities
carried at cost that were sold in 2010, 2009 and 2008:
|
Sales of Financial Instruments at Cost
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Amount of Sale
|
51 | 73 | 219 | |||||||||
|
Carrying Amount at Sale Date
|
36 | 64 | 147 | |||||||||
|
Gains/Losses
|
15 | 9 | 72 | |||||||||
| 9. | CASH AND BALANCES WITH CENTRAL BANKS |
The breakdown of the balance of the headings “Cash and
balances with central banks” and “Financial
liabilities at amortized cost — Deposits from central
banks” in the accompanying consolidated balance sheets was
as follows:
|
Cash and Balances with Central Banks
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Cash
|
4,284 | 4,218 | 3,915 | |||||||||
|
Balances at the Central Banks
|
15,683 | 12,113 | 10,727 | |||||||||
|
Accrued interests
|
14 | 13 | 17 | |||||||||
|
Total
|
19,981 | 16,344 | 14,659 | |||||||||
|
Deposits from Central Banks
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Deposits from Central Banks
|
10,987 | 21,096 | 16,762 | |||||||||
|
Accrued interest until expiration
|
23 | 70 | 82 | |||||||||
|
Total
|
11,010 | 21,166 | 16,844 | |||||||||
F-80
Table of Contents
| 10. | FINANCIAL ASSETS AND LIABILITES HELD FOR TRADING |
| 10.1. | BREAKDOWN OF THE BALANCE |
The breakdown of the balances of these headings in the
accompanying consolidated balance sheets as of December 31,
2010, 2009 and 2008 was as follows:
|
Financial Assets and Liabilities Held-for-Trading
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
ASSETS —
|
||||||||||||
|
Debt securities
|
24,358 | 34,672 | 26,556 | |||||||||
|
Equity instruments
|
5,260 | 5,783 | 5,797 | |||||||||
|
Trading derivatives
|
33,665 | 29,278 | 40,946 | |||||||||
|
Total
|
63,283 | 69,733 | 73,299 | |||||||||
|
LIABILITIES —
|
||||||||||||
|
Trading derivatives
|
33,166 | 29,000 | 40,309 | |||||||||
|
Short positions
|
4,046 | 3,830 | 2,700 | |||||||||
|
Total
|
37,212 | 32,830 | 43,009 | |||||||||
| 10.2. | DEBT SECURITIES |
The breakdown by type of instrument of the balance of this
heading in the accompanying consolidated balance sheets as of
December 31, 2010, 2009 and 2008 was as follows:
|
Debt Securities Held-for-Trading Breakdown by type of
instrument
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Issued by Central Banks
|
699 | 326 | 378 | |||||||||
|
Spanish government bonds
|
7,954 | 13,463 | 6,453 | |||||||||
|
Foreign government bonds
|
11,744 | 17,500 | 13,947 | |||||||||
|
Issued by Spanish financial institutions
|
722 | 431 | 578 | |||||||||
|
Issued by foreign financial institutions
|
1,552 | 954 | 2,247 | |||||||||
|
Other debt securities
|
1,687 | 1,998 | 2,953 | |||||||||
|
Total
|
24,358 | 34,672 | 26,556 | |||||||||
F-81
Table of Contents
10.3. EQUITY
INSTRUMENTS
The breakdown of the balance of this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008 was as follows:
|
Equity Instruments Held-for-Trading Breakdown by Issuer
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Shares of Spanish companies
|
||||||||||||
|
Credit institutions
|
304 | 666 | 444 | |||||||||
|
Other sectors
|
2,738 | 2,602 | 1,888 | |||||||||
|
Subtotal
|
3,042 | 3,268 | 2,332 | |||||||||
|
Shares of foreign companies
|
||||||||||||
|
Credit institutions
|
167 | 156 | 205 | |||||||||
|
Other sectors
|
2,051 | 2,359 | 3,260 | |||||||||
|
Subtotal
|
2,218 | 2,515 | 3,465 | |||||||||
|
Total
|
5,260 | 5,783 | 5,797 | |||||||||
| 10.4. | TRADING DERIVATIVES |
The trading derivatives portfolio arises from the Group’s
need to manage the risks incurred by it in the course of its
normal business activity, mostly for the positions held with
customers. As of December 31, 2010, 2009 and 2008, trading
derivatives were principally contracted in non-organized
markets, with non-resident credit entities as the main
counterparties, and related to foreign exchange and interest
rate risk and shares.
F-82
Table of Contents
Below is a breakdown by transaction type and market, of the fair
value of outstanding financial trading derivatives recognized in
the accompanying consolidated balance sheets and held by the
main companies in the Group, divided into organized and
non-organized (Over The Counter-“OTC”) markets:
Outstanding
Financial Trading Derivatives. Breakdown by Markets and
Transaction Types
|
Equity
|
Precious
|
|||||||||||||||||||||||||||||||
|
Currency
|
Interest
|
Price
|
Metals
|
Commodities
|
Credit
|
Other
|
||||||||||||||||||||||||||
|
2010
|
Risk | Rate Risk | Risk | Risk | Risk | Risk | Risks | Total | ||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||
|
Organized markets
|
||||||||||||||||||||||||||||||||
|
Financial futures
|
— | 2 | 6 | — | — | — | — | 8 | ||||||||||||||||||||||||
|
Options
|
(3 | ) | — | (348 | ) | (11 | ) | (7 | ) | — | — | (369 | ) | |||||||||||||||||||
|
Other products
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Subtotal
|
(3 | ) | 2 | (342 | ) | (11 | ) | (7 | ) | — | — | (361 | ) | |||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
(96 | ) | — | — | — | — | — | — | (96 | ) | ||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | 15 | — | — | — | — | — | 15 | ||||||||||||||||||||||||
|
Swaps
|
(541 | ) | (1,534 | ) | (4 | ) | 2 | 28 | — | — | (2,049 | ) | ||||||||||||||||||||
|
Options
|
(97 | ) | (786 | ) | 45 | — | — | — | 1 | (837 | ) | |||||||||||||||||||||
|
Other products
|
(1 | ) | 11 | — | — | — | (175 | ) | — | (165 | ) | |||||||||||||||||||||
|
Subtotal
|
(735 | ) | (2,294 | ) | 41 | 2 | 28 | (175 | ) | 1 | (3,132 | ) | ||||||||||||||||||||
|
Other financial institutions Forward transactions
|
54 | — | — | — | — | — | — | 54 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | 4 | — | — | — | — | — | 4 | ||||||||||||||||||||||||
|
Swaps
|
— | 1,174 | 31 | — | (5 | ) | — | — | 1,200 | |||||||||||||||||||||||
|
Options
|
(12 | ) | (56 | ) | (144 | ) | — | — | — | — | (212 | ) | ||||||||||||||||||||
|
Other products
|
— | — | — | — | — | 319 | — | 319 | ||||||||||||||||||||||||
|
Subtotal
|
42 | 1,122 | (113 | ) | — | (5 | ) | 319 | — | 1,365 | ||||||||||||||||||||||
|
Other sectors
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
385 | — | — | — | — | — | — | 385 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | 22 | — | — | — | — | — | 22 | ||||||||||||||||||||||||
|
Swaps
|
18 | 1,628 | 145 | — | (15 | ) | — | — | 1,776 | |||||||||||||||||||||||
|
Options
|
(41 | ) | 81 | 395 | — | — | — | — | 435 | |||||||||||||||||||||||
|
Other products
|
— | 14 | — | — | — | (5 | ) | — | 9 | |||||||||||||||||||||||
|
Subtotal
|
362 | 1,745 | 540 | — | (15 | ) | (5 | ) | — | 2,627 | ||||||||||||||||||||||
|
Subtotal
|
(331 | ) | 573 | 468 | 2 | 8 | 139 | 1 | 860 | |||||||||||||||||||||||
|
Total
|
(334 | ) | 575 | 126 | (9 | ) | 1 | 139 | 1 | 499 | ||||||||||||||||||||||
|
of which: Asset Trading Derivatives
|
6,007 | 22,978 | 3,343 | 14 | 186 | 1,125 | 12 | 33,665 | ||||||||||||||||||||||||
|
of which: Liability Trading Derivatives
|
(6,341 | ) | (22,404 | ) | (3,216 | ) | (23 | ) | (185 | ) | (986 | ) | (11 | ) | (33,166 | ) | ||||||||||||||||
F-83
Table of Contents
Outstanding
Financial Trading Derivatives. Breakdown by Markets and
Transaction Types
|
Equity
|
Precious
|
|||||||||||||||||||||||||||||||
|
Currency
|
Interest
|
Price
|
Metals
|
Commodities
|
Credit
|
Other
|
||||||||||||||||||||||||||
|
2009
|
Risk | Rate Risk | Risk | Risk | Risk | Risk | Risks | Total | ||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||
|
Organized markets
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Financial futures
|
— | 2 | 7 | — | — | — | — | 9 | ||||||||||||||||||||||||
|
Options
|
— | — | (143 | ) | — | — | — | — | (143 | ) | ||||||||||||||||||||||
|
Other products
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Subtotal
|
— | 2 | (136 | ) | — | — | — | — | (134 | ) | ||||||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
251 | — | — | — | — | — | — | 251 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | 30 | — | — | — | — | — | 30 | ||||||||||||||||||||||||
|
Swaps
|
(568 | ) | (1,559 | ) | (126 | ) | 2 | 18 | — | — | (2,233 | ) | ||||||||||||||||||||
|
Options
|
(3 | ) | (243 | ) | (536 | ) | — | (6 | ) | — | 3 | (785 | ) | |||||||||||||||||||
|
Other products
|
— | — | — | — | — | (66 | ) | — | (66 | ) | ||||||||||||||||||||||
|
Subtotal
|
(320 | ) | (1,772 | ) | (662 | ) | 2 | 12 | (66 | ) | 3 | (2,803 | ) | |||||||||||||||||||
|
Other financial institutions
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
28 | — | — | — | — | — | — | 28 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | (2 | ) | — | — | — | — | — | (2 | ) | ||||||||||||||||||||||
|
Swaps
|
— | 932 | 29 | — | 1 | — | — | 962 | ||||||||||||||||||||||||
|
Options
|
(1 | ) | (55 | ) | (341 | ) | — | — | — | — | (397 | ) | ||||||||||||||||||||
|
Other products
|
— | — | — | — | — | 345 | — | 345 | ||||||||||||||||||||||||
|
Subtotal
|
27 | 875 | (312 | ) | — | 1 | 345 | — | 936 | |||||||||||||||||||||||
|
Other sectors
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
351 | — | — | — | — | — | — | 351 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | (1 | ) | — | — | — | — | — | (1 | ) | ||||||||||||||||||||||
|
Swaps
|
7 | 1,383 | 44 | — | (9 | ) | — | — | 1,425 | |||||||||||||||||||||||
|
Options
|
45 | 155 | 336 | — | 3 | — | 1 | 540 | ||||||||||||||||||||||||
|
Other products
|
— | 18 | (3 | ) | — | — | (51 | ) | — | (36 | ) | |||||||||||||||||||||
|
Subtotal
|
403 | 1,555 | 377 | — | (6 | ) | (51 | ) | 1 | 2,279 | ||||||||||||||||||||||
|
Subtotal
|
110 | 658 | (597 | ) | 2 | 7 | 228 | 4 | 412 | |||||||||||||||||||||||
|
Total
|
110 | 660 | (733 | ) | 2 | 7 | 228 | 4 | 278 | |||||||||||||||||||||||
|
of which: Asset Trading Derivatives
|
5,953 | 19,398 | 2,836 | 2 | 59 | 1,018 | 12 | 29,278 | ||||||||||||||||||||||||
|
of which: Liability Trading Derivatives
|
(5,843 | ) | (18,738 | ) | (3,569 | ) | — | (52 | ) | (790 | ) | (8 | ) | (29,000 | ) | |||||||||||||||||
F-84
Table of Contents
Outstanding
Financial Trading Derivatives. Breakdown by Markets and
Transaction Types
|
Equity
|
Precious
|
|||||||||||||||||||||||||||||||
|
Currency
|
Interest
|
Price
|
Metals
|
Commodities
|
Credit
|
Other
|
||||||||||||||||||||||||||
|
2008
|
Risk | Rate Risk | Risk | Risk | Risk | Risk | Risks | Total | ||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||
|
Organized markets
|
||||||||||||||||||||||||||||||||
|
Financial futures
|
— | — | 4 | — | — | — | — | 4 | ||||||||||||||||||||||||
|
Options
|
— | 5 | (232 | ) | — | — | 2 | — | (225 | ) | ||||||||||||||||||||||
|
Other products
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Subtotal
|
— | 5 | (228 | ) | — | — | 2 | — | (221 | ) | ||||||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
(978 | ) | — | — | — | — | — | — | (978 | ) | ||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | 68 | — | — | — | — | — | 68 | ||||||||||||||||||||||||
|
Swaps
|
(672 | ) | (1,580 | ) | 154 | — | 15 | (196 | ) | — | (2,279 | ) | ||||||||||||||||||||
|
Options
|
(26 | ) | (140 | ) | (319 | ) | — | — | — | — | (485 | ) | ||||||||||||||||||||
|
Other products
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Subtotal
|
(1,676 | ) | (1,652 | ) | (165 | ) | — | 15 | (196 | ) | — | (3,674 | ) | |||||||||||||||||||
|
Other financial institutions
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
(110 | ) | — | — | — | — | — | — | (110 | ) | ||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Swaps
|
— | 1,278 | 24 | — | 12 | 580 | — | 1,894 | ||||||||||||||||||||||||
|
Options
|
(2 | ) | 57 | (175 | ) | — | 15 | — | — | (105 | ) | |||||||||||||||||||||
|
Other products
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Subtotal
|
(112 | ) | 1,335 | (151 | ) | — | 27 | 580 | — | 1,679 | ||||||||||||||||||||||
|
Other sectors
|
||||||||||||||||||||||||||||||||
|
Forward transactions
|
378 | — | — | — | — | — | — | 378 | ||||||||||||||||||||||||
|
Future rate agreements (FRAs)
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Swaps
|
10 | 1,482 | 49 | — | 63 | (90 | ) | — | 1,514 | |||||||||||||||||||||||
|
Options
|
(91 | ) | 119 | 962 | — | (12 | ) | — | — | 978 | ||||||||||||||||||||||
|
Other products
|
— | 4 | (21 | ) | — | — | — | — | (17 | ) | ||||||||||||||||||||||
|
Subtotal
|
297 | 1,605 | 990 | — | 51 | (90 | ) | — | 2,853 | |||||||||||||||||||||||
|
Subtotal
|
(1,491 | ) | 1,288 | 674 | — | 93 | 294 | — | 858 | |||||||||||||||||||||||
|
Total
|
(1,491 | ) | 1,293 | 446 | — | 93 | 296 | — | 637 | |||||||||||||||||||||||
|
of which: Asset Trading Derivatives
|
10,940 | 22,574 | 5,082 | — | 174 | 2,174 | 2 | 40,946 | ||||||||||||||||||||||||
|
of which: Liability Trading Derivatives
|
(12,431 | ) | (21,281 | ) | (4,636 | ) | — | (81 | ) | (1,878 | ) | (2 | ) | (40,309 | ) | |||||||||||||||||
F-85
Table of Contents
| 11. | OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
The breakdown of the balances of these headings in the
accompanying consolidated balance sheets as of December 31,
2010, 2009 and 2008 was as follows:
|
Other Financial Assets Designated at Fair Value through
Profit or
|
||||||||||||
|
Loss. Breakdown by Type of Instruments
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Assets —
|
||||||||||||
|
Debt securities
|
688 | 639 | 516 | |||||||||
|
Unit-linked products
|
103 | 95 | 516 | |||||||||
|
Other securities
|
585 | 544 | — | |||||||||
|
Equity instruments
|
2,086 | 1,698 | 1,238 | |||||||||
|
Unit-linked products
|
1,467 | 1,242 | 921 | |||||||||
|
Other securities
|
619 | 456 | 317 | |||||||||
|
Total
|
2,774 | 2,337 | 1,754 | |||||||||
|
Liabilities —
|
||||||||||||
|
Other financial liabilities
|
1,607 | 1,367 | 1,033 | |||||||||
|
Unit-linked products
|
1,607 | 1,367 | 1,033 | |||||||||
|
Total
|
1,607 | 1,367 | 1,033 | |||||||||
| 12. | AVAILABLE FOR SALE FINANCIAL ASSETS |
| 12.1. | BREAKDOWN OF THE BALANCE |
The detail of the balance of this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008, broken down by the nature of the financial
instruments, was as follows:
|
Available-for-Sale Financial Assets
|
2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
Debt securities
|
50,875 | 57,071 | 39,831 | |||||||||||||
|
Equity instruments
|
5,581 | 6,450 | 7,949 | |||||||||||||
|
Total
|
56,456 | 63,521 | 47,780 | |||||||||||||
F-86
Table of Contents
12.2. DEBT
SECURITIES
The detail of the balance of the heading “Debt
securities” as of December 31, 2010, 2009 and 2008,
broken down by the nature of the financial instruments, was as
follows:
Debt
Securities
Available-for-Sale
by Type of Financial Instrument
|
2010
|
Unrealized Gains | Unrealized Losses | Fair Value | |||||||||
| Millions of euros | ||||||||||||
|
Domestic Debt Securities
|
||||||||||||
|
Spanish Government and other government agency debt securities
|
58 | (1,264 | ) | 15,337 | ||||||||
|
Other debt securities
|
49 | (206 | ) | 5,229 | ||||||||
|
Issue by Central Banks
|
— | — | — | |||||||||
|
Issue by credit institutions
|
24 | (156 | ) | 4,090 | ||||||||
|
Issue by other issuers
|
25 | (50 | ) | 1,139 | ||||||||
|
Subtotal
|
107 | (1,470 | ) | 20,566 | ||||||||
|
Foreign Debt Securities
|
||||||||||||
|
Mexico
|
470 | (17 | ) | 10,106 | ||||||||
|
Mexican Government and other government agency debt securities
|
441 | (14 | ) | 9,417 | ||||||||
|
Other debt securities
|
29 | (3 | ) | 689 | ||||||||
|
Issue by Central Banks
|
— | — | — | |||||||||
|
Issue by credit institutions
|
28 | (2 | ) | 579 | ||||||||
|
Issue by other issuers
|
1 | (1 | ) | 110 | ||||||||
|
The United States
|
216 | (234 | ) | 6,832 | ||||||||
|
Government securities
|
13 | (9 | ) | 771 | ||||||||
|
US Treasury and other US Government agencies
|
6 | (8 | ) | 578 | ||||||||
|
States and political subdivisions
|
7 | (1 | ) | 193 | ||||||||
|
Other debt securities
|
203 | (225 | ) | 6,061 | ||||||||
|
Issue by Central Banks
|
— | — | — | |||||||||
|
Issue by credit institutions
|
83 | (191 | ) | 2,873 | ||||||||
|
Issue by other issuers
|
120 | (34 | ) | 3,188 | ||||||||
|
Other countries
|
394 | (629 | ) | 12,930 | ||||||||
|
Other foreign governments and other government agency debt
securities
|
169 | (371 | ) | 6,100 | ||||||||
|
Other debt securities
|
225 | (258 | ) | 6,830 | ||||||||
|
Issue by Central Banks
|
1 | — | 945 | |||||||||
|
Issue by credit institutions
|
177 | (188 | ) | 4,420 | ||||||||
|
Issue by other issuers
|
47 | (70 | ) | 1,465 | ||||||||
|
Subtotal
|
1,080 | (880 | ) | 30,309 | ||||||||
|
Total
|
1,187 | (2,350 | ) | 50,875 | ||||||||
The decrease in the balance of the heading “Financial
assets held for trading — Debt securities” in
2010 is due, primarily, to the sale of securities and the
changes in the valuations of these portfolios.
F-87
Table of Contents
Debt
Securities. Available-for-Sale by Type of Financial
Instrument
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
2009
|
Gains | Losses | Value | |||||||||
| Millions of euros | ||||||||||||
|
Domestic Debt Securities
|
||||||||||||
|
Spanish Government and other government agency debt securities
|
309 | (70 | ) | 18,551 | ||||||||
|
Other debt securities
|
178 | (125 | ) | 6,318 | ||||||||
|
Subtotal
|
487 | (195 | ) | 24,869 | ||||||||
|
Foreign Debt Securities
|
||||||||||||
|
The United States
|
174 | (173 | ) | 6,805 | ||||||||
|
Government securities
|
11 | (2 | ) | 637 | ||||||||
|
US Treasury and other US Government agencies
|
4 | (2 | ) | 416 | ||||||||
|
States and political subdivisions
|
7 | — | 221 | |||||||||
|
Other debt securities
|
163 | (171 | ) | 6,168 | ||||||||
|
Other countries
|
893 | (560 | ) | 25,397 | ||||||||
|
Other foreign governments and other government agency debt
securities
|
697 | (392 | ) | 17,363 | ||||||||
|
Other debt securities
|
196 | (168 | ) | 8,034 | ||||||||
|
Subtotal
|
1,067 | (733 | ) | 32,202 | ||||||||
|
Total
|
1,554 | (928 | ) | 57,071 | ||||||||
Debt
Securities. Available-for-Sale by Type of Financial
Instrument
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
2008
|
Gains | Losses | Value | |||||||||
| Millions of euros | ||||||||||||
|
Domestic Debt Securities
|
||||||||||||
|
Spanish Government and other government agency debt securities
|
138 | — | 6,371 | |||||||||
|
Other debt securities
|
91 | (62 | ) | 5,539 | ||||||||
|
Subtotal
|
229 | (62 | ) | 11,910 | ||||||||
|
Foreign Debt Securities
|
||||||||||||
|
The United States
|
155 | (286 | ) | 10,442 | ||||||||
|
Government securities
|
15 | (1 | ) | 840 | ||||||||
|
US Treasury and other US Government agencies
|
— | — | 444 | |||||||||
|
States and political subdivisions
|
15 | (1 | ) | 396 | ||||||||
|
Other debt securities
|
140 | (285 | ) | 9,602 | ||||||||
|
Other countries
|
431 | (488 | ) | 17,478 | ||||||||
|
Other foreign governments and other government agency debt
securities
|
261 | (232 | ) | 9,653 | ||||||||
|
Other debt securities
|
170 | (256 | ) | 7,825 | ||||||||
|
Subtotal
|
586 | (774 | ) | 27,920 | ||||||||
|
Total
|
815 | (836 | ) | 39,830 | ||||||||
F-88
Table of Contents
As of December 31, 2010, the credit ratings of the issuers
of debt securities in the
available-for-sale
portfolio were as follows:
|
Available-for-Sale Financial Assets Debt Secutities by
Rating
|
Fair Value | % | ||||||
| Millions of euros | ||||||||
|
AAA
|
11,638 | 22.9 | % | |||||
|
AA+
|
12,210 | 24.0 | % | |||||
|
AA
|
5,022 | 9.9 | % | |||||
|
AA-
|
2,523 | 5.0 | % | |||||
|
A+
|
1,651 | 3.2 | % | |||||
|
A
|
8,661 | 17.0 | % | |||||
|
A−
|
574 | 1.1 | % | |||||
|
With rating BBB+ or below
|
3,761 | 7.4 | % | |||||
|
Without rating
|
4,835 | 9.5 | % | |||||
|
Total
|
50,875 | 100.0 | % | |||||
12.3. EQUITY
INSTRUMENTS
The breakdown of the balance of the heading “Equity
instruments”, broken down by the nature of the financial
instruments as of December 31, 2010, 2009 and 2008 was as
follows:
Equity
Instruments. Available-for-Sale by Type of Financial
Instrument
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
2010
|
Gains | Losses | Value | |||||||||
| Millions of euros | ||||||||||||
|
Equity instruments listed
|
||||||||||||
|
Listed Spanish company shares
|
1,212 | (7 | ) | 4,583 | ||||||||
|
Credit institutions
|
— | — | 3 | |||||||||
|
Other entities
|
1,212 | (7 | ) | 4,580 | ||||||||
|
Listed foreign company shares
|
8 | (25 | ) | 253 | ||||||||
|
United States
|
1 | — | 13 | |||||||||
|
Other countries
|
7 | (25 | ) | 240 | ||||||||
|
Subtotal
|
1,220 | (32 | ) | 4,836 | ||||||||
|
Unlisted equity instruments
|
||||||||||||
|
Unlisted Spanish company shares
|
— | — | 25 | |||||||||
|
Credit institutions
|
— | — | 1 | |||||||||
|
Other entities
|
— | — | 24 | |||||||||
|
Unlisted foreign companies shares
|
63 | — | 720 | |||||||||
|
United States
|
55 | — | 649 | |||||||||
|
Other countries
|
8 | — | 71 | |||||||||
|
Subtotal
|
63 | — | 745 | |||||||||
|
Total
|
1,283 | (32 | ) | 5,581 | ||||||||
F-89
Table of Contents
Equity
Instruments. Available-for-Sale by Type of Financial
Instrument
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
2009
|
Gains | Losses | Value | |||||||||
| Millions of euros | ||||||||||||
|
Equity instruments listed
|
||||||||||||
|
Listed Spanish company shares
|
1,738 | (12 | ) | 5,383 | ||||||||
|
Credit institutions
|
— | — | — | |||||||||
|
Other entities
|
1,738 | (12 | ) | 5,383 | ||||||||
|
Listed foreign company shares
|
12 | (28 | ) | 250 | ||||||||
|
United States
|
— | (8 | ) | 8 | ||||||||
|
Other countries
|
12 | (20 | ) | 242 | ||||||||
|
Subtotal
|
1,750 | (40 | ) | 5,633 | ||||||||
|
Unlisted equity instruments
|
||||||||||||
|
Unlisted Spanish company shares
|
— | — | 26 | |||||||||
|
Credit institutions
|
— | — | 1 | |||||||||
|
Other entities
|
— | — | 25 | |||||||||
|
Unlisted foreign companies shares
|
109 | — | 791 | |||||||||
|
United States
|
104 | — | 729 | |||||||||
|
Other countries
|
5 | — | 62 | |||||||||
|
Subtotal
|
109 | — | 817 | |||||||||
|
Total
|
1,859 | (40 | ) | 6,450 | ||||||||
Equity
Instruments. Available-for-Sale by Type of Financial
Instrument
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
2008
|
Gains | Losses | Value | |||||||||
| Millions of euros | ||||||||||||
|
Equity instruments listed
|
||||||||||||
|
Listed Spanish company shares
|
1,189 | (95 | ) | 4,639 | ||||||||
|
Credit institutions
|
— | (9 | ) | 22 | ||||||||
|
Other entities
|
1,189 | (86 | ) | 4,617 | ||||||||
|
Listed foreign company shares
|
1 | (141 | ) | 2,443 | ||||||||
|
United States
|
— | (11 | ) | 28 | ||||||||
|
Other countries
|
1 | (130 | ) | 2,416 | ||||||||
|
Subtotal
|
1,190 | (236 | ) | 7,082 | ||||||||
|
Unlisted equity instruments
|
||||||||||||
|
Unlisted Spanish company shares
|
— | (1 | ) | 36 | ||||||||
|
Credit institutions
|
— | — | 1 | |||||||||
|
Other entities
|
— | (1 | ) | 35 | ||||||||
|
Unlisted foreign companies shares
|
7 | — | 831 | |||||||||
|
United States
|
— | — | 626 | |||||||||
|
Other countries
|
7 | — | 205 | |||||||||
|
Subtotal
|
7 | (1 | ) | 867 | ||||||||
|
Total
|
1,197 | (237 | ) | 7,949 | ||||||||
F-90
Table of Contents
| 12.4. | GAINS/LOSSES |
The changes in the gains/losses, net of taxes, recognized under
the equity heading “Valuation adjustments —
Available-for-sale
financial assets” for the year ended December 31,
2010, 2009 and 2008 was as follows:
|
Changes in Valuation Adjustments — Available-for-Sale
Financial Assets
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
1,951 | 931 | 3,546 | |||||||||
|
Valuation gains and losses
|
(1,952 | ) | 1,520 | (2,065 | ) | |||||||
|
Income tax
|
540 | (483 | ) | 1,172 | ||||||||
|
Amounts transferred to income
|
(206 | ) | (18 | ) | (1,722 | ) | ||||||
|
Balance at the end
|
333 | 1,951 | 931 | |||||||||
|
Of which:
|
||||||||||||
|
Debt securities
|
(746 | ) | 456 | (116 | ) | |||||||
|
Equity instruments
|
1,079 | 1,495 | 1,047 | |||||||||
The losses recognized under the heading “Valuation
adjustments — Available for sale financial
assets” in the consolidated income statement as of
December 31, 2010, correspond mainly to Spanish government
debt securities.
Some 13.7% of the losses recognized under the heading
“Valuation adjustments —
Available-for-sale
financial assets” of the debt securities were generated
over more than twelve months. However, as no impairment has been
estimated following an analysis of these unrealized losses, it
can be concluded that they are temporary, because: the interest
payment periods of all the fixed-income securities have been
satisfied; and because there is no evidence that the issuer will
not continue to comply with payment obligations, nor that future
payments of both principal and interests will not be sufficient
to recover the cost of the debt securities.
The losses recognized under the heading “Impairment losses
on financial assets (net) — Available for sale
assets” in the income statement year ended
December 31, 2010 amounted to €155 million
(€277 million and €145 million for the year
ended December 31, 2009 and 2008, respectively) (see
Note 49).
| 13. | LOANS AND RECEIVABLES |
| 13.1. | BREAKDOWN OF THE BALANCE |
The detail of the balance of this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008, based on the nature of the financial instrument, is as
follows:
|
Loans and Receivables
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Loans and advances to credit institutions
|
23,637 | 22,239 | 33,856 | |||||||||
|
Loans and advances to customers
|
338,857 | 323,442 | 335,260 | |||||||||
|
Debt securities
|
2,213 | 436 | 378 | |||||||||
|
Total
|
364,707 | 346,117 | 369,494 | |||||||||
The increase in 2010 of the “Debt securities” item in
the above table is mainly due to the reclassification of some
debt instruments issued by governments and registered under the
heading
“Available-for-sale
financial assets” in 2009.
F-91
Table of Contents
| 13.2. | LOANS AND ADVANCES TO CREDIT INSTITUTIONS |
The detail of the balance under this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008, broken down by the nature of the related financial
instrument, is as follows:
|
Loans and Advances to Credit Institutions
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Reciprocal accounts
|
168 | 226 | 390 | |||||||||
|
Deposits with agreed maturity
|
7,307 | 8,301 | 8,005 | |||||||||
|
Demand deposits
|
2,008 | 2,091 | 6,433 | |||||||||
|
Other accounts
|
6,299 | 6,125 | 9,250 | |||||||||
|
Reverse repurchase agreements
|
7,822 | 5,457 | 9,601 | |||||||||
|
Total gross
|
23,604 | 22,200 | 33,679 | |||||||||
|
Valuation adjustments
|
33 | 39 | 177 | |||||||||
|
Impairment losses
|
(67 | ) | (68 | ) | (74 | ) | ||||||
|
Accrued interests and fees
|
101 | 110 | 223 | |||||||||
|
Hedging derivatives and others
|
(1 | ) | (3 | ) | 28 | |||||||
|
Total
|
23,637 | 22,239 | 33,856 | |||||||||
| 13.3. | LOANS AND ADVANCES TO CUSTOMERS |
The detail of the balance under this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008, broken down by the nature of the related financial
instrument, is as follows:
|
Loans and Advances to Customers
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Financial paper
|
1,982 | 602 | 587 | |||||||||
|
Commercial credit
|
21,229 | 24,031 | 29,215 | |||||||||
|
Secured loans
|
150,782 | 148,874 | 145,522 | |||||||||
|
Credit accounts
|
23,705 | 19,683 | 21,593 | |||||||||
|
Other loans
|
101,999 | 98,238 | 111,597 | |||||||||
|
Reverse repurchase agreements
|
4,764 | 987 | 1,658 | |||||||||
|
Receivable on demand and other
|
19,246 | 15,253 | 13,372 | |||||||||
|
Finance leases
|
8,141 | 8,222 | 9,341 | |||||||||
|
Impaired assets
|
15,361 | 15,197 | 8,437 | |||||||||
|
Total gross
|
347,210 | 331,087 | 341,322 | |||||||||
|
Valuation adjustments
|
(8,353 | ) | (7,645 | ) | (6,062 | ) | ||||||
|
Impairment losses
|
(9,396 | ) | (8,720 | ) | (7,431 | ) | ||||||
|
Accrued interests and fees
|
195 | 320 | 719 | |||||||||
|
Hedging derivatives and others
|
848 | 755 | 650 | |||||||||
|
Total net
|
338,857 | 323,442 | 335,260 | |||||||||
Of all the “Loans and advances to customers” as of
December 31, 2010, 23.1% were concluded with fixed-interest
conditions and 76.9% were variable interest.
F-92
Table of Contents
The Group, via several of its banks, provides its customers with
financing to purchase assets, including movable and immovable
property, in the form of the finance lease arrangements
recognized under this heading. The breakdown of these finance
leases as of December 31, 2010, 2009 and 2008 was as
follows:
|
Financial Lease Arrangements
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Movable property
|
4,748 | 4,963 | 6,158 | |||||||||
|
Real Estate
|
3,393 | 3,259 | 3,271 | |||||||||
|
Fixed rate
|
42% | 38% | 33% | |||||||||
|
Floating rate
|
58% | 62% | 67% | |||||||||
As of December 31, 2010, non-accrued financial income from
finance leases granted to customers amounted to
€132 million. The unguaranteed residual value of these
contracts amounted to €435 million. Impairment losses
determined collectively on finance lease arrangements amounted
to €12 million.
The heading “Loans and receivables — Loans and
advances to customers” in the accompanying consolidated
balance sheets includes mortgage loans that, as mentioned in
Note 35, are considered a suitable guarantee for the issue
of long-term mortgage covered bonds (Note 23.4), pursuant
to the Mortgage Market Act.
The heading “Loans and receivables — Loans and
advances to customers” heading of the accompanying
consolidated balance sheets includes securitized loans that have
not been derecognized as mentioned in Note 2.2.2. The
amounts recognized in the accompanying consolidated balance
sheets corresponding to these securitized loans as of
December 31, 2010, 2009 and 2008 are set forth below:
|
Securitized Loans
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Securitized mortgage assets
|
31,884 | 33,786 | 34,032 | |||||||||
|
Other securitized assets
|
10,563 | 10,597 | 10,341 | |||||||||
|
Commercial and industrial loans
|
6,263 | 4,356 | 2,634 | |||||||||
|
Finance leases
|
771 | 1,380 | 2,238 | |||||||||
|
Loans to individuals
|
3,403 | 4,536 | 5,124 | |||||||||
|
Rest
|
126 | 325 | 345 | |||||||||
|
Total
|
42,447 | 44,383 | 44,373 | |||||||||
|
Of which:
|
||||||||||||
|
Liabilities associated to assets retained on the balance sheet(*)
|
8,846 | 9,012 | 14,948 | |||||||||
| (*) | These liabilities are recognized under “Financial liabilities at amortized cost — Debt securities” in the accompanying consolidated balance sheets (Note 23). |
Some other securitized loans have been derecognized where
substantially all attendant risks or benefits were effectively
transferred. As of December 31, 2010, 2009 and 2008, the
outstanding balances of derecognized securitized loans were as
follows:
|
Derecognized Securitized Loans
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Securitized mortgage assets
|
24 | 116 | 132 | |||||||||
|
Other securitized assets
|
176 | 276 | 413 | |||||||||
|
Total
|
200 | 392 | 545 | |||||||||
F-93
Table of Contents
| 14. | HELD-TO-MATURITY INVESTMENTS |
The breakdown of the balance of this heading in the accompanying
consolidated balance sheets was as follows:
Held-to-Maturity
Investments. Breakdown by Type of Financial
Instrument
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
|
2010
|
Cost | Gains | Losses | Value | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Domestic Debt Securities
|
||||||||||||||||
|
Spanish Government and other government agency debt securities
|
6,611 | 2 | (671 | ) | 5,942 | |||||||||||
|
Other domestic debt securities
|
892 | — | (63 | ) | 829 | |||||||||||
|
Issue by credit institutions
|
290 | — | (13 | ) | 277 | |||||||||||
|
Issue by other issuers
|
602 | — | (50 | ) | 552 | |||||||||||
|
Subtotal
|
7,503 | 2 | (734 | ) | 6,771 | |||||||||||
|
Foreign Debt Securities
|
||||||||||||||||
|
Other foreign governments and other government agency debt
securities not issued by the governments of the countries where
they operate
|
2,181 | 10 | (20 | ) | 2,171 | |||||||||||
|
Issue by credit institutions
|
262 | 6 | (21 | ) | 247 | |||||||||||
|
Subtotal
|
2,443 | 16 | (41 | ) | 2,418 | |||||||||||
|
Total
|
9,946 | 18 | (775 | ) | 9,189 | |||||||||||
The net increase in the balance in 2010 is due primarily to the
acquisition of debt securities from the Spanish government.
The foreign securities by the Group as of December 31,
2010, 2009 and 2008 in the
held-to-maturity
portfolio correspond to European issuers.
Held-to-Maturity
Investments. Breakdown by Type of Financial
Instrument
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
|
2009
|
Cost | Gains | Losses | Value | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Domestic Debt Securities
|
||||||||||||||||
|
Spanish Government and other government agency debt securities
|
1,674 | 21 | (13 | ) | 1,682 | |||||||||||
|
Other domestic debt securities
|
952 | 8 | (18 | ) | 942 | |||||||||||
|
Subtotal
|
2,626 | 29 | (31 | ) | 2,624 | |||||||||||
|
Foreign Debt Securities
|
||||||||||||||||
|
Government and other government agency debt securities
|
2,399 | 64 | (7 | ) | 2,456 | |||||||||||
|
Other debt securities
|
412 | 7 | (6 | ) | 413 | |||||||||||
|
Subtotal
|
2,811 | 71 | (13 | ) | 2,869 | |||||||||||
|
Total
|
5,437 | 100 | (44 | ) | 5,493 | |||||||||||
F-94
Table of Contents
Held-to-Maturity
Investments. Breakdown by Type of Financial
Instrument
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
|
2008
|
Cost | Gains | Losses | Value | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Domestic Debt Securities
|
||||||||||||||||
|
Spanish Government and other government agency debt securities
|
1,412 | 7 | (7 | ) | 1,412 | |||||||||||
|
Other domestic debt securities
|
980 | — | (53 | ) | 927 | |||||||||||
|
Subtotal
|
2,392 | 7 | (60 | ) | 2,339 | |||||||||||
|
Foreign Debt Securities
|
||||||||||||||||
|
Government and other government agency debt securities
|
2,432 | 22 | (17 | ) | 2,437 | |||||||||||
|
Other debt securities
|
458 | 3 | (16 | ) | 445 | |||||||||||
|
Subtotal
|
2,890 | 25 | (33 | ) | 2,882 | |||||||||||
|
Total
|
5,282 | 32 | (93 | ) | 5,221 | |||||||||||
As of December 31, 2010, the distribution to the credit
ratings of the issuers of debt securities of the
held-to-maturity
investments was as follows:
|
Held to Maturuty Investments
|
||||||||
|
Debt Secutities by Rating
|
Carrying Amount | % | ||||||
| Millions of euros | ||||||||
|
AAA
|
1,908 | 19.2 | % | |||||
|
AA+
|
6,703 | 67.4 | % | |||||
|
AA−
|
1,222 | 12.3 | % | |||||
|
With rating A+ or below
|
113 | 1.1 | % | |||||
|
Total
|
9,946 | 100.0 | % | |||||
Following an analysis of the unrealized losses, it can be
concluded that they are temporary, because: the interest payment
periods of all the fixed-income securities have been satisfied;
and because there is no evidence that the issuer will not
continue to comply with payment obligations, nor that future
payments of both principal and interests will not be sufficient
to recover the cost of the securities.
The following is a summary of the gross changes in 2010, 2009
and 2008 in this heading in the accompanying consolidated
balance sheets, not including impairment losses:
|
Held-to-Maturity Investments Changes on the Period
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at the beginning
|
5,438 | 5,285 | 5,589 | |||||||||
|
Acquisitions
|
4,969 | 426 | — | |||||||||
|
Redemptions and others
|
(460 | ) | (273 | ) | (304 | ) | ||||||
|
Balance at the end
|
9,947 | 5,438 | 5,285 | |||||||||
|
Impairment
|
(1 | ) | (1 | ) | (3 | ) | ||||||
|
Total
|
9,946 | 5,437 | 5,282 | |||||||||
F-95
Table of Contents
| 15. | HEDGING DERIVATIVES (RECEIVABLE AND PAYABLE) AND FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES |
The breakdown of the balance of these items in the accompanying
consolidated balance sheets was as follows:
|
Hedging Derivatives and Fair Value Changes of the
|
||||||||||||
|
Hedged Items in Portfolio Hedges of Interest Rate Risk
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
ASSETS —
|
||||||||||||
|
Fair value changes of the hedged items in portfolio hedges of
interest rate risk
|
40 | — | — | |||||||||
|
Hedging derivatives
|
3,563 | 3,595 | 3,833 | |||||||||
|
LIABILITIES —
|
||||||||||||
|
Fair value changes of the hedged items in portfolio hedges of
interest rate risk
|
(2 | ) | — | — | ||||||||
|
Hedging derivatives
|
1,664 | 1,308 | 1,226 | |||||||||
As of December 31, 2010, 2009 and 2008, the main positions
hedged by the Group and the derivatives assigned to hedge those
positions are:
| • | Fair value hedge: |
| - | Available-for-sale fixed-interest debt securities: this risk is hedged using interest-rate derivatives (fixed-variable swaps). | |
| - | Long term fixed-interest debt issued by Group: this risk is hedged using interest-rate derivatives (fixed-variable swaps). | |
| - | Available-for-sale equity securities: this risk is hedged using equity swaps. | |
| - | Fixed-interest loans: this risk is hedged using interest-rate derivatives (fixed-variable swaps). | |
| - | Fixed-interest deposit portfolio hedges: this risk is hedged using fixed-variable swaps and derivatives for interest rate. The valuation of the deposit hedges corresponding to interest-rate risk is recognized under the heading “Changes in the fair value of the hedged items in the portfolio hedges of interest-rate risk”. |
| • | Cash-flow hedge: Most of the hedged items are floating interest-rate loans: this risk is hedged using foreign-exchange and interest-rate swaps. | |
| • | Net foreign-currency investment hedge: The risks hedged are foreign-currency investments in the Group’s subsidiaries abroad. This risk is hedged mainly with foreign-exchange options and forward currency purchase. |
Note 7 analyzes the Group’s main risks that are hedged
using these financial instruments.
F-96
Table of Contents
The details of the fair value of the hedging derivatives,
organized hedged risk, recognized in the accompanying
consolidated balance sheets are as follows:
Hedging
Derivatives. Breakdown of the Fair Value by Markets and
Transaction Type
|
Currency
|
Interest
|
Equity
|
Other
|
|||||||||||||||||
|
2010
|
Risk | Rate Risk | Price Risk | Risks | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 1,645 | 7 | 3 | 1,655 | |||||||||||||||
|
Of wich: Macro hedge
|
— | (282 | ) | — | — | (282 | ) | |||||||||||||
|
Cash flow hedge
|
(4 | ) | 160 | — | — | 156 | ||||||||||||||
|
Net investment in a foreign operation hedge
|
3 | (6 | ) | — | — | (3 | ) | |||||||||||||
|
Subtotal
|
(1 | ) | 1,799 | 7 | 3 | 1,808 | ||||||||||||||
|
Other financial Institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 109 | 5 | — | 114 | |||||||||||||||
|
Of wich: Macro hedge
|
— | (20 | ) | — | — | (20 | ) | |||||||||||||
|
Cash flow hedge
|
— | (1 | ) | — | — | (1 | ) | |||||||||||||
|
Net investment in a foreign operation hedge
|
— | — | — | — | — | |||||||||||||||
|
Subtotal
|
— | 108 | 5 | — | 113 | |||||||||||||||
|
Other sectors
|
||||||||||||||||||||
|
Fair value hedge
|
— | (12 | ) | — | — | (12 | ) | |||||||||||||
|
Of wich: Macro hedge
|
— | (2 | ) | — | — | (2 | ) | |||||||||||||
|
Cash flow hedge
|
— | (10 | ) | — | — | (10 | ) | |||||||||||||
|
Net investment in a foreign operation hedge
|
— | — | — | — | — | |||||||||||||||
|
Subtotal
|
— | (22 | ) | — | — | (22 | ) | |||||||||||||
|
Total
|
(1 | ) | 1,885 | 12 | 3 | 1,899 | ||||||||||||||
|
of which: Asset Hedging Derivatives
|
14 | 3,486 | 60 | 3 | 3,563 | |||||||||||||||
|
of which: Liability Hedging Derivatives
|
(15 | ) | (1,601 | ) | (48 | ) | — | (1,664 | ) | |||||||||||
F-97
Table of Contents
Hedging
Derivatives. Breakdown of Fair Value by Markets and Transaction
Type
|
Currency
|
Interest
|
Equity
|
Other
|
|||||||||||||||||
|
2009
|
Risk | Rate Risk | Price Risk | Risks | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 1,985 | (32 | ) | — | 1,953 | ||||||||||||||
|
Cash flow hedge
|
17 | 258 | (4 | ) | (4 | ) | 267 | |||||||||||||
|
Net investment in a foreign operation hedge
|
1 | (27 | ) | — | — | (26 | ) | |||||||||||||
|
Subtotal
|
18 | 2,216 | (36 | ) | (4 | ) | 2,194 | |||||||||||||
|
Other financial Institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 123 | (21 | ) | — | 102 | ||||||||||||||
|
Subtotal
|
— | 123 | (21 | ) | — | 102 | ||||||||||||||
|
Other sectors
|
||||||||||||||||||||
|
Fair value hedge
|
— | (9 | ) | — | — | (9 | ) | |||||||||||||
|
Subtotal
|
— | (9 | ) | — | — | (9 | ) | |||||||||||||
|
Total
|
18 | 2,330 | (57 | ) | (4 | ) | 2,287 | |||||||||||||
|
Of which: Asset Hedging Derivatives
|
22 | 3,492 | 81 | — | 3,595 | |||||||||||||||
|
Of which: Liability Hedging Derivatives
|
(4 | ) | (1,162 | ) | (138 | ) | (4 | ) | (1,308 | ) | ||||||||||
Hedging
Derivatives. Breakdown of the Fair Value by Markets and
Transaction Type
|
Currency
|
Interest
|
Equity
|
Other
|
|||||||||||||||||
|
2008
|
Risk | Rate Risk | Price Risk | Risks | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
OTC markets
|
||||||||||||||||||||
|
Credit institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 1,972 | — | — | 1,972 | |||||||||||||||
|
Cash flow hedge
|
106 | 338 | — | — | 444 | |||||||||||||||
|
Net investment in a foreign operation hedge
|
99 | (20 | ) | — | — | 79 | ||||||||||||||
|
Subtotal
|
205 | 2,290 | — | — | 2,495 | |||||||||||||||
|
Other financial Institutions
|
||||||||||||||||||||
|
Fair value hedge
|
— | 68 | — | — | 68 | |||||||||||||||
|
Cash flow hedge
|
— | 32 | — | — | 32 | |||||||||||||||
|
Subtotal
|
— | 100 | — | — | 100 | |||||||||||||||
|
Other sectors
|
||||||||||||||||||||
|
Fair value hedge
|
— | 1 | — | — | 1 | |||||||||||||||
|
Cash flow hedge
|
11 | — | — | — | 11 | |||||||||||||||
|
Subtotal
|
11 | 1 | — | — | 12 | |||||||||||||||
|
Total
|
216 | 2,391 | — | — | 2,607 | |||||||||||||||
|
of which: Asset Hedging Derivatives
|
227 | 3,606 | — | — | 3,833 | |||||||||||||||
|
of which: Liability Hedging Derivatives
|
(11 | ) | (1,215 | ) | — | — | (1,226 | ) | ||||||||||||
F-98
Table of Contents
The most significant cash flows forecasted for the coming years
for cash flow hedging held on the balance sheet as of
December 31, 2010 are shown below:
|
From 3
|
||||||||||||||||||||
|
3 Months
|
Months to
|
From 1 to
|
More than
|
|||||||||||||||||
|
Cash Flows of Hedging Instruments
|
or Less | 1 Year | 5 Years | 5 Years | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Receivable cash inflows
|
103 | 292 | 1,080 | 2,276 | 3,751 | |||||||||||||||
|
Payable cash outflows
|
103 | 168 | 815 | 2,395 | 3,481 | |||||||||||||||
The cash flows indicated above will impact the consolidated
income statements until 2049. The amounts previously recognized
in equity from cash flow hedge that were removed from equity and
included in consolidated income statement — in the
heading “Gains or losses of financial assets and
liabilities (net) or in the heading “Exchange differences
(net)” — during the years 2010, 2009 and 2008
reached €34 million, €11 million and
€12 million, respectively.
The amount for derivatives designated as accounting hedges that
did not pass the effectiveness test in 2010 was not significant.
| 16. | NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
The composition of the balance of the heading “Non-current
assets held for sale” in the accompanying consolidated
balance sheets, broken down by the origin of the assets, is as
follows:
|
Non-Current Assets Held-for-Sale
|
||||||||||||
|
Breakdown by type of Asset
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Property, plants and equipment
|
252 | 397 | 151 | |||||||||
|
Buildings for own use
|
188 | 313 | 79 | |||||||||
|
Operating leases
|
64 | 84 | 72 | |||||||||
|
Foreclosures and recoveries
|
1,513 | 861 | 391 | |||||||||
|
Foreclosures
|
1,427 | 795 | 364 | |||||||||
|
Recoveries from financial leases
|
86 | 66 | 27 | |||||||||
|
Accrued amortization(*)
|
(52 | ) | (41 | ) | (34 | ) | ||||||
|
Impairment losses
|
(184 | ) | (167 | ) | (64 | ) | ||||||
|
Total
|
1,529 | 1,050 | 444 | |||||||||
| (*) | Until classified as non-current assets held for sale |
As of December 31, 2010, 2009 and 2008, there were no
liabilities associated with non-current assets held for sale.
F-99
Table of Contents
As of December 31, 2010, 2009 and 2008, the changes in the
heading “Non-current assets held for sale” of the
accompanying consolidated balance sheets were as follow:
|
Non-Current Assets Held-for-Sale.
|
||||||||||||||||
|
Changes in the Period
|
2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the beginning
|
1,217 | 506 | 306 | |||||||||||||
|
Additions
|
1,513 | 919 | 515 | |||||||||||||
|
Retirements
|
(1,017 | ) | (780 | ) | (374 | ) | ||||||||||
|
Acquisition of subsidiaries
|
— | — | — | |||||||||||||
|
Transfers
|
145 | 493 | 57 | |||||||||||||
|
Exchange difference and other
|
(172 | ) | 79 | 2 | ||||||||||||
|
Balance at the end(1)
|
1,686 | 1,217 | 506 | |||||||||||||
|
Impairment —
|
||||||||||||||||
|
Balance at the beginning
|
167 | 62 | 66 | |||||||||||||
|
Additions
|
221 | 134 | 38 | |||||||||||||
|
Retirements
|
(44 | ) | (7 | ) | (22 | ) | ||||||||||
|
Transfers
|
38 | 77 | 25 | |||||||||||||
|
Exchange difference and other
|
(225 | ) | (99 | ) | (45 | ) | ||||||||||
|
Balance at the end(2)
|
157 | 167 | 62 | |||||||||||||
|
Total(1) — (2)
|
1,529 | 1,050 | 444 | |||||||||||||
| 16.1. | FROM TANGIBLE ASSETS FOR OWN USE |
The most significant changes in the balance of the heading
“Non-current assets held for sale — From tangible
assets for own use”, in 2010, 2009 and 2008, were a result
of the following operations:
Sale
of property with leaseback in 2010 and 2009.
In 2009, 1,150 properties (offices and other singular buildings)
belonging to the Group in Spain were reclassified to this
heading at an amount of €426 million, for which a
sales plan had been established. As of December 31, 2008,
these assets were recognized under the heading “Tangible
assets — Property, plants and equipment —
For own use” of the accompanying consolidated balance
sheets (Note 19).
In 2010 and 2009, the Bank sold 164 and 971 properties,
respectively, in Spain to investments not related to BBVA Group
for a total sale price of €404 million and
€1,263 million at market prices, respectively, without
making funds available to the buyers to pay the price of these
transactions.
At the same time the Bank signed long-term operating leases with
these investors on the aforementioned properties for periods of
10, 15, 20, 25 or 30 years (according to the property) and
renewable. Most have obligatory periods of 20 or 30 years.
Most can be extended for a maximum of three additional
5-year
periods, up to a total of 35 to 45 years. The total annual
nominal income from the real estate in said operating lease
arrangements amounted to €115 million. This income is
updated annually based on the terms and conditions set forth in
said arrangements.
In 2010 and 2009, a total of €113 and
€31 million, respectively, were registered to the
enclosed income statement for income from rents (Note 46.2)
corresponding to said lease contracts.
The sale agreements also established call options for each of
the properties at the termination of each of the lease
agreements so that the Bank can repurchase these properties The
repurchasing price of these call options will be the market
value as determined by an independent expert. For this reason,
these transactions have been considered as firm sales.
Therefore, the Group made a gross profit of €273 and
€914 million, recognized under the heading “Gains
(losses) in non-current assets held for sale not classified as
discontinued operations” in the accompanying consolidated
income statements for 2010 and 2009 (see Note 52).
F-100
Table of Contents
The current value of the future minimum payments the Bank will
incur in the mandatory period, as of December 31, 2010, is
€106 million in 1 year, €349 million
between 2 and 5 years and €649 million in more
than 5 years.
Sale
of the Bancomer building in 2008
On March 4, 2008, BBVA Bancomer, S.A. de C.V. completed the
process of selling its Centro Bancomer property together with
its car part, for which it obtained a gross profit of
€61.3 million, recognized under the heading
“Gains (losses) in non-current assets held for sale not
classified as discontinued operations” in the accompanying
consolidated income statement for 2008 (see Note 52). This
transaction was carried out without the purchaser receiving any
type of finance from any BBVA Group entity.
Jointly with the sale agreement, an operational leasing
agreement was concluded for this property and its car park for a
3-year
period extendable for 2 more years.
16.2. FROM
FORECLOSURES OR RECOVERIES
As of December 31, 2010, the balance of the heading
“Non-current assets held for sale - Foreclosures or
recoveries” was made up of €1,114 million of
assets for residential use, €209 million of assets for
tertiary use (industrial, commercial or offices) and
€10 million of assets for agricultural use.
In 2010, the additions of assets through foreclosures or
recoveries amounted to €1,306 million. The
derecognitions in 2010 through sales of such assets amounted to
€700 million.
As of December 31, 2010, mean maturity of the assets
through foreclosures or recoveries was less than 2 years.
In 2010, some of the sales operations of these assets were
financed by some Group entities. The amount of the loans granted
to the buyers of these assets was €193 million, with a
mean percentage financed of 90.4% of the price of sale.
As of December 31, 2010, there were €32 million
of gains from the financed sale of these assets yet to be
recognized for transactions completed in 2010 as well as in
previous years.
| 17. | INVESTMENTS |
The breakdown of the balances of “Investments in entities
accounted for using the equity method” in accompanying the
consolidated balance sheets is as follows:
|
Investments in Entities Accounted for Using the Equity
Method
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Associate entities
|
4,247 | 2,614 | 894 | |||||||||
|
Jointly controlled entities
|
300 | 308 | 573 | |||||||||
|
Total
|
4,547 | 2,922 | 1,467 | |||||||||
F-101
Table of Contents
17.1. ASSOCIATES
The following table shows the carrying amount of the most
significant of the Group’s investments in associates in the
accompanying consolidated balance sheets:
|
Associates Entities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Grupo CITIC
|
4,022 | 2,296 | 541 | |||||||||
|
Occidental Hoteles Management, S.L.(*)
|
— | 84 | 128 | |||||||||
|
Tubos Reunidos, S.A.(**)
|
51 | 52 | 54 | |||||||||
|
BBVA Elcano Empresarial II, S.C.R.R.S., S.A.
|
37 | 49 | 39 | |||||||||
|
BBVA Elcano Empresarial, S.C.R.R.S., S.A.
|
37 | 49 | 39 | |||||||||
|
Rest of associate
|
100 | 84 | 93 | |||||||||
|
Total
|
4,247 | 2,614 | 894 | |||||||||
| (*) | Since November 2010 the company had been accounted for as a jointly controlled entitie. | |
| (**) | Company that quoted in Madrid’s stock exchange market. |
The investment in the CITIC Group includes the investment in
Citic International Financial Holdings Limited
(“CIFH”) and China National Citic Bank
(“CNCB”).
Appendix IV shows details of associates as of
December 31, 2010.
The details of the balance and gross changes as of
December 31, 2010, 2009 and 2008 under this heading in the
accompanying consolidated balance sheets are as follows:
|
Associates Entities. Changes in the Year Breakdown of
Goodwill
|
2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the beginning
|
2,614 | 894 | 846 | |||||||||||||
|
Acquisitions and capital increases(*)
|
1,210 | 53 | 655 | |||||||||||||
|
Disposals
|
(9 | ) | (2 | ) | (782 | ) | ||||||||||
|
Transfers and others(**)
|
432 | 1,669 | 175 | |||||||||||||
|
Balance at the end
|
4,247 | 2,614 | 894 | |||||||||||||
|
Of which:
|
||||||||||||||||
|
Goodwill
|
1,574 | 844 | 217 | |||||||||||||
|
CITIC Group
|
1,570 | 841 | 214 | |||||||||||||
|
Rest
|
4 | 3 | 3 | |||||||||||||
| (*) | The change of 2010 corresponds basically to the acquisition of 4.93% of CNCB formalized in April 2010 | |
| (**) | Correspond mainly to the reclassification from the heading “Available-for-sale financial assets ‘” of CNCB investmentand in 2009 and in 2010 due to the exchange rate development. |
Agreement
with the CITIC Group
The BBVA Group holds several agreements with the CITIC Group to
develop a strategic alliance in the Chinese market. BBVA’s
investment in CNCB is considered strategic for the Group, as it
is the platform for developing its business in continental China
and is also key for the development of CITIC’s
international business. BBVA has the status of “sole
strategic investor” in CNCB. In 2009, BBVA’s share in
CNCB was reclassified from “Available for sale financial
assets” of the accompanying consolidated balance sheets
(Note 12) to the heading “Investments in entities
accounted for using the equity method —
Associates” since the Group gained significant influence in
the holding.
F-102
Table of Contents
Furthermore, on April 1, 2010, after obtaining the
corresponding authorizations, the purchase of an additional
4.93% of CNCB’s capital was finalized for
€1,197 million.
As of December 31, 2010, BBVA had a 29.68% holding in CIFH
and 15% in CNCB.
17.2. JOINTLY
CONTROLLED ENTITIES
This heading of the accompanying consolidated balance sheets
encompasses the jointly controlled entities that the Group has
considered should be accounted for using the equity method (see
Note 2.1) because this better reflects the economic reality
of such holdings.
The following table shows the balances of the most significant
of the Group’s investments in the primary jointly
controlled entities in the accompanying consolidated balance
sheets:
|
Jointly Controlled Entities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Corporación IBV Participaciones Empresariales S.A.
|
71 | 157 | 385 | |||||||||
|
Occidental Hoteles Management, S.L.(*)
|
88 | — | — | |||||||||
|
Fideicomiso F/403853-5 BBVA Bancomer
S
o
S ZIBAT
|
22 | 20 | 20 | |||||||||
|
I+D Mexico, S.A.
|
22 | 15 | 14 | |||||||||
|
Fideicomiso Hares BBVA Bancomer F/47997-2(**)
|
— | 15 | 12 | |||||||||
|
Fideicomiso F/70413 Mirasierra
|
14 | 12 | — | |||||||||
|
Fideicomiso F/402770-2 Alamar
|
11 | 10 | — | |||||||||
|
Fideicomiso F/403112-6 Dos lagos
|
11 | 9 | — | |||||||||
|
Las Pedrazas Golf, S.L.
|
10 | 9 | 16 | |||||||||
|
Altitude Software SGPS, S.A.
|
10 | — | — | |||||||||
|
Rest
|
41 | 61 | 111 | |||||||||
|
Total
|
300 | 308 | 558 | |||||||||
|
Of which
|
||||||||||||
|
Goodwill
|
9 | 5 | 8 | |||||||||
| (*) | Since November 2010 the company had been accounted for as a jointly controlled entitie. | |
| (**) | Since august 2010 the company had been accounter for as a subsidiary. |
If the jointly controlled entities accounted for using equity
method had been accounted for by the proportionate method, the
effect on the Group’s main consolidated figures as of
December 31, 2010, 2009 and 2008 would have been as follows:
|
Jointly Controlled Entities. Effect on the Group’s main
figures
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Assets
|
1,062 | 863 | 910 | |||||||||
|
Liabilities
|
313 | 469 | 139 | |||||||||
|
Net operating income
|
15 | (12 | ) | 17 | ||||||||
Details of the jointly controlled entities consolidated using
the equity method as of December 31, 2010 are shown in
Appendix IV.
F-103
Table of Contents
| 17.3. | INFORMATION ABOUT ASSOCIATES AND JOINTLY CONTROLLED ENTITIES BY THE EQUITY METHOD |
The following table provides relevant information of the balance
sheet and income statement of associates and jointly controlled
entities accounted for using the equity method as of
December 31, 2010, 2009 and 2008, respectively (see
Appendix IV).
| 2010(*) | 2009(*) | 2008(*) | ||||||||||||||||||||||
|
Jointly
|
Jointly
|
Jointly
|
||||||||||||||||||||||
|
Associates and Jointly Controlles Entities
|
Controlled
|
Controlled
|
Controlled
|
|||||||||||||||||||||
|
Financial Main figures
|
Associates | Entities | Associates | Entities | Associates | Entities | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
Current Assets
|
19,979 | 279 | 10,611 | 347 | 745 | 559 | ||||||||||||||||||
|
Non-current Assets
|
17,911 | 780 | 8,463 | 514 | 4,162 | 349 | ||||||||||||||||||
|
Current Liabilities
|
32,314 | 179 | 10,356 | 108 | 230 | 136 | ||||||||||||||||||
|
Non-current Liabilities
|
5,576 | 879 | 8,719 | 754 | 4,677 | 772 | ||||||||||||||||||
|
Net sales
|
855 | 168 | 605 | 84 | 210 | 102 | ||||||||||||||||||
|
Operating Income
|
450 | 15 | 244 | (12 | ) | 99 | 17 | |||||||||||||||||
|
Net Income
|
339 | 1 | 166 | (14 | ) | 93 | 286 | |||||||||||||||||
| (*) | Non audited information |
17.4. NOTIFICATIONS
ABOUT ACQUISITION OF HOLDINGS
Appendix V shown on acquisitions and disposals of holdings
in associates or jointly controlled entities and the
notification dates thereof, in compliance with Article 86
of the Corporations Act and Article 53 of the Securities
Market Act 24/1988.
17.5 IMPAIRMENT
No impairment losses on the goodwill of jointly-controlled
entities were recognized in 2010. For the year ended
December 31, 2009, €3 million of impairment
losses on goodwill in jointly controlled entities were
recognized, of which most were related to Econta Gestión
Integral, S.L. For the year ended December 31, 2008, no
impairment on goodwill in associates and jointly controlled
entities was recognized.
| 18. | REINSURANCE ASSETS |
This heading in the accompanying consolidated balance sheets
reflects the amounts receivable by consolidated entities from
reinsurance contracts with third parties.
The amounts recognized in the accompanying consolidated balance
sheets corresponding to the share of the reinsurer in the
technical provisions are set forth below:
|
Reinsurance Asset
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Reinsurance assets
|
28 | 29 | 29 | |||||||||
F-104
Table of Contents
| 19. | TANGIBLE ASSETS |
As of December 31, 2010, 2009 and 2008, the details of the
balance of this heading in the accompanying consolidated balance
sheets, broken down by the nature of the related items, were as
follows:
|
Assets
|
||||||||||||||||||||||||||||
| For Own Use |
Total
|
Leased
|
||||||||||||||||||||||||||
|
Furniture,
|
Tangible
|
Out Under
|
||||||||||||||||||||||||||
|
Land and
|
Work in
|
Fixtures and
|
Asset of
|
Investment
|
an Operating
|
|||||||||||||||||||||||
|
2010
|
Buildings | Progress | Vehicles | Own Use | Properties | Lease | Total | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
Cost —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
2,734 | 435 | 5,599 | 8,768 | 1,803 | 989 | 11,560 | |||||||||||||||||||||
|
Additions
|
194 | 179 | 357 | 730 | 66 | 245 | 1,041 | |||||||||||||||||||||
|
Retirements
|
(49 | ) | (45 | ) | (156 | ) | (250 | ) | (8 | ) | (2 | ) | (260 | ) | ||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Disposal of entities in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Transfers
|
387 | (335 | ) | (81 | ) | (29 | ) | 32 | (221 | ) | (218 | ) | ||||||||||||||||
|
Exchange difference and other
|
140 | (19 | ) | (264 | ) | (144 | ) | (52 | ) | 4 | (192 | ) | ||||||||||||||||
|
Balance at the end
|
3,406 | 215 | 5,455 | 9,075 | 1,841 | 1,015 | 11,931 | |||||||||||||||||||||
|
Accrued depreciation —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
750 | — | 3,818 | 4,568 | 53 | 265 | 4,886 | |||||||||||||||||||||
|
Additions
|
86 | — | 362 | 448 | 15 | 7 | 470 | |||||||||||||||||||||
|
Retirements
|
(6 | ) | — | (142 | ) | (148 | ) | (1 | ) | (1 | ) | (150 | ) | |||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Disposal of entities in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Transfers
|
27 | — | (47 | ) | (20 | ) | (1 | ) | (110 | ) | (131 | ) | ||||||||||||||||
|
Exchange difference and other
|
32 | — | (244 | ) | (212 | ) | — | 111 | (101 | ) | ||||||||||||||||||
|
Balance at the end
|
889 | — | 3,747 | 4,636 | 66 | 272 | 4,974 | |||||||||||||||||||||
|
Impairment —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
15 | — | 4 | 19 | 116 | 32 | 167 | |||||||||||||||||||||
|
Additions
|
8 | — | 1 | 9 | 83 | — | 92 | |||||||||||||||||||||
|
Retirements
|
(2 | ) | — | (5 | ) | (7 | ) | — | (14 | ) | (21 | ) | ||||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Exchange difference and other
|
10 | — | — | 10 | 7 | 1 | 18 | |||||||||||||||||||||
|
Balance at the end
|
31 | — | — | 31 | 206 | 19 | 256 | |||||||||||||||||||||
|
Net tangible assets —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
1,969 | 435 | 1,777 | 4,181 | 1,634 | 692 | 6,507 | |||||||||||||||||||||
|
Balance at the end
|
2,486 | 215 | 1,708 | 4,408 | 1,569 | 724 | 6,701 | |||||||||||||||||||||
F-105
Table of Contents
|
Assets
|
||||||||||||||||||||||||||||
| For Own Use |
Total
|
Leased
|
||||||||||||||||||||||||||
|
Furniture,
|
Tangible
|
Out Under
|
||||||||||||||||||||||||||
|
Land and
|
Work in
|
Fixtures and
|
Asset of
|
Investment
|
an Operating
|
Total
|
||||||||||||||||||||||
|
2009
|
Buildings | Progress | Vehicles | Own Use | Properties | Lease | ||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
Cost —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
3,030 | 422 | 4,866 | 8,318 | 1,786 | 996 | 11,100 | |||||||||||||||||||||
|
Additions
|
120 | 102 | 437 | 659 | 74 | 210 | 943 | |||||||||||||||||||||
|
Retirements
|
(22 | ) | (73 | ) | (661 | ) | (756 | ) | (35 | ) | (2 | ) | (793 | ) | ||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Disposal of entities in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Transfers
|
(747 | ) | (16 | ) | (23 | ) | (786 | ) | (11 | ) | (212 | ) | (1,009 | ) | ||||||||||||||
|
Exchange difference and other
|
353 | — | 980 | 1,333 | (11 | ) | (3 | ) | 1,319 | |||||||||||||||||||
|
Balance at the end
|
2,734 | 435 | 5,599 | 8,768 | 1,803 | 989 | 11,560 | |||||||||||||||||||||
|
Accrued depreciation —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
729 | — | 3,128 | 3,857 | 45 | 259 | 4,161 | |||||||||||||||||||||
|
Additions
|
66 | — | 349 | 415 | 11 | 8 | 434 | |||||||||||||||||||||
|
Retirements
|
(15 | ) | — | (511 | ) | (526 | ) | — | (1 | ) | (527 | ) | ||||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Disposal of entities in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Transfers
|
(253 | ) | — | (15 | ) | (268 | ) | (2 | ) | (103 | ) | (373 | ) | |||||||||||||||
|
Exchange difference and other
|
223 | — | 867 | 1,090 | (1 | ) | 102 | 1,191 | ||||||||||||||||||||
|
Balance at the end
|
750 | — | 3,818 | 4,568 | 53 | 265 | 4,886 | |||||||||||||||||||||
|
Impairment —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
16 | — | 3 | 19 | 8 | 5 | 32 | |||||||||||||||||||||
|
Additions
|
7 | — | 17 | 24 | 93 | 38 | 155 | |||||||||||||||||||||
|
Retirements
|
(2 | ) | — | (17 | ) | (19 | ) | (1 | ) | — | (20 | ) | ||||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Exchange difference and other
|
(6 | ) | — | 1 | (5 | ) | 16 | (11 | ) | — | ||||||||||||||||||
|
Balance at the end
|
15 | — | 4 | 19 | 116 | 32 | 167 | |||||||||||||||||||||
|
Net tangible assets —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
2,285 | 422 | 1,735 | 4,442 | 1,734 | 732 | 6,908 | |||||||||||||||||||||
|
Balance at the end
|
1,969 | 435 | 1,777 | 4,181 | 1,634 | 692 | 6,507 | |||||||||||||||||||||
F-106
Table of Contents
|
Assets
|
||||||||||||||||||||||||||||
| For Own Use |
Total
|
Leased
|
||||||||||||||||||||||||||
|
Furniture,
|
tangible
|
Out Under
|
||||||||||||||||||||||||||
|
Land and
|
Fixtures and
|
asset of
|
Investment
|
an Operating
|
||||||||||||||||||||||||
|
2008
|
Buildings | Work in Progress | Vehicles | Own Use | Properties | Lease | Total | |||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||
|
Cost —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
3,415 | 151 | 5,024 | 8,590 | 96 | 966 | 9,652 | |||||||||||||||||||||
|
Additions
|
156 | 101 | 561 | 818 | 41 | 220 | 1,079 | |||||||||||||||||||||
|
Retirements
|
(125 | ) | (55 | ) | (483 | ) | (663 | ) | (3 | ) | (28 | ) | (694 | ) | ||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | 16 | 16 | 1,661 | — | 1,677 | |||||||||||||||||||||
|
Disposal of entities in the year
|
(12 | ) | (2 | ) | (5 | ) | (19 | ) | — | — | (19 | ) | ||||||||||||||||
|
Transfers
|
(326 | ) | 263 | (22 | ) | (85 | ) | (8 | ) | (162 | ) | (255 | ) | |||||||||||||||
|
Exchange difference and other
|
(78 | ) | (36 | ) | (225 | ) | (339 | ) | (1 | ) | — | (340 | ) | |||||||||||||||
|
Balance at the end
|
3,030 | 422 | 4,866 | 8,318 | 1,786 | 996 | 11,100 | |||||||||||||||||||||
|
Accrued depreciation —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
725 | — | 3,402 | 4,127 | 14 | 245 | 4,386 | |||||||||||||||||||||
|
Additions
|
77 | — | 356 | 433 | 1 | 8 | 442 | |||||||||||||||||||||
|
Retirements
|
(30 | ) | — | (490 | ) | (520 | ) | (3 | ) | (4 | ) | (527 | ) | |||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | 4 | 4 | 33 | — | 37 | |||||||||||||||||||||
|
Disposal of entities in the year
|
(3 | ) | — | (4 | ) | (7 | ) | — | — | (7 | ) | |||||||||||||||||
|
Transfers
|
(11 | ) | — | (4 | ) | (15 | ) | — | — | (15 | ) | |||||||||||||||||
|
Exchange difference and other
|
(29 | ) | — | (136 | ) | (165 | ) | — | 10 | (155 | ) | |||||||||||||||||
|
Balance at the end
|
729 | — | 3,128 | 3,857 | 45 | 259 | 4,161 | |||||||||||||||||||||
|
Impairment —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
21 | — | 5 | 26 | 1 | 2 | 29 | |||||||||||||||||||||
|
Additions
|
3 | — | — | 3 | 4 | 1 | 8 | |||||||||||||||||||||
|
Retirements
|
(1 | ) | — | — | (1 | ) | — | — | (1 | ) | ||||||||||||||||||
|
Acquisition of subsidiaries in the year
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Exchange difference and other
|
(7 | ) | — | (2 | ) | (9 | ) | 3 | 2 | (4 | ) | |||||||||||||||||
|
Balance at the end
|
16 | — | 3 | 19 | 8 | 5 | 32 | |||||||||||||||||||||
|
Net tangible assets —
|
||||||||||||||||||||||||||||
|
Balance at the beginning
|
2,669 | 151 | 1,617 | 4,437 | 82 | 719 | 5,238 | |||||||||||||||||||||
|
Balance at the end
|
2,285 | 422 | 1,735 | 4,442 | 1,734 | 732 | 6,908 | |||||||||||||||||||||
The main changes under this heading in 2009 and 2008 are as
follows:
2009
| • | The reduction in the balance of the heading “Tangible assets — For own use — Land and buildings” in 2009 is mainly the result of the transfer of some properties owned by the Bank in Spain to the heading “Non-current assets held for sale”, as mentioned in Note 16. |
2008
| • | The balance under the heading “Investment properties” includes mainly the rented buildings of the real estate fund BBVA Propiedad FII (see Appendix II) which has been fully consolidated since 2008 (see |
F-107
Table of Contents
| Appendix II) following the Group’s acquisition in 2008 of a 95.65% stake. The activity of this real estate fund is subject to regulations by the Spanish Securities and Exchange Commission (CNMV). |
| • | In March 2008, BBVA Bancomer bought two properties in Mexico City, one of them located on Paseo de la Reforma and the other on Parques Polanco, in which it will set up the new BBVA Bancomer Group corporate headquarters. |
As of December 31, 2010 the carrying amount of fully
amortized financial assets that continue in use was
€480 million.
The main activity of the Group is carried out through a network
of bank branches located geographically as shown in the
following table:
| Number of branches | ||||||||||||
|
Bank Branches by Geographical Location
|
2010 | 2009 | 2008 | |||||||||
|
Spain
|
3,024 | 3,055 | 3,375 | |||||||||
|
Americas
|
4,193 | 4,267 | 4,267 | |||||||||
|
Rest of the world
|
144 | 144 | 145 | |||||||||
|
Total
|
7,361 | 7,466 | 7,787 | |||||||||
As of December 31, 2010, 2009 and 2008, the percentage of
branches leased from third parties in Spain was 83%, 77% and
47.3%, respectively, and 57%, 55% and 61% in Latin America,
respectively. The increase in the number of branches leased in
Spain is mainly due to the sale and leaseback operations carried
out in 2010 and 2009 described above (see Note 16).
The following table shows the detail of the net carrying amount
of the tangible assets corresponding to Spanish or foreign
entities as of December 31, 2010, 2009 and 2008:
|
Tangible Assets by Spanish and Foreign
|
||||||||||||
|
Subsidiaries Net Assets Values
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Foreign subsidiaries
|
2,741 | 2,473 | 2,276 | |||||||||
|
BBVA and Spanish subsidiaries
|
3,960 | 4,034 | 4,632 | |||||||||
|
Total
|
6,701 | 6,507 | 6,908 | |||||||||
The amount of tangible assets under financial lease schemes on
which it is expected to exercise the purchase option was
insignificant as of December 31, 2010, 2009 and 2008.
F-108
Table of Contents
| 20. | INTANGIBLE ASSETS |
| 20.1. | GOODWILL |
As of December 31, 2010, 2009 and 2008, the details of the
balance of this heading in the accompanying consolidated balance
sheets, broken down by the cash-generating units
(“CGU”) that originated them, were as follows:
Goodwill.
Breakdown by CGU and Changes of the Period
|
Balance at
|
Exchange
|
Balance at
|
||||||||||||||||||||||
|
2010
|
the Beginning | Additions | Difference | Impairment | Rest | the End | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
The United States
|
5,357 | — | 418 | — | (2 | ) | 5,773 | |||||||||||||||||
|
Mexico
|
593 | — | 85 | — | — | 678 | ||||||||||||||||||
|
Colombia
|
205 | — | 31 | — | — | 236 | ||||||||||||||||||
|
Chile
|
65 | — | 11 | — | — | 76 | ||||||||||||||||||
|
Chile Pensions
|
108 | — | 18 | — | — | 126 | ||||||||||||||||||
|
Spain and Portugal
|
68 | — | — | (13 | ) | — | 55 | |||||||||||||||||
|
Global markets(*)
|
— | 1 | 1 | — | 3 | 5 | ||||||||||||||||||
|
Total
|
6,396 | 1 | 564 | (13 | ) | 1 | 6,949 | |||||||||||||||||
| (*) | Since February 2010, Group PYPSA (CGU Global Markets), accounted for using the proportionate method (previously accounted for using the equity method) |
Goodwill.
Breakdown by CGU and Changes of the Period
|
Balance at
|
Exchange
|
Balance at
|
||||||||||||||||||||||
|
2009
|
the Beginning | Additions | Difference | Impairment | Rest | the End | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
The United States
|
6,676 | — | (226 | ) | (1,097 | ) | 4 | 5,357 | ||||||||||||||||
|
Mexico
|
588 | — | 9 | — | (4 | ) | 593 | |||||||||||||||||
|
Colombia
|
193 | — | 12 | — | — | 205 | ||||||||||||||||||
|
Chile
|
54 | — | 11 | — | — | 65 | ||||||||||||||||||
|
Chile Pensions
|
89 | — | 19 | — | — | 108 | ||||||||||||||||||
|
Spain and Portugal
|
59 | — | — | — | 9 | 68 | ||||||||||||||||||
|
Total
|
7,659 | — | (175 | ) | (1,097 | ) | 9 | 6,396 | ||||||||||||||||
Goodwill.
Breakdown by CGU and Changes of the Period
|
Balance at
|
Exchange
|
Balance at
|
||||||||||||||||||||||
|
2008
|
the Beginning | Additions | Difference | Impairment | Rest | the End | ||||||||||||||||||
|
The United States
|
6,296 | — | 368 | — | 12 | 6,676 | ||||||||||||||||||
|
Mexico
|
702 | — | (114 | ) | — | — | 588 | |||||||||||||||||
|
Colombia
|
204 | — | (11 | ) | — | — | 193 | |||||||||||||||||
|
Chile
|
64 | — | (10 | ) | — | — | 54 | |||||||||||||||||
|
Chile Pensions
|
108 | — | (19 | ) | — | — | 89 | |||||||||||||||||
|
Spain and Portugal
|
62 | — | — | — | (3 | ) | 59 | |||||||||||||||||
|
Total
|
7,436 | — | 214 | — | 9 | 7,659 | ||||||||||||||||||
F-109
Table of Contents
As described in Note 2.2.8, the cash-generating units to
which goodwill has been allocated are tested for impairment by
including the allocated goodwill in their carrying amount. This
analysis is performed at least annually and always if there is
any indication of impairment.
As of December 31, 2010, 2009 and 2008, the Group performed
the goodwill impairment tests. The results from each of these
tests on the dates mentioned were as follows:
| • | As of December 31, 2010, there were no impairment losses on the goodwill recognized in the Group’s cash-generating units, except for the insignificant impairment on the goodwill for the cash-generating unit in Spain and Portugal for the impairment on the investments in Rentrucks, Alquiler y Servicios de Transportes, S.A. and in BBVA Finanzia SpA (for €9 million and €4 million, respectively). |
The most significant goodwill corresponds to the CGU in the
United States. The recoverable amount of this CGU is equal to
its value in use. This is calculated as the discounted value of
the cash flow projections that Management estimates based on the
latest budgets available for the next five years. As of
December 31, 20010, the Group used a sustainable growth
rate of 4.2% (4.3% as of December 31, 2009) to
extrapolate the cash flows in perpetuity which was based on the
US real GDP growth rate. The discount rate used to discount the
cash flows is the cost of capital assigned to the CGU, and stood
at 11.4% as of December 31, 2010 (11.2% as of
December 31, 2009), which consists of the free risk rate
plus a risk premium.
| • | As of December 31, 2009, impairment losses of €1,097 million were estimated in the United States cash-generating unit which were recognized under “Impairment losses on other assets (net) — Goodwill and other intangible assets” in the accompanying consolidated income statement for 2009 (Note 50). The impairment loss of this unit was attributed to the significant decline in economic and credit conditions in the states in which the Group operates in the United States. The valuations were verified by an independent expert, not the Group’s accounts auditor. |
Both the US unit’s fair values and the fair values assigned
to its assets and liabilities were based on the estimates and
assumptions that the Group’s Management deemed most likely
given the circumstances. However, some changes to the valuation
assumptions used could result in differences in the impairment
test result. If the discount rate had increased or decreased by
50 basis points, the difference between the carrying amount
and its recoverable amount would have increased or decreased by
up to €573 million and €664 million,
respectively. If the growth rate had increased or decreased by
50 basis points, the difference between the carrying amount
and its recoverable amount would have increased or decreased by
€555 million and €480 million, respectively.
| • | As of December 31, 2008, there were no impairment losses on the goodwill recognized in the Group’s cash-generating units. |
20.2. OTHER
INTANGIBLE ASSETS
The details of the balance under this heading in the
accompanying consolidated balance sheets as of December 31,
2010, 2009 and 2008 are as follows:
|
Other Intangible Assets. Breakdown by Type of Assets
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Computer software acquisition expenses
|
749 | 464 | 259 | |||||||||
|
Other deferred charges
|
28 | 29 | 113 | |||||||||
|
Other intangible assets
|
282 | 360 | 409 | |||||||||
|
Impairment
|
(1 | ) | (1 | ) | (1 | ) | ||||||
|
Total
|
1,058 | 852 | 780 | |||||||||
F-110
Table of Contents
The changes for the year ended, December 31, 2010, 2009 and
2008 under this heading in the accompanying consolidated balance
sheets are as follows:
|
Other Intangible Assets. Changes Over the Period
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the beginning
|
852 | 780 | 808 | |||||||||||||
|
Additions
|
458 | 362 | 242 | |||||||||||||
|
Amortization in the year
|
47 | (291 | ) | (262 | ) | (256 | ) | |||||||||
|
Exchange differences and other
|
39 | (28 | ) | (13 | ) | |||||||||||
|
Impairment
|
50 | — | — | (1 | ) | |||||||||||
|
Balance at the end
|
1,058 | 852 | 780 | |||||||||||||
As of December 31, 2010, the totally amortized intangible
assets still in use amounted to €294 million.
| 21. | TAX ASSETS AND LIABILITIES |
21.1.
Consolidated
tax group
Pursuant to current legislation, the Consolidated Tax Group
includes BBVA as the Parent company, and, as subsidiaries, the
Spanish subsidiaries that meet the requirements provided for
under Spanish legislation regulating the taxation regime for the
consolidated net income of corporate groups.
The Group’s other banks and subsidiaries file tax returns
in accordance with the tax legislation in force in each country.
21.2
Years
open for review by the tax authorities
The years open to review in the Consolidated Tax Group as of
December 31, 2010 are 2004 and following for the main taxes
applicable.
The rest of the Spanish consolidated entities in general have
the last four years open for inspection by the tax authorities
for the main taxes applicable, except for those in which there
has been an interruption of the limitation period due to the
start of an inspection.
In 2009, as a result of action by the tax authorities, tax
inspections proceedings were instituted for the years since (and
including) 2003, some of which were contested. After considering
the temporary nature of certain of the items assessed,
provisions were set aside for the amounts, if any, that might
arise from these assessments.
Over the year ended December 31, 2009, notice was also
given of the start of inspections for the years 2004 to 2006 for
the main taxes to which the tax group is subject. These
inspections had not been completed as of December 31, 2010.
In view of the varying interpretations that can be made of the
applicable tax legislation, the outcome of the tax inspections
of the open years that could be conducted by the tax authorities
in the future could give rise to contingent tax liabilities
which cannot be objectively quantified at the present time.
However, the Banks’ Board of Directors and its tax advisers
consider that the possibility of these contingent liabilities
becoming actual liabilities is remote and, in any case, the tax
charge which might arise therefore would not materially affect
the Group’s accompanying consolidated financial statements.
F-111
Table of Contents
21.3
Reconciliation
The reconciliation of the corporate tax expense resulting from
the application of the standard tax rate and the expense
registered by this tax in the accompanying consolidated income
statements is as follows:
|
Reconciliation of the Corporate Tax Expense Resulting
|
||||||||||||
|
from the Application of the Standard Rate and the
|
||||||||||||
|
Expense Registered by this Tax
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Corporation tax(*)
|
1,927 | 1,721 | 2,078 | |||||||||
|
Decreases due to permanent differences:
|
(559 | ) | (633 | ) | (690 | ) | ||||||
|
Tax credits and tax relief at consolidated Companies
|
(180 | ) | (223 | ) | (441 | ) | ||||||
|
Other items net
|
(379 | ) | (410 | ) | (249 | ) | ||||||
|
Net increases (decreases) due to temporary differences
|
(19 | ) | 96 | 580 | ||||||||
|
Charge for income tax and other taxes
|
1,349 | 1,184 | 1,968 | |||||||||
|
Deferred tax assets and liabilities recorded (utilized)
|
19 | (96 | ) | (580 | ) | |||||||
|
Income tax and other taxes accrued in the period
|
1,368 | 1,088 | 1,388 | |||||||||
|
Adjustments to prior years’ income tax and other taxes
|
59 | 53 | 153 | |||||||||
|
Income tax and other taxes
|
1,427 | 1,141 | 1,541 | |||||||||
| (*) | 30% Tax Rate. |
The effective tax rate for 2010, 2009 and 2008 is as follows:
|
Effective Tax Rate
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Income from:
|
||||||||||||
|
Consolidated Tax Group
|
2,398 | 4,066 | 2,492 | |||||||||
|
Other Spanish Entities
|
(70 | ) | (77 | ) | 40 | |||||||
|
Foreign Entities
|
4,094 | 1,747 | 4,394 | |||||||||
|
Total
|
6,422 | 5,736 | 6,926 | |||||||||
|
Income tax and other taxes
|
1,427 | 1,141 | 1,541 | |||||||||
|
Effective Tax Rate
|
22.22 | % | 19.89 | % | 22.25 | % | ||||||
21.4
Tax
recognized in total equity
In addition to the income tax recognized in the accompanying
consolidated income statements, the group has recognized the
following amounts for these items in the consolidated equity as
of December 31, 2010, 2009 and 2008:
|
Tax Recognized in Total Equity
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Charges to total equity
|
||||||||||||
|
Debt securities
|
— | (276 | ) | (19 | ) | |||||||
|
Equity instruments
|
(354 | ) | (441 | ) | (168 | ) | ||||||
|
Subtotal
|
(354 | ) | (717 | ) | (187 | ) | ||||||
|
Credits to total equity(*)
|
||||||||||||
|
Debt securities and others
|
192 | 1 | 2 | |||||||||
|
Subtotal
|
192 | 1 | 2 | |||||||||
|
Total
|
(162 | ) | (716 | ) | (185 | ) | ||||||
| (*) | Tax asset credit to total equity as of December 31, 2010, due primaly to debt instruments unrealized losses. |
F-112
Table of Contents
21.5
Deferred
taxes
The balance of the heading “Tax assets” in the
accompanying consolidated balance sheets includes the tax
receivables relating to deferred tax assets; the balance of the
heading “Tax liabilities” includes the liabilities
relating to the Group’s various deferred tax liabilities.
The details of the most important tax assets and liabilities are
as follows:
|
Tax Assets and Liabilities. Breakdown
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Tax assets -
|
||||||||||||
|
Current
|
1,113 | 1,187 | 1,266 | |||||||||
|
Deferred
|
5,536 | 5,086 | 5,218 | |||||||||
|
Pensions
|
1,392 | 1,483 | 1,659 | |||||||||
|
Portfolio
|
1,546 | 987 | 1,205 | |||||||||
|
Other assets
|
234 | 221 | 140 | |||||||||
|
Impairment losses
|
1,648 | 1,632 | 1,453 | |||||||||
|
Other
|
699 | 737 | 720 | |||||||||
|
Tax losses
|
17 | 26 | 40 | |||||||||
|
Total
|
6,649 | 6,273 | 6,484 | |||||||||
|
Tax Liabilities -
|
||||||||||||
|
Current
|
604 | 539 | 984 | |||||||||
|
Deferred
|
1,591 | 1,669 | 1,282 | |||||||||
|
Portfolio
|
1,280 | 1,265 | 977 | |||||||||
|
Charge for income tax and other taxes
|
311 | 404 | 305 | |||||||||
|
Total
|
2,195 | 2,208 | 2,266 | |||||||||
As of December 31, 2010, the estimated balance of temporary
differences in connection with investments in subsidiaries,
branches and associates and investments in jointly controlled
entities was €503 million. No deferred tax liabilities
have been recognized with respect to this in the accompanying
consolidated balance sheet.
The amortization of certain components of goodwill for tax
purposes gives rise to temporary differences triggered by the
resulting differences in the tax and accounting bases of
goodwill balances. In this regard, and as a general rule, the
Group’s accounting policy is to recognize deferred tax
liabilities in respect of these temporary differences at the
Group companies that are subject to this particular tax benefit.
F-113
Table of Contents
| 22. | OTHER ASSETS AND LIABILITIES |
The breakdown of the balance of these headings in the
accompanying consolidated balance sheets was as follows:
|
Other Assets and Liabilities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Assets -
|
||||||||||||
|
Inventories
|
2,788 | 1,933 | 1,066 | |||||||||
|
Of which:
|
||||||||||||
|
Real estate agencies
|
2,729 | 1,930 | 1,064 | |||||||||
|
Transactions in transit
|
26 | 55 | 33 | |||||||||
|
Accrued interest
|
538 | 581 | 383 | |||||||||
|
Unaccrued prepaid expenses
|
402 | 421 | 206 | |||||||||
|
Other prepayments and accrued income
|
136 | 160 | 177 | |||||||||
|
Other items
|
1,175 | 1,383 | 1,296 | |||||||||
|
Total
|
4,527 | 3,952 | 2,778 | |||||||||
|
Liabilities -
|
||||||||||||
|
Transactions in transit
|
58 | 49 | 53 | |||||||||
|
Accrued interest
|
2,162 | 2,079 | 1,918 | |||||||||
|
Unpaid accrued expenses
|
1,516 | 1,412 | 1,321 | |||||||||
|
Other accrued expenses and deferred income
|
646 | 667 | 597 | |||||||||
|
Other items
|
847 | 780 | 586 | |||||||||
|
Total
|
3,067 | 2,908 | 2,557 | |||||||||
The heading “Inventories” includes the net carrying
amount of the purchases of land and property that the
Group’s property companies hold for sale or for their
business. The amounts under this heading include real-estate
assets bought by these companies from distressed customers
(mainly in Spain), net of their corresponding impairment. In
2010, 2009 and 2008, the accumulated valuation adjustment due to
impairment losses on these assets amounted to
€1,088 million, €606 million and
€85 million, respectively.
The principal companies in the Group that engage in real estate
business activity and make up nearly all of the amount in the
“Inventory” heading of the accompanying consolidated
balance sheets are as follows: Anida Desarrollos Inmobiliarios,
S.A., Desarrollo Urbanístico Chamartín, S.A., Anida
Desarrollo Singulares, S.L., Anida Operaciones Singulares, S.L.
and Anida Inmuebles España y Portugal, S.L.
| 23. | FINANCIAL LIABILITIES AT AMORTIZED COST |
The breakdown of the balance of this heading in the accompanying
consolidated balance sheets was as follows:
|
Financial Liabilities at Amortized Cost
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Deposits from central banks (Note 9)
|
11,010 | 21,166 | 16,844 | |||||||||
|
Deposits from credit institutions
|
57,170 | 49,146 | 49,961 | |||||||||
|
Customer deposits
|
275,789 | 254,183 | 255,236 | |||||||||
|
Debt certificates
|
85,179 | 99,939 | 104,157 | |||||||||
|
Subordinated liabilities
|
17,420 | 17,878 | 16,987 | |||||||||
|
Other financial liabilities
|
6,596 | 5,624 | 7,420 | |||||||||
|
Total
|
453,164 | 447,936 | 450,605 | |||||||||
F-114
Table of Contents
23.1.
DEPOSITS
FROM CENTRAL BANKS
The breakdown of the balance under this heading in the
accompanying consolidated balance sheets is presented in
Note 9.
23.2.
DEPOSITS
FROM CREDIT INSTITUTIONS
The breakdown of the balance of this heading in the consolidated
balance sheets, according to the nature of the financial
instruments, is as follows:
|
Deposits from Credit Institutions
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Reciprocal accounts
|
140 | 68 | 90 | |||||||||
|
Deposits with agreed maturity
|
38,265 | 30,608 | 35,785 | |||||||||
|
Demand deposits
|
1,530 | 1,273 | 1,228 | |||||||||
|
Other accounts
|
696 | 733 | 547 | |||||||||
|
Repurchase agreements
|
16,314 | 16,263 | 11,923 | |||||||||
|
Subtotal
|
56,945 | 48,945 | 49,573 | |||||||||
|
Accrued interest until expiration
|
225 | 201 | 388 | |||||||||
|
Total
|
57,170 | 49,146 | 49,961 | |||||||||
The breakdown by geographical area and the nature of the related
instruments of this heading in the accompanying consolidated
balance sheets, disregarding valuation adjustments, was as
follows:
|
Demand
|
Deposits with
|
|||||||||||||||
|
2010
|
Deposits | Agreed Maturity | Repos | Total | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Spain
|
961 | 7,566 | 340 | 8,867 | ||||||||||||
|
Rest of Europe
|
151 | 16,160 | 6,315 | 22,626 | ||||||||||||
|
The United States
|
147 | 6,027 | 665 | 6,839 | ||||||||||||
|
Latin America
|
356 | 5,408 | 8,994 | 14,758 | ||||||||||||
|
Rest of the world
|
56 | 3,799 | — | 3,855 | ||||||||||||
|
Total
|
1,671 | 38,960 | 16,314 | 56,945 | ||||||||||||
|
Demand
|
Deposits with
|
|||||||||||||||
|
2009
|
Deposits | Agreed Maturity | Repos | Total | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Spain
|
456 | 6,414 | 822 | 7,692 | ||||||||||||
|
Rest of Europe
|
382 | 15,404 | 4,686 | 20,472 | ||||||||||||
|
The United States
|
150 | 5,611 | 811 | 6,572 | ||||||||||||
|
Latin America
|
336 | 1,576 | 9,945 | 11,857 | ||||||||||||
|
Rest of the world
|
16 | 2,336 | — | 2,352 | ||||||||||||
|
Total
|
1,340 | 31,341 | 16,264 | 48,945 | ||||||||||||
F-115
Table of Contents
|
Demand
|
Deposits with
|
|||||||||||||||
|
2008
|
Deposits | Agreed Maturity | Repos | Total | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Spain
|
676 | 4,413 | 1,131 | 6,220 | ||||||||||||
|
Rest of Europe
|
82 | 17,542 | 2,669 | 20,293 | ||||||||||||
|
The United States
|
40 | 8,164 | 1,093 | 9,297 | ||||||||||||
|
Latin America
|
439 | 3,518 | 7,030 | 10,987 | ||||||||||||
|
Rest of the world
|
80 | 2,696 | — | 2,776 | ||||||||||||
|
Total
|
1,317 | 36,333 | 11,923 | 49,573 | ||||||||||||
23.3.
CUSTOMERS
DEPOSITS
The breakdown of this heading of the accompanying consolidated
balance sheets, by type of financial instruments, was as follows:
|
Customer Deposits
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Government and other government agencies
|
30,982 | 15,297 | 18,837 | |||||||||
|
Spanish
|
17,404 | 4,291 | 6,320 | |||||||||
|
Foreign
|
13,563 | 10,997 | 12,496 | |||||||||
|
Accrued interests
|
15 | 9 | 21 | |||||||||
|
Other resident sectors
|
116,217 | 93,190 | 98,630 | |||||||||
|
Current accounts
|
18,705 | 20,243 | 20,725 | |||||||||
|
Savings accounts
|
24,520 | 27,137 | 23,863 | |||||||||
|
Fixed-term deposits
|
49,160 | 35,135 | 43,829 | |||||||||
|
Repurchase agreements
|
23,197 | 10,186 | 9,339 | |||||||||
|
Other accounts
|
46 | 31 | 62 | |||||||||
|
Accrued interests
|
589 | 458 | 812 | |||||||||
|
Non-resident sectors
|
128,590 | 145,696 | 137,769 | |||||||||
|
Current accounts
|
39,567 | 33,697 | 28,160 | |||||||||
|
Savings accounts
|
26,435 | 23,394 | 22,840 | |||||||||
|
Fixed-term deposits
|
56,752 | 83,754 | 79,094 | |||||||||
|
Repurchase agreements
|
5,370 | 4,415 | 6,890 | |||||||||
|
Other accounts
|
122 | 103 | 104 | |||||||||
|
Accrued interests
|
344 | 333 | 681 | |||||||||
|
Total
|
275,789 | 254,183 | 255,236 | |||||||||
|
Of which:
|
||||||||||||
|
In euros
|
151,806 | 114,066 | 121,895 | |||||||||
|
In foreign currency
|
123,983 | 140,117 | 133,341 | |||||||||
|
Of which:
|
||||||||||||
|
Deposits from other creditors without valuation adjustment
|
275,055 | 253,566 | 254,075 | |||||||||
|
Accrued interests
|
734 | 617 | 1,161 | |||||||||
F-116
Table of Contents
The breakdown by geographical area of this heading in the
accompanying consolidated balance sheets, by type of instrument
and geographical area, disregarding valuation adjustments, was
as follows:
|
Deposits
|
||||||||||||||||||||
|
Demand
|
Savings
|
with Agreed
|
||||||||||||||||||
|
2010
|
Deposits | Deposits | Maturity | Repos | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Spain
|
21,848 | 24,707 | 67,838 | 18,640 | 133,033 | |||||||||||||||
|
Rest of Europe
|
3,784 | 482 | 18,245 | 1,609 | 24,120 | |||||||||||||||
|
The United States
|
13,985 | 11,363 | 17,147 | — | 42,495 | |||||||||||||||
|
Latin America
|
28,685 | 15,844 | 23,724 | 3,762 | 72,015 | |||||||||||||||
|
Rest of the world
|
357 | 201 | 2,620 | — | 3,178 | |||||||||||||||
|
Total
|
68,659 | 52,597 | 129,574 | 24,011 | 274,841 | |||||||||||||||
|
Deposits
|
||||||||||||||||||||
|
Demand
|
Savings
|
with Agreed
|
||||||||||||||||||
|
2009
|
Deposits | Deposits | Maturity | Repos | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Spain
|
23,836 | 27,245 | 38,370 | 7,572 | 97,023 | |||||||||||||||
|
Rest of Europe
|
2,975 | 457 | 18,764 | 3 | 22,199 | |||||||||||||||
|
The United States
|
11,548 | 10,146 | 46,292 | — | 67,986 | |||||||||||||||
|
Latin America
|
24,390 | 13,593 | 20,631 | 4,413 | 63,027 | |||||||||||||||
|
Rest of the world
|
440 | 181 | 2,527 | — | 3,148 | |||||||||||||||
|
Total
|
63,189 | 51,622 | 126,584 | 11,988 | 253,383 | |||||||||||||||
|
Deposits
|
||||||||||||||||||||
|
Demand
|
Savings
|
with Agreed
|
||||||||||||||||||
|
2008
|
Deposits | Deposits | Maturity | Repos | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Spain
|
26,209 | 23,892 | 45,299 | 9,745 | 105,145 | |||||||||||||||
|
Rest of Europe
|
3,214 | 360 | 22,733 | 34 | 26,341 | |||||||||||||||
|
The United States
|
8,288 | 10,899 | 36,997 | — | 56,184 | |||||||||||||||
|
Latin America
|
20,219 | 9,911 | 20,195 | 6,867 | 57,192 | |||||||||||||||
|
Rest of the world
|
1,576 | 2,488 | 4,796 | — | 8,860 | |||||||||||||||
|
Total
|
59,506 | 47,550 | 130,020 | 16,646 | 253,722 | |||||||||||||||
23.4.
DEBT
CERTIFICATES AND SUBORDINATED LIABILITIES
The breakdown of the headings “Debt certificates (including
bonds)” and “Subordinated liabilities” in the
accompanying consolidated balance sheets was as follows:
|
Debt Certificates and Subordinated Liabilities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Debt Certificates
|
85,179 | 99,939 | 104,157 | |||||||||
|
Promissory notes and bills
|
13,215 | 29,582 | 19,985 | |||||||||
|
Bonds and debentures
|
71,964 | 70,357 | 84,172 | |||||||||
|
Subordinated Liabilities
|
17,420 | 17,878 | 16,987 | |||||||||
|
Total
|
102,599 | 117,817 | 121,144 | |||||||||
F-117
Table of Contents
The changes in 2010, 2009 and 2008 under the headings “Debt
certificates (including bonds)” and “Subordinated
liabilities” was as follows:
|
Exchange
|
||||||||||||||||||||
|
Balance at the
|
Repurchase or
|
Differences and
|
Balance at the
|
|||||||||||||||||
|
2010
|
Beginning | Issuances | Redemption | Other | End | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Debt certificates issued in the European Union
|
107,069 | 129,697 | (149,965 | ) | 3,768 | 90,569 | ||||||||||||||
|
With information brochure
|
107,035 | 129,697 | (149,962 | ) | 3,768 | 90,538 | ||||||||||||||
|
Without information brochure
|
34 | — | (3 | ) | — | 31 | ||||||||||||||
|
Other debt certificates issued outside the European Union
|
10,748 | 2,622 | (2,097 | ) | 758 | 12,031 | ||||||||||||||
|
Total
|
117,817 | 132,319 | (152,062 | ) | 4,526 | 102,600 | ||||||||||||||
|
Exchange
|
||||||||||||||||||||
|
Balance at the
|
Repurchase or
|
Differences and
|
Balance at the
|
|||||||||||||||||
|
2009
|
Beginning | Issuances | Redemption | Other | End | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Debt certificates issued in the European Union
|
111,159 | 129,107 | (126,713 | ) | (6,484 | ) | 107,069 | |||||||||||||
|
With information brochure
|
111,126 | 129,107 | (126,713 | ) | (6,485 | ) | 107,035 | |||||||||||||
|
Without information brochure
|
33 | — | — | 1 | 34 | |||||||||||||||
|
Other debt certificates issued outside the European Union
|
9,986 | 4,894 | (4,343 | ) | 211 | 10,748 | ||||||||||||||
|
Total
|
121,145 | 134,001 | (131,056 | ) | (6,273 | ) | 117,817 | |||||||||||||
|
Exchange
|
||||||||||||||||||||
|
Balance at the
|
Repurchase or
|
Differences and
|
Balance at the
|
|||||||||||||||||
|
2008
|
Beginning | Issuances | Redemption | Other | End | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Debt certificates issued in the European Union
|
109,173 | 107,848 | (85,671 | ) | (20,192 | ) | 111,158 | |||||||||||||
|
With information brochure
|
109,140 | 107,848 | (85,671 | ) | (20,192 | ) | 111,125 | |||||||||||||
|
Without information brochure
|
33 | — | — | — | 33 | |||||||||||||||
|
Other debt certificates issued outside the European Union
|
8,737 | 42,494 | (40,844 | ) | (401 | ) | 9,986 | |||||||||||||
|
Total
|
117,910 | 150,342 | (126,515 | ) | (20,593 | ) | 121,144 | |||||||||||||
The detail of the most significant outstanding issuances,
repurchases or refunds of debt instruments issued by the Bank or
companies in the Group as of December 31, 2010, 2009 and
2008 are shown on Appendix VIII.
F-118
Table of Contents
23.4.1 Promissory
notes and bills
The breakdown of the balance under this heading “Promissory
notes and bills”, by currency, is as follows:
|
Promissory Notes and Bills
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
In euros
|
7,672 | 11,024 | 9,593 | |||||||||
|
In other currencies
|
5,543 | 18,558 | 10,392 | |||||||||
|
Total
|
13,215 | 29,582 | 19,985 | |||||||||
These promissory notes were issued mainly by BBVA, S.A. and
Banco de Financiación, S.A.
23.4.2.
Bonds
and debentures issued
The breakdown of the balance under this heading “Bonds and
debentures issued”, by financial instrument and currency,
is as follows:
|
Bonds and Debentures Issued
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
In euros -
|
||||||||||||
|
Non-convertible bonds and debentures at floating interest rates
|
6,776 | 8,593 | 11,577 | |||||||||
|
Non-convertible bonds and debentures at fixed interest rates
|
7,493 | 5,932 | 4,736 | |||||||||
|
Covered bonds
|
37,170 | 34,708 | 38,481 | |||||||||
|
Hybrid financial instruments
|
373 | 389 | — | |||||||||
|
Securitization bonds realized by the Group
|
8,047 | 8,407 | 13,783 | |||||||||
|
Accrued interest and others(*)
|
2,952 | 2,731 | 2,668 | |||||||||
|
In foreign currency -
|
||||||||||||
|
Non-convertible bonds and debentures at floating interest rates
|
3,767 | 4,808 | 8,980 | |||||||||
|
Non-convertible bonds and debentures at fixed interest rates
|
2,681 | 2,089 | 1,601 | |||||||||
|
Covered bonds
|
772 | 731 | 1,005 | |||||||||
|
Hybrid financial instruments
|
1,119 | 1,342 | — | |||||||||
|
Other securities associated to financial activities
|
— | — | 15 | |||||||||
|
Securitization bonds realized by the Group
|
799 | 605 | 1,165 | |||||||||
|
Accrued interest and others(*)
|
15 | 22 | 161 | |||||||||
|
Total
|
71,964 | 70,357 | 84,172 | |||||||||
| (*) | Hedging operations and issuance costs. |
The following table shows the weighted average interest rates of
fixed and floating rate bonds and debentures issued in euros and
foreign currencies in 2010, 2009 and 2008:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Foreign
|
Foreign
|
Foreign
|
||||||||||||||||||||||
|
Interests Rates of Promissory Notes and Bills Issued
|
Euros | Currency | Euros | Currency | Euros | Currency | ||||||||||||||||||
|
Fixed rate
|
3.75 | % | 5.31 | % | 3.86 | % | 5.00 | % | 3.86 | % | 4.79 | % | ||||||||||||
|
Floating rate
|
1.30 | % | 3.00 | % | 0.90 | % | 2.56 | % | 4.41 | % | 4.97 | % | ||||||||||||
Most of the foreign-currency issuances are denominated in
U.S. dollars.
F-119
Table of Contents
23.4.3.
Subordinated
liabilities
The breakdown of the heading “Subordinated
liabilities” of the accompanying consolidated balance
sheets, by type of financial instruments, was as follows:
|
Subordinated Liabilities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Subordinated debt
|
11,569 | 12,117 | 10,785 | |||||||||
|
Preferred securities
|
5,202 | 5,188 | 5,464 | |||||||||
|
Subtotal
|
16,771 | 17,305 | 16,249 | |||||||||
|
Accrued interest until expiration
|
649 | 573 | 738 | |||||||||
|
Total
|
17,420 | 17,878 | 16,987 | |||||||||
23.4.3.1.
Subordinated
debt
These issuances are non-convertible subordinated debt and,
accordingly, for debt seniority purposes, they rank behind
ordinary debt.
The breakdown of this heading in the accompanying consolidated
balance sheets, disregarding valuation adjustments, by currency
of issuance and interest rate, is disclosed in
Appendix VIII.
The item “Subordinated Liabilities” in the
accompanying consolidated balance sheets includes the issue of
convertible subordinated obligations at a value of
€2,000 million issued by BBVA in September 2009. These
obligations have a 5% annual coupon, payable quarterly, and can
be converted into Bank shares after the first year, at the
Bank’s discretion, at each of the coupon payment dates, and
by obligation on the date of their final maturity date,
October 15, 2014. These obligations have been recognized as
financial liabilities given that the number of Bank shares to be
delivered is variable. The number of said shares will be that
value at the date of conversion (determined based on the quoted
value of the five sessions preceding the conversion) is equal to
the nominal value of the obligations.
23.4.3.2.
Preferred
securities
The breakdown by issuer of this heading in the accompanying
consolidated balance sheets is as follows:
|
Preferred Securities by Issuer
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
BBVA International, Ltd.(1)
|
500 | 500 | 500 | |||||||||
|
BBVA Capital Finance, S.A.U.(1)
|
2,975 | 2,975 | 2,975 | |||||||||
|
Banco Provincial, S.A
|
37 | 67 | 70 | |||||||||
|
BBVA International Preferred, S.A.U.(2)
|
1,671 | 1,628 | 1,901 | |||||||||
|
Phoenix Loan Holdings, Inc.
|
19 | 18 | 18 | |||||||||
|
Total
|
5,202 | 5,188 | 5,464 | |||||||||
| (1) | Traded on the Spanish AIAF market, | |
| (2) | Traded on the London Stock Exchange and New York Stock Exchanges, |
These issues were fully subscribed by third parties outside the
Group and are wholly or partially redeemable at the issuer
company’s option after five or ten years from the issue
date, depending on the terms of each issue.
Of the above, the issuances of BBVA International, Ltd., BBVA
Capital Finance, S.A.U. and BBVA International Preferred,
S.A.U., are subordinately guaranteed by the Bank.
In 2009, there was a partial exchange of three issues of
preferred securities of the company BBVA International
Preferred, S.A.U. for two new preferred securities in the same
company. As a result of said exchange, two issues in euros at
€801 million and another in pounds sterling at
369 million pounds, which were substituted
F-120
Table of Contents
with one issue in euros at €645 million and another in
pounds sterling at 251 million pounds. The debt instruments
issued have substantially different conditions than those
amortized in terms of their current value. Therefore, the Group
recognized gains of €228 million in the heading
“Net gains (losses) on financial assets and
liabilities” in the accompanying consolidated income
statements for 2009 (see Note 44).
The breakdown of the issues of preferred securities in the
accompanying consolidated balance sheets, disregarding valuation
adjustments, by currency of issuance and interest rate of the
issues, is disclosed in Appendix VIII.
23.5.
Other
financial liabilities
The breakdown of the balance under this heading in the
accompanying consolidated balance sheets is as follows:
|
Other Financial Liabilities
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Creditors for other financial liabilities
|
2,295 | 1,776 | 3,191 | |||||||||
|
Collection accounts
|
2,068 | 2,049 | 2,077 | |||||||||
|
Creditors for other payment obligations
|
1,829 | 1,799 | 1,526 | |||||||||
|
Dividend payable but pending payment
|
404 | — | 626 | |||||||||
|
Total
|
6,596 | 5,624 | 7,420 | |||||||||
As of December 31, 2010 and 2008, the “Dividend
payable but pending payment” from the table above
corresponds to the third interim dividend against the 2010 and
2008 results, paid in January of the following years, (see
Note 4). As of December 31, 2009, said heading did not
include the third interim dividend, as it was paid in December
2009.
| 24. | LIABILITIES UNDER INSURANCE CONTRACTS |
The breakdown of the balance of this item in the accompanying
consolidated balance sheets was as follows:
|
Liabilities under Insurance Contracts
|
||||||||||||
|
Technical Reserve and Provisions
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Mathematical reserves
|
6,766 | 5,994 | 5,503 | |||||||||
|
Provision for unpaid claims reported
|
759 | 712 | 640 | |||||||||
|
Provisions for unexpired risks and other provisions
|
509 | 480 | 428 | |||||||||
|
Total
|
8,034 | 7,186 | 6,571 | |||||||||
| 25. | PROVISIONS |
The details of the balance of this heading in the accompanying
consolidated balance sheets as of December 31, 2010, 2009
and 2008 are as follows:
|
Provisions. Breakdown by Concepts
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Provisions for pensions and similar obligations
|
5,980 | 6,246 | 6,359 | |||||||||
|
Provisions for taxes and other legal contingencies
|
304 | 299 | 263 | |||||||||
|
Provisions for contingent exposures and commitments
|
264 | 243 | 421 | |||||||||
|
Other provisions
|
1,774 | 1,771 | 1,635 | |||||||||
|
Total
|
8,322 | 8,559 | 8,678 | |||||||||
F-121
Table of Contents
The changes in 2010, 2009 and 2008 in the balances of this
heading in the accompanying consolidated balance sheets are as
follows:
|
Provisions for Pensions and Similar Obligations.
|
||||||||||||||||
|
Changes Over the Period
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the beginning
|
6,246 | 6,359 | 5,967 | |||||||||||||
|
Add -
|
||||||||||||||||
|
Charge to income for the year
|
607 | 747 | 1,229 | |||||||||||||
|
Interest expenses and similar charges
|
39.2 | 259 | 274 | 254 | ||||||||||||
|
Personnel expenses
|
46.1 | 37 | 44 | 56 | ||||||||||||
|
Provision expenses
|
311 | 429 | 919 | |||||||||||||
|
Charges to reserves(*)
|
26.2 | 63 | 146 | 63 | ||||||||||||
|
Transfers and other changes
|
16 | 111 | 65 | |||||||||||||
|
Less -
|
||||||||||||||||
|
Payments
|
(815 | ) | (980 | ) | (828 | ) | ||||||||||
|
Amount used and other changes
|
(137 | ) | (137 | ) | (137 | ) | ||||||||||
|
Balance at the end
|
5,980 | 6,246 | 6,359 | |||||||||||||
| (*) | Correspond to actuarial losses (gains) arising from certain defined-benefit post-employment commitments recognized in “Reserves” in the consolidated balance sheets (see Note 2.2.3.). |
|
Provisions for Contingent Exposures and Commitments.
|
||||||||||||
|
Changes Over the Period
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at beginning
|
243 | 421 | 546 | |||||||||
|
Add -
|
||||||||||||
|
Charge to income for the year
|
62 | 110 | 97 | |||||||||
|
Transfers and other changes
|
5 | — | — | |||||||||
|
Less -
|
||||||||||||
|
Available funds
|
(40 | ) | (280 | ) | (216 | ) | ||||||
|
Amount used and other variations
|
(6 | ) | (8 | ) | (6 | ) | ||||||
|
Balance at the end
|
264 | 243 | 421 | |||||||||
|
Provisions for Taxes, Legal Contingents and Other
Provisions
|
||||||||||||
|
Changes Over the Period
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Balance at beginning
|
2,070 | 1,898 | 1,829 | |||||||||
|
Add -
|
||||||||||||
|
Charge to income for the year
|
145 | 152 | 705 | |||||||||
|
Acquisition of subsidiaries
|
— | — | — | |||||||||
|
Transfers and other changes
|
41 | 360 | 254 | |||||||||
|
Less -
|
||||||||||||
|
Available funds
|
(90 | ) | (103 | ) | (245 | ) | ||||||
|
Amount used and other variations
|
(88 | ) | (237 | ) | (645 | ) | ||||||
|
Disposal of subsidiaries
|
— | — | — | |||||||||
|
Balance at the end
|
2,078 | 2,070 | 1,898 | |||||||||
F-122
Table of Contents
| 26. | PENSIONS AND OTHER COMMITMENTS |
As described in Note 2.2.12, the Group has assumed both
defined-benefit and defined-contribution post-employment
commitments with its employees; the proportion of
defined-contribution plans is gradually increasing, mainly due
to new hires.
26.1. PENSION
COMMITMENTS THROUGH DEFINED-CONTRIBUTION PLANS
The commitments with employees for pensions in post-employment
defined-contribution plans correspond to current contributions
the Group makes every year on behalf of active employees. These
contributions are accrued and charged to the consolidated income
statement in the corresponding financial year (see
Note 2.2.12). No liability is therefore recognized in the
accompanying consolidated balance sheets.
The amounts registered under this item in the accompanying
consolidated income statements for contributions to these plans
in 2010, 2009 and 2008 were €84, €68 and
€71 million, respectively (see Note 46.1).
| 26.2 | PENSION COMMITMENTS THROUGH DEFINED-BENEFIT PLANS AND OTHER LONG-TERM BENEFITS |
Pension commitments in defined-benefit plans correspond mainly
to employees who have retired or taken early retirement from the
Group and to certain groups of employees still active in the
Group in the case of pension benefits, and to the majority of
active employees in the case of permanent incapacity and death
benefits.
The breakdown of the BBVA Group’s aggregate amounts for
pension commitments in defined-benefit plans and other
post-employment commitments (such as early retirement and
welfare benefits) registered under the heading
“Provisions — Provisions for pensions and similar
obligations” of the accompanying consolidated balance
sheets for the last five years, are as follows.
|
Commitments and Plan Assets in Defined-Benefit Plans
|
||||||||||||||||||||
|
and Other Post-Employment Commitments
|
2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Pension and post-employment benefits
|
8,082 | 7,996 | 7,987 | 7,816 | 8,173 | |||||||||||||||
|
Assets and insurance contracts coverage
|
2,102 | 1,750 | 1,628 | 1,883 | 1,816 | |||||||||||||||
|
Net assets
|
— | — | — | (34 | ) | — | ||||||||||||||
|
Net liabilities(*)
|
5,980 | 6,246 | 6,359 | 5,967 | 6,357 | |||||||||||||||
| (*) | Registered under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets |
F-123
Table of Contents
The breakdown of the pension commitments in defined-benefit
plans and other post-employment commitments as of
December 31, 2010, 2009 and 2008, as well as the
corresponding insurance contracts or coverage, distinguishing
between employees in Spain and the rest of the BBVA, S.A.
companies and branches abroad, is as follows.
|
Pensions and Early-Retirement
|
||||||||||||||||||||||||||||||||||||
|
Commitments and Welfare
|
Commitments in Spain | Commitments Abroad | Total BBVA Group | |||||||||||||||||||||||||||||||||
|
Benefits: Spain and Abroad
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Post-employment benefits
|
||||||||||||||||||||||||||||||||||||
|
Pension commitments
|
2,857 | 2,946 | 3,060 | 1,122 | 998 | 904 | 3,979 | 3,944 | 3,964 | |||||||||||||||||||||||||||
|
Early retirements
|
3,106 | 3,309 | 3,437 | — | — | — | 3,106 | 3,309 | 3,437 | |||||||||||||||||||||||||||
|
Post-employment welfare benefits
|
220 | 222 | 221 | 777 | 521 | 365 | 997 | 743 | 586 | |||||||||||||||||||||||||||
|
Total post-employment benefits(1)
|
6,183 | 6,477 | 6,718 | 1,899 | 1,519 | 1,269 | 8,082 | 7,996 | 7,987 | |||||||||||||||||||||||||||
|
Insurance contracts coverage
|
||||||||||||||||||||||||||||||||||||
|
Pension commitments
|
430 | 455 | 436 | — | — | — | 430 | 455 | 436 | |||||||||||||||||||||||||||
|
Other plan assets
|
||||||||||||||||||||||||||||||||||||
|
Pension commitments
|
— | — | — | 1,052 | 953 | 891 | 1,052 | 953 | 891 | |||||||||||||||||||||||||||
|
Post-employment welfare benefits
|
— | — | — | 620 | 342 | 301 | 620 | 342 | 301 | |||||||||||||||||||||||||||
|
Total plan assets and insurance contracts coverage(2)
|
430 | 455 | 436 | 1,672 | 1,295 | 1,192 | 2,102 | 1,750 | 1,628 | |||||||||||||||||||||||||||
|
Total net commitments(1) — (2)
|
5,753 | 6,022 | 6,282 | 227 | 224 | 77 | 5,980 | 6,246 | 6,359 | |||||||||||||||||||||||||||
|
of which:
|
||||||||||||||||||||||||||||||||||||
|
Net assets
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Net liabilities(*)
|
5,753 | 6,022 | 6,282 | 227 | 224 | 77 | 5,980 | 6,246 | 6,359 | |||||||||||||||||||||||||||
| (*) | Registered under the heading “Provisions — Provisions for pensions and similar obligations” of the accompanying consolidated balance sheets |
Additionally, there are other commitments to employees,
including long-service awards which are recognized under the
heading “Other provisions” in the accompanying
consolidated balance sheets (see Note 25). These amounted
to €39 million, €39 million and
€36 million as of December 31, 2010, 2009 and
2008, respectively, of which €11 million,
€13 million and €11 million correspond to
Spanish companies and €28 million,
€26 million and €25 million correspond to
companies and branches abroad.
The balance of the heading “Provisions —
Provisions for pensions and similar obligations” of the
accompanying consolidated balance sheets as of December 31,
2010 included €209.3 million, for commitments for
post-employment benefits maintained with previous members of the
Board of Directors and the Bank’s Management Committee. No
charges for those concepts were recognized in the consolidate
income statements in 2010.
F-124
Table of Contents
The aggregated total of the changes in all the net commitments
from companies in Spain and abroad in 2010, 2009 and 2008 were
as follows:
|
Net Commitments Spain and Abroad:
|
Commitments in Spain | Commitments Abroad | Total BBVA Group | |||||||||||||||||||||||||||||||||
|
Summary of Changes in the Period
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Balance at the Beginning
|
6,022 | 6,282 | 5,832 | 224 | 76 | 100 | 6,246 | 6,358 | 5,932 | |||||||||||||||||||||||||||
|
Interest costs
|
244 | 259 | 244 | 131 | 105 | 116 | 375 | 364 | 360 | |||||||||||||||||||||||||||
|
Expected return on plan assets
|
— | — | — | (116 | ) | (90 | ) | (106 | ) | (116 | ) | (90 | ) | (106 | ) | |||||||||||||||||||||
|
Current service cost
|
6 | 20 | 16 | 37 | 26 | 43 | 43 | 46 | 59 | |||||||||||||||||||||||||||
|
Cost for early retirements
|
296 | 430 | 1,004 | 9 | — | — | 305 | 430 | 1,004 | |||||||||||||||||||||||||||
|
Past service cost or changes in the plan
|
— | 36 | 8 | 9 | 7 | 1 | 9 | 43 | 9 | |||||||||||||||||||||||||||
|
Benefits paid in the period
|
(815 | ) | (980 | ) | (828 | ) | — | — | — | (815 | ) | (980 | ) | (828 | ) | |||||||||||||||||||||
|
Acquisitions and divestitures
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Effect of curtailments and settlements
|
— | — | — | — | 6 | (88 | ) | — | 6 | (88 | ) | |||||||||||||||||||||||||
|
Contributions in the period
|
— | — | — | (137 | ) | (55 | ) | (50 | ) | (137 | ) | (55 | ) | (50 | ) | |||||||||||||||||||||
|
Actuarial gains and losses
|
(4 | ) | 3 | 4 | 72 | 146 | 59 | 68 | 149 | 63 | ||||||||||||||||||||||||||
|
Exchage differences
|
— | — | — | 26 | 2 | 1 | 26 | 2 | 1 | |||||||||||||||||||||||||||
|
Other changes
|
4 | (28 | ) | 2 | (29 | ) | 1 | — | (25 | ) | (27 | ) | 2 | |||||||||||||||||||||||
|
Balance at the End
|
5,753 | 6,022 | 6,282 | 227 | 224 | 76 | 5,980 | 6,246 | 6,358 | |||||||||||||||||||||||||||
The net charges registered in the accompanying consolidated
income statement and under the heading “Reserves” of
the accompanying consolidated balance sheets (see
Note 2.2.11) of the BBVA Group for the commitments in
post-employment benefits in entities in Spain and abroad, are as
follows:
|
Total Post-employments Benefits BBVA Group:
|
||||||||||||||||
|
Income Statements and Equity Effects.
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Interest and similar expenses
|
39.1 | 259 | 274 | 254 | ||||||||||||
|
Interest costs
|
375 | 364 | 360 | |||||||||||||
|
Expected return on plan assets
|
(116 | ) | (90 | ) | (106 | ) | ||||||||||
|
Personnel expenses
|
127 | 132 | 143 | |||||||||||||
|
Defined-contribution plan expense
|
46.1 | 84 | 68 | 71 | ||||||||||||
|
Defined-benefit plan expense
|
46.1 | 37 | 44 | 56 | ||||||||||||
|
Other personnel expenses — Welfare benefits
|
6 | 20 | 16 | |||||||||||||
|
Provision — Pension funds and similar
obligations
|
48 | 405 | 552 | 985 | ||||||||||||
|
Pension funds
|
25 | 9 | (5 | ) | (83 | ) | ||||||||||
|
Early retirements
|
25 | 301 | 431 | 1,003 | ||||||||||||
|
Other provisions
|
95 | 126 | 65 | |||||||||||||
|
Total Effects in Income Statements: Debit (Credit)
|
791 | 958 | 1,382 | |||||||||||||
|
Total Effects in Equity: Debit (Credit) to Reserves(*)
|
64 | 149 | 62 | |||||||||||||
| (*) | Correspond to actuarial losses (gains) arising from pension commitments and welfare benefits recognized in “Reserves”. For Early reitirements are recognized in the Income Statements (see Note 2.2.3.). |
F-125
Table of Contents
26.2.1 Commitments
in Spain
The most significant actuarial assumptions used as of
December 31, 2010, 2009 and 2008, to quantify these
commitments are as follows:
|
Actuarial Assumptions
|
||||||
|
Commitments with Employees in Spain
|
2010 | 2009 | 2008 | |||
|
Mortality tables
|
PERM/F 2000P. | PERM/F 2000P. | PERM/F 2000P. | |||
|
Discount rate (cumulative annual)
|
4.5%/AA Corporate
Bond Yield Curve |
4.5%/AA Corporate
Bond Yield Curve |
4.5%/AA Corporate
Bond Yield Curve |
|||
|
Consumer price index (cumulative annual)
|
2% | 2% | 2% | |||
|
Salary growth rate (cumulative annual)
|
At least 3%
(depending on employee) |
At least 3%
(depending on employee) |
At least 3%
(depending on employee) |
|||
|
Retirement age
|
||||||
| First date at which the employees are entitled to retire or contractually | ||||||
| agreed at the individual level in the case of early retirements | ||||||
The breakdown of the various commitments to employees in Spain
is as follows:
• Pension
commitments in Spain
The breakdown of pension commitments in defined-benefit plans as
of December 31, 2010, 2009 and 2008 is as follows:
|
Pension Commitments Spain
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Pension commitments to retired employees
|
2,765 | 2,847 | 2,852 | |||||||||
|
Vested contingencies in respect of current employees
|
92 | 99 | 208 | |||||||||
|
Total(*)
|
2,857 | 2,946 | 3,060 | |||||||||
| (*) | Recognized under the heading “Provisions-Provisions for pension and similar obligations” in the accompanyng consolidated balance sheets |
Insurance contracts have been contracted with insurance
companies not related to the group to cover some pension
commitments in Spain. These commitments are covered by assets
and therefore are presented in the accompanying consolidated
balance sheets for the net amount of the commitment less plan
assets. As of December 31, 2010, 2009 and 2008, the plan
assets related to the aforementioned insurance contracts (shown
under the heading “Insurance contract cover”) equaled
the amount of the commitments covered, therefore its net value
was zero in the accompanying consolidated balance sheets.
The rest of commitments included in the previous table include
defined-benefit commitments for which insurance has been
contracted with BBVA Seguros, S.A. de Seguros y Reaseguros,
which is 99.95% owned by the Group. The assets in which the
insurance company has invested the amount of the policies cannot
be considered plan assets under IAS 19 and are presented in the
accompanying consolidated balance sheets under different
headings of “assets”, depending on the classification
of their corresponding financial instruments. The commitments
are recognized under the heading “Provisions —
Provisions for pensions and similar obligations” of the
accompanying consolidated balance sheets (see Note 25).
• Early
retirements in Spain
In 2010 the Group offered certain employees the possibility of
taking early retirement before the age stipulated in the
collective labor agreement in force. This offer was accepted by
683 employees (857 and 2.044 in 2009 and 2008,
respectively).
F-126
Table of Contents
The early retirements commitments in Spain as of
December 31, 2010, 2009 and 2008 are recognized under the
heading “Provisions — Provisions for pensions and
similar obligations” (see Note 25) in the
accompanying consolidated balance sheets amounted to
€3,106 million, €3,309 million and
€3,437 million, respectively.
The cost of early retirements for the year was recognized under
the heading “Provision Expense (Net) — Transfers
to funds for pensions and similar obligations — Early
retirements” in the accompanying consolidated income
statements (see Note 48).
• Other
long-term commitments with employees in Spain
The long-term commitments with employees include post-employment
welfare benefits and other commitments with employees.
•
Post-employment
welfare benefits in Spain
The details of these commitments as of December 31, 2010,
2009 and 2008 are as follows:
|
Post-Employment Welfare Benefits Commitments in Spain
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Post-employment welfare benefit commitments to retired employees
|
180 | 183 | 181 | |||||||||
|
Vested post-employment welfare benefit contingencies in respect
of current employees
|
40 | 39 | 40 | |||||||||
|
Total Commitments(*)
|
220 | 222 | 221 | |||||||||
| (*) | Recognized under the heading “Provisions-Provisions for pension and similar obligations” in the accompanyng consolidated balance sheets |
| • | Other commitments with employees — Long-service awards |
In addition to the post-employment welfare benefits mentioned
above, the Group maintained certain commitments in Spain with
some employees, called “Long-service awards”. These
commitments were for payment of a certain amount in cash and for
the allotment of Banco Bilbao Vizcaya Argentaria S.A. shares,
when these employees complete a given number of years of
effective service. The Group has offered these employees the
option to redeem the accrued value of such share benefits prior
to the established date of seniority. The value of the
long-service awards as of December 31, 2010 for employees
who did not choose early settlement is recognized under the
heading “Provisions — Other provisions”
(Note 25) of the accompanying consolidated balance
sheets as of December 31, 2010, 2009 and 2008 with the
amount of €11 million, €13 million and
€12 million, respectively.
F-127
Table of Contents
Breakdown
of changes in commitments with employees in Spain
The changes in the net commitments with employees in Spain in
2010, 2009 and 2008 were as follows:
|
Net Commitments in Spain :
|
Early
|
Welfare
|
Total
|
|||||||||||||
|
Changes in the Year 2010
|
Pensions | Retirements | Benefits | Spain | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the Beginning
|
2,491 | 3,309 | 222 | 6,022 | ||||||||||||
|
Interest costs
|
107 | 127 | 10 | 244 | ||||||||||||
|
Expected return on plan assets
|
— | — | — | — | ||||||||||||
|
Current service cost
|
4 | — | 2 | 6 | ||||||||||||
|
Cost for early retirements
|
— | 296 | — | 296 | ||||||||||||
|
Past service cost or changes in the plan
|
— | — | — | — | ||||||||||||
|
Benefits paid in the period
|
(170 | ) | (627 | ) | (18 | ) | (815 | ) | ||||||||
|
Acquisitions and divestitures
|
— | — | — | — | ||||||||||||
|
Effect of curtailments and settlements
|
— | — | — | — | ||||||||||||
|
Contributions in the period
|
— | — | — | — | ||||||||||||
|
Actuarial gains and losses
|
(9 | ) | 6 | (1 | ) | (4 | ) | |||||||||
|
Exchage differences
|
— | — | — | — | ||||||||||||
|
Other changes
|
4 | (5 | ) | 5 | 4 | |||||||||||
|
Balance at the End
|
2,427 | 3,106 | 220 | 5,753 | ||||||||||||
|
Net Commitments in Spain :
|
Early
|
Welfare
|
Total
|
|||||||||||||
|
Changes in the Year 2009
|
Pensions | Retirements | Benefits | Spain | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the Beginning
|
2,624 | 3,437 | 221 | 6,282 | ||||||||||||
|
Interest costs
|
114 | 135 | 10 | 259 | ||||||||||||
|
Expected return on plan assets
|
— | — | — | — | ||||||||||||
|
Current service cost
|
18 | — | 2 | 20 | ||||||||||||
|
Cost for early retirements
|
— | 430 | — | 430 | ||||||||||||
|
Past service cost or changes in the plan
|
31 | — | 5 | 36 | ||||||||||||
|
Benefits paid in the period
|
(249 | ) | (712 | ) | (19 | ) | (980 | ) | ||||||||
|
Effect of curtailments and settlements
|
— | — | — | — | ||||||||||||
|
Contributions in the period
|
— | — | — | — | ||||||||||||
|
Actuarial gains and losses
|
2 | 4 | (3 | ) | 3 | |||||||||||
|
Other changes
|
(49 | ) | 15 | 6 | (28 | ) | ||||||||||
|
Balance at the End
|
2,491 | 3,309 | 222 | 6,022 | ||||||||||||
F-128
Table of Contents
|
Net Commitments in Spain :
|
Early
|
Welfare
|
Total
|
|||||||||||||
|
Changes in the Year 2008
|
Pensions | Retirements | Benefits | Spain | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance at the Beginning
|
2,648 | 2,950 | 234 | 5,832 | ||||||||||||
|
Interest costs
|
116 | 117 | 11 | 244 | ||||||||||||
|
Expected return on plan assets
|
— | — | — | — | ||||||||||||
|
Current service cost
|
14 | — | 2 | 16 | ||||||||||||
|
Cost for early retirements
|
— | 1,004 | — | 1,004 | ||||||||||||
|
Past service cost or changes in the plan
|
8 | — | — | 8 | ||||||||||||
|
Benefits paid in the period
|
(167 | ) | (618 | ) | (43 | ) | (828 | ) | ||||||||
|
Acquisitions and divestitures
|
— | — | — | — | ||||||||||||
|
Effect of curtailments and settlements
|
— | — | — | — | ||||||||||||
|
Contributions in the period
|
— | — | — | — | ||||||||||||
|
Actuarial gains and losses
|
5 | (2 | ) | 1 | 4 | |||||||||||
|
Exchage differences
|
— | — | — | — | ||||||||||||
|
Other changes
|
— | (14 | ) | 16 | 2 | |||||||||||
|
Balance at the End
|
2,624 | 3,437 | 221 | 6,282 | ||||||||||||
The net charges registered in the accompanying consolidated
income statement and under the heading “Reserves” of
the accompanying consolidated balance sheets (see
Note 2.2.12) of the BBVA Group for commitments to
post-employment benefits in Spain are as follows:
|
Post-employments Benefits in Spain
|
||||||||||||
|
Income Statements and Equity Effects
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Interest and similar expenses
|
244 | 259 | 244 | |||||||||
|
Personnel expenses
|
6 | 20 | 16 | |||||||||
|
Provision (net) — Early retirements
|
301 | 431 | 1,003 | |||||||||
|
Total Effects in Income Statements: Debit (Credit)
|
551 | 710 | 1,263 | |||||||||
|
Total Effects in Equity: Debit (Credit) to Reserves(*)
|
(9 | ) | 2 | 5 | ||||||||
26.2.2. Commitments
abroad:
The main post-employment commitments through
defined-contribution plans with employees abroad correspond to
those in Mexico, Portugal and the United States, which jointly
represent 95% of the total commitments with employees abroad as
of December 31, 2010, and 22% of the total commitments with
employees in the Group as a whole as of December 31, 2010
(94% and 18%, respectively, as of December 31, 2009 and 94%
and 15%, respectively, as of December 31, 2008).
F-129
Table of Contents
As of December 31, 2010, the breakdown by country of the
various commitments with employees of the BBVA Group abroad was
as follows:
|
Post-Employment
|
Commitments | Plan Assets | Net Commitments | |||||||||||||||||||||||||||||||||
|
Commitments Abroad
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Pension Commitments
|
||||||||||||||||||||||||||||||||||||
|
Mexico
|
508 | 398 | 387 | 519 | 424 | 436 | (11 | ) | (26 | ) | (49 | ) | ||||||||||||||||||||||||
|
Portugal
|
288 | 321 | 283 | 290 | 320 | 283 | (2 | ) | 1 | — | ||||||||||||||||||||||||||
|
The United States
|
236 | 195 | 168 | 191 | 163 | 135 | 45 | 32 | 33 | |||||||||||||||||||||||||||
|
Rest of countries
|
90 | 84 | 66 | 52 | 46 | 37 | 38 | 38 | 29 | |||||||||||||||||||||||||||
|
Subtotal
|
1,122 | 998 | 904 | 1,052 | 953 | 891 | 70 | 45 | 13 | |||||||||||||||||||||||||||
|
Post-Employment Welfare Benefits
|
||||||||||||||||||||||||||||||||||||
|
Mexico
|
766 | 511 | 360 | 620 | 342 | 301 | 146 | 169 | 59 | |||||||||||||||||||||||||||
|
Portugal
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
The United States
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Rest of countries
|
11 | 10 | 4 | — | — | — | 11 | 10 | 4 | |||||||||||||||||||||||||||
|
Subtotal
|
777 | 521 | 364 | 620 | 342 | 301 | 157 | 179 | 63 | |||||||||||||||||||||||||||
|
Total
|
1,899 | 1,519 | 1,268 | 1,672 | 1,295 | 1,192 | 227 | 224 | 76 | |||||||||||||||||||||||||||
The changes in the net post-employment commitments with
employees abroad in 2010 were as follows:
|
Net Commitments Abroad:
|
United
|
Rest of
|
Total
|
|||||||||||||||||
|
Changes in the Year 2010
|
Mexico | Portugal | States | Countries | Abroad | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Balance at the Beginning
|
143 | 1 | 32 | 48 | 224 | |||||||||||||||
|
Interest cost
|
94 | 17 | 12 | 8 | 131 | |||||||||||||||
|
Expected return on plan assets
|
(87 | ) | (13 | ) | (13 | ) | (3 | ) | (116 | ) | ||||||||||
|
Current service cost
|
26 | 5 | 5 | 2 | 37 | |||||||||||||||
|
Cost for early retirements
|
— | 9 | — | — | 9 | |||||||||||||||
|
Past service cost or changes in the plan
|
8 | — | — | 1 | 9 | |||||||||||||||
|
Benefits paid in the period
|
— | — | — | — | (0 | ) | ||||||||||||||
|
Acquisitions and divestitures
|
— | — | — | — | — | |||||||||||||||
|
Effect of curtailments and settlements
|
— | — | — | — | — | |||||||||||||||
|
Contributions in the period
|
(114 | ) | (17 | ) | (2 | ) | (3 | ) | (137 | ) | ||||||||||
|
Actuarial gains and losses
|
45 | 19 | 9 | (1 | ) | 72 | ||||||||||||||
|
Exchage differences
|
20 | — | 2 | 4 | 26 | |||||||||||||||
|
Other changes
|
(1 | ) | (22 | ) | 1 | (7 | ) | (29 | ) | |||||||||||
|
Balance at the End
|
135 | (2 | ) | 45 | 49 | 227 | ||||||||||||||
F-130
Table of Contents
|
Net Commitments Abroad:
|
United
|
Rest of
|
Total
|
|||||||||||||||||
|
Changes in the Year 2009
|
Mexico | Portugal | States | Countries | Abroad | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Balance at the Beginning
|
10 | — | 33 | 33 | 76 | |||||||||||||||
|
Interest cost
|
72 | 16 | 11 | 6 | 105 | |||||||||||||||
|
Expected return on plan assets
|
(65 | ) | (13 | ) | (10 | ) | (2 | ) | (90 | ) | ||||||||||
|
Current service cost
|
15 | 4 | 4 | 3 | 26 | |||||||||||||||
|
Cost for early retirements
|
— | — | — | — | — | |||||||||||||||
|
Past service cost or changes in the plan
|
1 | — | — | 6 | 7 | |||||||||||||||
|
Benefits paid in the period
|
— | — | — | — | — | |||||||||||||||
|
Acquisitions and divestitures
|
— | — | — | — | — | |||||||||||||||
|
Effect of curtailments and settlements
|
(5 | ) | 10 | — | 1 | 6 | ||||||||||||||
|
Contributions in the period
|
(12 | ) | (29 | ) | (12 | ) | (2 | ) | (55 | ) | ||||||||||
|
Actuarial gains and losses
|
127 | 13 | 7 | (1 | ) | 146 | ||||||||||||||
|
Exchage differences
|
— | — | (1 | ) | 3 | 2 | ||||||||||||||
|
Other changes
|
— | — | — | 1 | 1 | |||||||||||||||
|
Balance at the End
|
143 | 1 | 32 | 48 | 224 | |||||||||||||||
|
Net Commitments Abroad:
|
United
|
Rest of
|
Total
|
|||||||||||||||||
|
Changes in the Year 2008
|
Mexico | Portugal | States | Countries | Abroad | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Balance at the Beginning
|
74 | 3 | (6 | ) | 29 | 100 | ||||||||||||||
|
Interest cost
|
84 | 15 | 9 | 8 | 116 | |||||||||||||||
|
Expected return on plan assets
|
(78 | ) | (13 | ) | (12 | ) | (3 | ) | (106 | ) | ||||||||||
|
Current service cost
|
29 | 4 | 5 | 5 | 43 | |||||||||||||||
|
Cost for early retirements
|
— | — | — | — | — | |||||||||||||||
|
Past service cost or changes in the plan
|
— | — | 1 | — | 1 | |||||||||||||||
|
Benefits paid in the period
|
— | — | — | — | — | |||||||||||||||
|
Acquisitions and divestitures
|
— | — | — | — | — | |||||||||||||||
|
Effect of curtailments and settlements
|
(83 | ) | — | (2 | ) | (3 | ) | (88 | ) | |||||||||||
|
Contributions in the period
|
(31 | ) | (10 | ) | (3 | ) | (6 | ) | (50 | ) | ||||||||||
|
Actuarial gains and losses
|
15 | 1 | 41 | 2 | 59 | |||||||||||||||
|
Exchage differences
|
— | — | — | 1 | 1 | |||||||||||||||
|
Other changes
|
— | — | — | — | — | |||||||||||||||
|
Balance at the End
|
10 | — | 33 | 33 | 76 | |||||||||||||||
In the tables above, “Benefits paid in the period” are
presented net, as the difference between the commitments and
plan assets for the same amount. These payments corresponding to
2010, amounted to €36 million for pensions in Mexico,
€18 million for welfare benefits in Mexico,
€16 million for pensions in Portugal and
€8 million for pensions in the United States.
F-131
Table of Contents
The net charges registered in the accompanying consolidated
income statement and under the heading “Reserves” of
the accompanying consolidated balance sheets (see
Note 2.2.12) of the BBVA Group for commitments to
post-employment benefits abroad are as follows:
|
Commitments with employees Abroad:
|
||||||||||||
|
Income Statements and Equity Effects.
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Interest and similar expenses
|
15 | 15 | 10 | |||||||||
|
Personnel expenses
|
37 | 24 | 40 | |||||||||
|
Provisions (net)
|
9 | (5 | ) | (83 | ) | |||||||
|
Total Effects in Income Statements: Debit (Credit)
|
61 | 34 | (33 | ) | ||||||||
|
Total Effects in Equity: Debit (Credit) to Reserves(*)
|
73 | 147 | 57 | |||||||||
• Commitments
with employees in Mexico:
In Mexico, the main actuarial assumptions used in quantifying
the commitments with employees as of December 31, 2010,
2009 and 2008, were as follows:
|
Post-Employment Actuarial Assumptions in Mexico
|
2010 | 2009 | 2008 | |||
|
Mortality tables
|
EMSSA 97 | EMSSA 97 | EMSSA 97 | |||
|
Discount rate (cumulative annual)
|
8.75% | 9.25% | 10.25% | |||
|
Consumer price index (cumulative annual)
|
3.75% | 3.75% | 3.75% | |||
|
Medical cost trend rate
|
6.75% | 6.75% | 6.75% | |||
|
Expected rate of return on plan assets
|
9.00% | 9.40% | 9.75% |
• Pension
commitments in Mexico
The changes of these commitments and plan assets in 2010, for
all Group’s companies in Mexico, were as follows:
|
Pension Commitments and Plan Assets
|
Commitments | Plan Assets | Net Commitments | |||||||||||||||||||||||||||||||||
|
in Mexico: Changes in the period
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Balance at the Beginning
|
398 | 387 | 584 | 424 | 436 | 572 | (26 | ) | (49 | ) | 12 | |||||||||||||||||||||||||
|
Interest cost
|
40 | 35 | 49 | — | — | — | 40 | 35 | 49 | |||||||||||||||||||||||||||
|
Expected return on plan assets
|
— | — | — | 42 | 37 | 48 | (42 | ) | (37 | ) | (48 | ) | ||||||||||||||||||||||||
|
Current service cost
|
7 | 4 | 15 | — | — | — | 7 | 4 | 15 | |||||||||||||||||||||||||||
|
Past service cost or changes in the plan
|
8 | 1 | — | — | — | — | 8 | 1 | — | |||||||||||||||||||||||||||
|
Benefits paid in the period
|
(36 | ) | (31 | ) | (31 | ) | (36 | ) | (31 | ) | (31 | ) | (0 | ) | — | — | ||||||||||||||||||||
|
Effect of curtailments and settlements
|
— | (1 | ) | (66 | ) | — | — | — | — | (1 | ) | (66 | ) | |||||||||||||||||||||||
|
Contributions in the period
|
— | — | — | 45 | 3 | 8 | (45 | ) | (3 | ) | (8 | ) | ||||||||||||||||||||||||
|
Actuarial gains and losses
|
33 | 30 | (47 | ) | 66 | 6 | (37 | ) | (33 | ) | 24 | (10 | ) | |||||||||||||||||||||||
|
Exchage differences
|
57 | 6 | (88 | ) | 61 | 6 | (95 | ) | (4 | ) | — | 7 | ||||||||||||||||||||||||
|
Other changes
|
— | (33 | ) | (29 | ) | (83 | ) | (33 | ) | (29 | ) | 83 | — | — | ||||||||||||||||||||||
|
Balance at the End
|
508 | 398 | 387 | 519 | 424 | 436 | (11 | ) | (26 | ) | (49 | ) | ||||||||||||||||||||||||
The plan assets related to these commitments are to be used
directly to settle the vested obligations and meet the following
conditions: They are not owned by the Group entities; they are
available only to pay post-employment benefits; and they cannot
be returned to the Group entities. In 2010, the return on plan
assets amounts to €108 million.
As of December 31, 2010 the plan assets for these
commitments were all in debt securities.
F-132
Table of Contents
The vested obligations related to these commitments are
presented in the accompanying consolidated balance sheets net of
the plan assets for these commitments recognized under the
heading “Provisions — Provisions for pensions and
similar obligations” (see Note 25).
On December 2008, a new defined-contribution plan was put in
place in Mexico on a voluntary basis; it substitutes the current
defined-benefit plan commitments. Approximately 70% of the
workforce opted to sign up for the new plan, triggering a
decrease in the pension obligations included in the changes in
commitments in 2009.
• Post-employment
welfare benefits in Mexico
The changes in these commitments and plan assets in 2010 for all
Groups’ companies in Mexico were as follows:
|
Welfare Benefits Commitments and
|
||||||||||||||||||||||||||||||||||||
|
Plan Assets in Mexico: Changes in the
|
Commitments | Plan Assets | Net Commitments | |||||||||||||||||||||||||||||||||
|
period
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Balance at the Beginning
|
511 | 360 | 416 | 342 | 301 | 354 | 169 | 59 | 62 | |||||||||||||||||||||||||||
|
Interest costs
|
54 | 37 | 35 | — | — | — | 54 | 37 | 35 | |||||||||||||||||||||||||||
|
Expected return on plan assets
|
— | — | — | 45 | 28 | 30 | (45 | ) | (28 | ) | (30 | ) | ||||||||||||||||||||||||
|
Current service cost
|
19 | 11 | 14 | — | — | — | 19 | 11 | 14 | |||||||||||||||||||||||||||
|
Past service cost or changes in the plan
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Benefits paid in the period
|
(18 | ) | (18 | ) | (19 | ) | (18 | ) | (18 | ) | (19 | ) | — | — | — | |||||||||||||||||||||
|
Effect of curtailments and settlements
|
— | (4 | ) | (17 | ) | — | — | — | — | (4 | ) | (17 | ) | |||||||||||||||||||||||
|
Contributions in the period
|
— | — | — | 69 | 9 | 23 | (69 | ) | (9 | ) | (23 | ) | ||||||||||||||||||||||||
|
Actuarial gains and losses
|
127 | 119 | 2 | 49 | 16 | (23 | ) | 78 | 103 | 25 | ||||||||||||||||||||||||||
|
Exchage differences
|
73 | 6 | (71 | ) | 49 | 6 | (64 | ) | 24 | — | (7 | ) | ||||||||||||||||||||||||
|
Other changes
|
— | — | — | 84 | — | — | (84 | ) | — | — | ||||||||||||||||||||||||||
|
Balance at the End
|
766 | 511 | 360 | 620 | 342 | 301 | 146 | 169 | 59 | |||||||||||||||||||||||||||
The plan assets related to these commitments are to be used
directly to settle the vested obligations and meet the following
conditions: They are not owned by the Group entities; they are
available only to pay post-employment benefits; and they cannot
be returned to the Group entities. In 2010, the return on plan
assets for the post-employment welfare benefits commitments
amounts to €94 million.
The plan assets for these commitments are all in debt securities.
The vested obligations related to these commitments are
presented in the accompanying consolidated balance sheets net of
the plan assets for these commitments recognized under the
heading “Provisions — Provisions for pensions and
similar obligations” (see Note 25).
The sensitivity analysis to changes in medical cost trend rates
costs for 2010 is as follows:
|
1%
|
1%
|
|||||||
|
Welfare Benefits in Mexico. Sensitivity Analysis
|
Increase | Decrease | ||||||
| Millions of euros | ||||||||
|
Increase/Decrease in current service cost and interest cost
|
21 | (16 | ) | |||||
|
Increase/Decrease in commitments
|
155 | (121 | ) | |||||
F-133
Table of Contents
• Pension
Commitments in Portugal:
In Portugal, the main actuarial assumptions used in quantifying
the commitments with employees as of December 31, 2010,
2009 and 2008, were as follows:
|
Post-Employment Actuarial Assumptions in Portugal
|
2010 | 2010 | 2009 | |||
|
Mortality tables
|
TV88/90 | TV88/90 | TV88/90 | |||
|
Discount rate (cumulative annual)
|
5.35% | 5.35% | 5.90% | |||
|
Consumer price index (cumulative annual)
|
1.75% | 2.00% | 2.00% | |||
|
Salary growth rate (cumulative annual)
|
2.75% | 3.00% | 3.00% | |||
|
Expected rate of return on plan assets
|
4.40% | 4.50% | 4.60% |
The changes to these commitments and plan assets in 2010, for
all the Group’s companies in Portugal, were as follows:
|
Pensions Net Commitments in
|
||||||||||||||||||||||||||||||||||||
|
Portugal:
|
Commitments | Plan Assets | Net Commitments | |||||||||||||||||||||||||||||||||
|
Changes in the period
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Balance at the Beginning
|
321 | 283 | 295 | 320 | 283 | 292 | 1 | — | 3 | |||||||||||||||||||||||||||
|
Interest cost
|
17 | 16 | 15 | — | — | — | 17 | 16 | 15 | |||||||||||||||||||||||||||
|
Expected return on plan assets
|
— | — | — | 13 | 13 | 13 | (13 | ) | (13 | ) | (13 | ) | ||||||||||||||||||||||||
|
Current service cost
|
5 | 4 | 4 | — | — | — | 5 | 4 | 4 | |||||||||||||||||||||||||||
|
Cost for early retirements
|
9 | — | — | — | — | — | 9 | — | — | |||||||||||||||||||||||||||
|
Past service cost or changes in the plan
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Benefits paid in the period
|
(16 | ) | (16 | ) | (15 | ) | (16 | ) | (16 | ) | (15 | ) | — | — | — | |||||||||||||||||||||
|
Effect of curtailments and settlements
|
— | 10 | — | — | — | — | — | 10 | — | |||||||||||||||||||||||||||
|
Contributions in the period
|
— | — | — | 17 | 29 | 10 | (17 | ) | (29 | ) | (10 | ) | ||||||||||||||||||||||||
|
Actuarial gains and losses
|
(25 | ) | 24 | (16 | ) | (44 | ) | 11 | (17 | ) | 19 | 13 | 1 | |||||||||||||||||||||||
|
Exchage differences
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
|
Other changes
|
(22 | ) | — | — | — | — | — | (22 | ) | — | — | |||||||||||||||||||||||||
|
Balance at the End
|
288 | 321 | 283 | 290 | 320 | 283 | (2 | ) | 1 | — | ||||||||||||||||||||||||||
The plan assets related to these commitments are to be used
directly to settle the vested obligations and meet the following
conditions: They are not owned by the Group entities; they are
available only to pay post-employment benefits; and they cannot
be returned to the Group entities. In 2010 the return on plan
assets related to these pension commitments reached
-31 million euros.
The vested obligations related to these commitments are
presented in the accompanying consolidated balance sheets net of
the plan assets for these commitments recognized under the
heading “Provisions — Provisions for pensions and
similar obligations” (see Note 25).
The distribution of the main categories of plan assets related
to these commitments as of 31 December, 2010, 2009 and 2008
for all Group’s companies in Portugal was as follows:
| Percentage | ||||||||||||
|
Plan Assets Categories in Portugal
|
2010 | 2009 | 2008 | |||||||||
|
Equity instruments
|
— | — | 8.7 | |||||||||
|
Debt securities
|
91.5 | 93.2 | 85.3 | |||||||||
|
Property, Land and Buildings
|
0.5 | — | 0.5 | |||||||||
|
Cash
|
8.0 | 5.2 | 3.6 | |||||||||
|
Other investments
|
— | 1.6 | 1.9 | |||||||||
F-134
Table of Contents
• Pension
commitments in the United States:
In the United States, the main actuarial assumptions used in
quantifying the commitments with employees as of
December 31, 2010, 2009 and 2008, were as follows:
|
Post-Employment Actuarial
|
||||||
|
Assumptions in the United States
|
2010 | 2009 | 2008 | |||
|
Mortality tables
|
RP 2000 Projected | RP 2000 Projected | RP 2000 Projected | |||
|
Discount rate (cumulative annual)
|
5.44% | 5.93% | 6.92% | |||
|
Consumer price index (cumulative annual)
|
2.50% | 2.50% | 2.50% | |||
|
Salary growth rate (cumulative annual)
|
3.50% | 3.50% | 4.00% | |||
|
Expected rate of return on plan assets
|
7.50% | 7.50% | 7.50% |
The changes of these commitments and plan assets in 2010, for
all Group’s companies in United States, were as follows:
|
Pensions Net Commitments in the
|
||||||||||||||||||||||||||||||||||||
|
United States
|
Commitments | Plan Assets | Net Commitments | |||||||||||||||||||||||||||||||||
|
Changes in the Period
|
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Balance at the Beginning
|
195 | 168 | 162 | 163 | 135 | 168 | 32 | 33 | (6 | ) | ||||||||||||||||||||||||||
|
Interest cost
|
12 | 11 | 9 | — | — | — | 12 | 11 | 9 | |||||||||||||||||||||||||||
|
Expected return on plan assets
|
— | — | — | 13 | 10 | 12 | (13 | ) | (10 | ) | (12 | ) | ||||||||||||||||||||||||
|
Current service cost
|
5 | 4 | 5 | — | — | — | 5 | 4 | 5 | |||||||||||||||||||||||||||
|
Past service cost or changes in the plan
|
— | — | 1 | — | — | — | — | — | 1 | |||||||||||||||||||||||||||
|
Benefits paid in the period
|
(7 | ) | (6 | ) | (7 | ) | (7 | ) | (6 | ) | (7 | ) | — | — | — | |||||||||||||||||||||
|
Effect of curtailments and settlements
|
— | — | (2 | ) | — | — | — | — | — | (2 | ) | |||||||||||||||||||||||||
|
Contributions in the period
|
— | — | — | 2 | 12 | 3 | (2 | ) | (12 | ) | (3 | ) | ||||||||||||||||||||||||
|
Actuarial gains and losses
|
16 | 24 | (9 | ) | 7 | 17 | (50 | ) | 9 | 7 | 41 | |||||||||||||||||||||||||
|
Exchage differences
|
14 | (6 | ) | 9 | 12 | (5 | ) | 9 | 2 | (1 | ) | — | ||||||||||||||||||||||||
|
Other changes
|
1 | — | — | — | — | — | 1 | — | — | |||||||||||||||||||||||||||
|
Balance at the End
|
236 | 195 | 168 | 191 | 163 | 135 | 45 | 32 | 33 | |||||||||||||||||||||||||||
The plan assets related to these commitments are to be used
directly to settle the vested obligations and meet the following
conditions: They are not owned by the Group entities; they are
available only to pay post-employment benefits; and they cannot
be returned to the Group entities. In 2010 the return on plan
assets related to these pension commitments reached
€20 million.
The vested obligations related to these commitments are
presented in the accompanying consolidated balance sheets net of
the plan assets for these commitments recognized under the
heading “Provisions — Provisions for pensions and
similar obligations” (see Note 25).
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The distribution of the main category of plan assets related to
these commitments as of 31 December, 2010, 2009 and 2008
for all the companies in the United States was as follows:
|
Plan Assets Categories for
|
||||||||||||
|
Pension Commitments in the United
|
Percentage | |||||||||||
|
States
|
2010 | 2009 | 2008 | |||||||||
|
Equity instruments
|
62.4 | 63.6 | 52.7 | |||||||||
|
Debt securities
|
35.7 | 35.1 | 46.0 | |||||||||
|
Property, Land and Buildings
|
— | — | — | |||||||||
|
Cash
|
1.9 | 1.3 | 1.3 | |||||||||
|
Other investments
|
— | — | — | |||||||||
| 26.2.3 | Estimated future payments for commitments with employees in the BBVA Group |
The estimated benefit payments in millions of euros over the
next 10 years for all the companies in Spain, Mexico,
Portugal and the United States are as follows:
|
Expected Future Benefits for
|
||||||||||||||||||||||||
|
Post-Employment Commitments
|
2011 | 2012 | 2013 | 2014 | 2015 | 2016-2020 | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
Pensions Spain
|
791 | 734 | 688 | 637 | 580 | 1,939 | ||||||||||||||||||
|
Early retirement Spain
|
596 | 541 | 497 | 448 | 392 | 1,043 | ||||||||||||||||||
|
Pension Mexico
|
60 | 59 | 61 | 65 | 70 | 441 | ||||||||||||||||||
|
Pensions Portugal
|
17 | 17 | 17 | 17 | 17 | 84 | ||||||||||||||||||
|
Pensions The United States
|
8 | 9 | 10 | 11 | 12 | 72 | ||||||||||||||||||
|
Total
|
876 | 819 | 776 | 730 | 679 | 2,536 | ||||||||||||||||||
| 27. | COMMON STOCK |
The BBVA Board of Directors, at its meeting on November 1,
2010, under the delegation conferred by the AGM held on
March 13, 2009, agreed to a BBVA capital increase
(including the pre-emptive subscription right for former
shareholders) that was completed for a nominal amount of
€364,040,190.36, with the issue and release into
circulation of 742,939,164 new ordinary shares of the same class
and series as the previously existing ones, with a par value of
€0.49 each and represented through book-entry accounts. The
subscription price of the new shares was €6.75 per share,
of which forty-nine euro cents (€0.49) corresponded to the
par value and six euros and twenty-six cents (€6.26)
corresponded to the share premium (Note 28), therefore, the
total effective amount of the common stock increase was
€5,014,839,357.
After the aforementioned capital increase, BBVA’s share
capital, as of December 31, 2010 amounted to
€2,200,545,059.65, divided into 4,490,908,285 fully
subscribed and
paid-up
registered shares, all of the same class and series, at
€0.49 par value each, represented through book-entry
accounts.
All BBVA shares carry the same voting and dividend rights and no
single stockholder enjoys special voting rights. There are no
shares that do not represent an interest in the Bank’s
common stock.
BBVA shares are traded on the continuous market in Spain, as
well as on the London and Mexico stock markets. American
Depositary Shares (ADSs) traded on the New York Stock Exchange
are also traded on the Lima Stock Exchange (Peru), under an
exchange agreement between these two markets.
Also, as of December 31, 2010, the shares of BBVA Banco
Continental, S.A., Banco Provincial S.A., BBVA Colombia, S.A.,
BBVA Chile, S.A., BBVA Banco Frances, S.A. and AFP Provida were
listed on their respective local stock markets, the last two
also being listed on the New York Stock Exchange. BBVA Banco
Frances, S.A. is also listed on the Latin American market of the
Madrid Stock Exchange.
As of December 31, 2010, Manuel Jove Capellán owned
5.07% of BBVA common stock through the company Inveravante
Inversiones Universales, S.L.
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Furthermore, as of December 31, 2010, State Street Bank and
Trust Co., Chase Nominees Ltd. and The Bank of New York
Mellon, S.A. NV, in their capacity as international
custodian/depositary banks, held 7.22%, 5.95% and 3.65% of BBVA
common stock, respectively. Of said positions held by the
custodian banks, there are no individual shareholder with direct
or indirect holdings greater than or equal to 3% of the BBVA
common stock, except in the case of the Blackrock Inc. company
that, on February 4, 2010, reported to the Spanish
Securities and Exchange Commission (CNMV) that, as a result of
the acquisition on December 1, 2009 of the Barclays Global
Investors (BGI) company, now has an indirect holding of BBVA
common stock totaling 4.45% through the Blackrock Investment
Management company.
BBVA is not aware of any direct or indirect interests through
which ownership or control of the Bank may be exercised.
BBVA has not been notified of the existence of any agreements
between shareholders to regulate the exercise of voting rights
at the Bank’s AGMs, or to restrict or place conditions upon
the free transferability of BBVA shares. The Bank is also not
aware of any agreement that might result in changes in the
control of the issuer.
The AGM held on March 13, 2009, under the fifth point of
the Agenda, resolved to confer authority on the Board of
Directors, pursuant to article 153.1.b) of the Corporations
Act (now Article 297.1b) of the Corporations Act), to
resolve to increase the common stock on one or several occasions
up to the maximum nominal amount representing 50% of the
Company’s common stock that is subscribed and paid up on
the date on which the resolution is adopted, i.e.,
€918,252,434.60. Article 159.2 of the Corporations Act
(now Article 506 of the Corporations Act) empowers the
Board to exclude the pre-emptive subscription right in relation
to these share issues, under the terms and with the limitations
of the aforementioned agreement. The directors have five years
from the date of the adoption of the agreement by the General
Meeting, i.e. March 13, 2009, to perform this common stock
increase.
On the signing of this agreement, the Board of Directors agreed
on a share capital increase of the Bank with the pre-emptive
subscription right, as described above, on November 1,
2010. The Board of Directors, at its meeting on July 27,
2009, agreed to a share capital increase for the amount required
to address the conversion of the convertible obligations agreed
upon on said date, as described below. This will be carried out
through the issue and release into circulation of up to
444,444,445 ordinary shares with a par value of €0.49 each
and without prejudice to the adjustments that may arise
according to the anti-dilution mechanisms.
At the AGM held on March 14, 2008 the shareholders resolved
to delegate to the Board of Directors for a five-year period the
right to issue bonds, convertible
and/or
exchangeable into Bank shares for a maximum total of
€9,000 million. The powers include the right to
establish the different aspects and conditions of each issue,
including the power to exclude pre-emptive subscription right of
shareholders in accordance with the Corporations Act (now the
Corporations Act), to determine the basis and methods of
conversion and to increase capital stock in the amount
considered necessary. In virtue of said authorization, the Board
of Directors, at its meeting on July 27, 2009, agreed to
proceed to the issue of convertible obligations for an amount of
€2,000 million with the exclusion of the pre-emptive
subscription right (see Note 23.4), as well as the
corresponding Bank’s share capital increase needed to
address the conversion of said convertible obligations, on the
basis of the conferral to the Board of Directors to increase
share capital, as adopted by the aforementioned AGM held on
March 13, 2009.
Previously, the AGM held on March 18, 2006 had agreed to
delegate to the Board of Directors the faculty to issue, within
a maximum legal period of five years as of said date, on one or
several occasions, directly or through subsidiary companies
fully underwritten by the Bank, any kind of debt instruments
through debentures, any class of bonds, promissory notes, any
class of commercial paper or warrants, which may be totally or
partially exchangeable for equity that the Company or another
company may already have issued, or via contracts for difference
(CFD), or any other senior or secured nominative or bearer debt
securities (including mortgage-backed bonds) in euros or any
other currency that can be subscribed in cash or kind, with or
without the incorporation of rights to the securities
(warrants), subordinated or not, with a limited or open-ended
term. The total maximum nominal amount authorized is
€105,000 million. This amount was increased by
€30,000 million by the Ordinary General
Stockholders’ Meeting held on March 16, 2007, by
€50,000 million by the AGM on March 14 2008, and by an
additional €50,000 million by the AGM on
March 13, 2009. Accordingly, the maximum total nominal
amount delegated by the General Meeting was
€235,000 million.
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Table of Contents
| 28. | SHARE PREMIUM |
The amounts under this heading in the accompanying consolidated
balance sheets total €17,104, €12,453 and
€12,770 million as of 31 December, 2010, 2009 and
2008, respectively.
The change in the amount in 2010 is due to the share premium of
the aforementioned capital increase.
The change in the balance in 2009 is the result of a charge of
€317 million corresponding to the payment to
shareholders on April 20, 2009 as a complement to dividends
for 2008, which was approved at the AGM on March 13, 2009.
This payment consisted in a total of 60,451,115 treasury stock
(see Note 30) at one (1) share for each sixty-two
(62) held by shareholders at market close on April 9,
2009. These shares are valued at €5.25 each (the average
weighted price per share of Banco Bilbao Vizcaya Argentaria,
S.A. in the Spanish stock market (continuous market) on
March 12, the day before that of the AGM mentioned above.
The amended Spanish Corporation Act expressly permits the use of
the share premium balance to increase capital and establishes no
specific restrictions as to its use.
| 29. | RESERVES |
The breakdown of the balance of this heading in the accompanying
consolidated balance sheets was as follows:
|
Reserves. Breakdown by concepts
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Legal reserve
|
367 | 367 | 367 | |||||||||
|
Restricted reserve for retired capital
|
88 | 88 | 88 | |||||||||
|
Restricted reserve for Parent Company shares
|
456 | 470 | 604 | |||||||||
|
Restricted reserve for redenomination of capital in euros
|
2 | 2 | 2 | |||||||||
|
Revaluation Royal Decree-Law 7/1996
|
32 | 48 | 82 | |||||||||
|
Voluntary reserves
|
4,168 | 2,918 | 1,927 | |||||||||
|
Consolidation reserves attributed to the Bank and dependents
consolidated companies
|
9,247 | 8,181 | 6,340 | |||||||||
|
Total
|
14,360 | 12,074 | 9,410 | |||||||||
29.1.
LEGAL
RESERVE
Under the amended Corporations Act, 10% of any profit made each
year must be transferred to the legal reserve until the balance
of this reserve reaches 20% of the share capital. This limit of
20% of share capital had already been reached BBVA as of
December 31, 2010, once the proposal for applying the 2010
earnings was considered (see Note 4). The legal reserve may
also be used to increase the share capital in the part exceeding
the 10% of the capital already increased.
Until the legal reserve exceeds 20% of capital, it can only be
used to offset losses, provided that sufficient other reserves
are not available for this purpose.
29.2.
RESTRICTED
RESERVES
BBVA has recognized a restricted reserve resulting from the
reduction of the nominal value of each share in April 2000, and
another restricted reserve resulting from the amount of treasury
stock held by the Bank at each period-end, as well as by the
amount of customer loans outstanding at those dates that were
granted for the purchase of, or are secured by, the Bank’s
shares.
Finally, pursuant to Law 46/1998 on the introduction of the
euro, a restricted reserve is recognized as a result of the
rounding effect of the redenomination of the share capital in
euros.
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Table of Contents
| 29.3. | REVALUATION OF ROYAL DECREE-LAW 7/1996 (REVALUATION AND REGULARIZATION OF THE BALANCE SHEET) |
Prior to the merger, Banco de Bilbao, S.A. and Banco de Vizcaya,
S.A. availed themselves of the legal provisions applicable to
the regularization and revaluation of balance sheets. Thus, on
December 31, 1996, Banco Bilbao Vizcaya, S.A. revalued its
tangible assets pursuant to Royal Decree-Law 7/1996 of June 7 by
applying the maximum coefficients authorized, up to the limit of
the market value arising from the existing valuations. The
resulting increases in the cost and depreciation of tangible
fixed assets were calculated and allocated as follows:
|
Revaluation and Regularization of the Balance Sheet
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Legal revaluations and regularizations of tangible assets:
|
||||||||||||
|
Cost
|
187 | 187 | 187 | |||||||||
|
Less:
|
||||||||||||
|
Single revaluation tax (3%)
|
(6 | ) | (6 | ) | (6 | ) | ||||||
|
Balance as of December 31, 1999
|
181 | 181 | 181 | |||||||||
|
Rectification as a result of review by the tax authorities in
2000
|
(5 | ) | (5 | ) | (5 | ) | ||||||
|
Transfer to voluntary reserves
|
(144 | ) | (128 | ) | (94 | ) | ||||||
|
Total
|
32 | 48 | 82 | |||||||||
Following the review of the balance of the “Revaluation
Reserve pursuant to Royal Decree-Law 7/1996”, June 7,
account by the tax authorities in 2000, this balance could only
be used, free of tax, to offset recognized losses and to
increase share capital until January 1, 2007. From that
date, the remaining balance of this account can also be
allocated to unrestricted reserves, provided that the surplus
has been depreciated or the revalued assets have been
transferred or derecognized. As of December 31, 2010, 2009
and 2008, the balance of restricted reserves (not yet classified
as unrestricted reserves) amounted to €32,
€48 million and €82 million, respectively.
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Table of Contents
29.4.
RESERVES
(LOSSES) BY ENTITY
The breakdown, by company or corporate group, of the item
“Reserves” in the accompanying consolidated balance
sheets is as follows:
|
Reserves Assigned to the Consolidation Process
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Accumulated reserves (losses)
|
||||||||||||
|
BBVA, S.A. (Reserves asigned to the holding company)
|
4,760 | 1,676 | 1,516 | |||||||||
|
Grupo BBVA Bancomer
|
4,306 | 4,022 | 3,489 | |||||||||
|
Grupo Chile
|
540 | 419 | 248 | |||||||||
|
Grupo BBVA Banco Provincial
|
593 | 413 | 198 | |||||||||
|
Grupo BBVA Continental
|
183 | 127 | 95 | |||||||||
|
Grupo BBVA Puerto Rico
|
5 | 72 | 44 | |||||||||
|
Grupo BBVA USA Bancshares
|
(960 | ) | 71 | (84 | ) | |||||||
|
Grupo BBVA Portugal
|
(207 | ) | (207 | ) | (220 | ) | ||||||
|
Grupo BBVA Colombia
|
(144 | ) | (209 | ) | (264 | ) | ||||||
|
Grupo BBVA Banco Francés
|
(113 | ) | (139 | ) | (305 | ) | ||||||
|
BBVA Seguros, S.A.
|
1,275 | 1,052 | 862 | |||||||||
|
Corporacion General Financiera, S.A.
|
1,356 | 1,229 | 979 | |||||||||
|
BBVA Luxinvest, S.A.
|
1,231 | 1,239 | 1,232 | |||||||||
|
Cidessa Uno, S.L.
|
1,016 | 746 | 298 | |||||||||
|
Anida Grupo Inmobiliario, S.L.
|
377 | 401 | 380 | |||||||||
|
BBVA Suiza, S.A.
|
249 | 233 | 222 | |||||||||
|
Bilbao Vizcaya Holding, S.A.
|
150 | 166 | 150 | |||||||||
|
BBVA Panamá, S.A.
|
147 | 118 | 108 | |||||||||
|
BBVA Ireland Public Limited Company
|
144 | 103 | 103 | |||||||||
|
Almacenes Generales de Deposito, S.A.E.
|
— | 105 | 97 | |||||||||
|
Compañía de Cartera e Inversiones, S.A.
|
141 | 123 | 121 | |||||||||
|
Anida Desarrollos Singulares, S.L.
|
(299 | ) | (21 | ) | — | |||||||
|
Participaciones Arenal, S.L.
|
(181 | ) | (181 | ) | (182 | ) | ||||||
|
Anida Operaciones Singulares, S.L.
|
(117 | ) | (1 | ) | — | |||||||
|
BBVA Propiedad F.I.I.
|
(116 | ) | (12 | ) | (11 | ) | ||||||
|
Compañía Chilena de Inversiones, S.L.
|
(87 | ) | (135 | ) | (135 | ) | ||||||
|
Finanzia, Banco de Crédito, S.A.
|
(49 | ) | 146 | 144 | ||||||||
|
Rest
|
105 | 211 | (288 | ) | ||||||||
|
Subtotal
|
14,305 | 11,766 | 8,801 | |||||||||
|
Reserves (losses) of entities accounted for using the equity
method:
|
||||||||||||
|
Grupo CITIC
|
93 | 31 | 151 | |||||||||
|
Tubos Reunidos, S.A.
|
52 | 51 | 53 | |||||||||
|
Corp. IBV Participaciones Empresariales, S.A.
|
4 | 249 | 437 | |||||||||
|
Part. Servired, Sdad.Civil
|
12 | 24 | 8 | |||||||||
|
Occidental Hoteles Management, S.L.
|
(44 | ) | (13 | ) | (3 | ) | ||||||
|
Hestenar, S.L.
|
(15 | ) | (2 | ) | (0 | ) | ||||||
|
Rest
|
(47 | ) | (31 | ) | (37 | ) | ||||||
|
Subtotal
|
55 | 309 | 609 | |||||||||
|
Total Reserves
|
14,360 | 12,075 | 9,410 | |||||||||
For the purpose of allocating the reserves and accumulated
losses at the consolidated companies shown in the above table,
the transfers of reserves arising from the dividends paid and
transactions between these companies are taken into account in
the period in which they took place.
As of December 31, 2010, 2009 and 2008,
€2,612 million, €2,140 and 2,217 million,
respectively, in the individual financial statements of the
subsidiaries were restricted reserves.
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Table of Contents
| 30. | TREASURY STOCK |
In 2010, 2009 and 2008 the Group companies performed the
following transactions with shares issued by the Bank:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Number of
|
Millions of
|
Number of
|
Millions of
|
Number of
|
Millions of
|
|||||||||||||||||||
|
Treasury Stock
|
Shares | Euros | Shares | Euros | Shares | Euros | ||||||||||||||||||
|
Balance at beginning
|
16,642,054 | 224 | 61,539,883 | 720 | 15,836,692 | 389 | ||||||||||||||||||
|
+ Purchases
|
821,828,799 | 7,828 | 688,601,601 | 6,431 | 1,118,942,855 | 14,096 | ||||||||||||||||||
|
− Sales and other changes
|
(780,423,886 | ) | (7,545 | ) | (733,499,430 | ) | (6,835 | ) | (1,073,239,664 | ) | (13,745 | ) | ||||||||||||
|
+/− Derivatives over BBVA shares
|
— | 45 | — | (92 | ) | — | (20 | ) | ||||||||||||||||
|
Balance at the end
|
58,046,967 | 552 | 16,642,054 | 224 | 61,539,883 | 720 | ||||||||||||||||||
|
Of which:
|
||||||||||||||||||||||||
|
Held by BBVA
|
2,838,798 | 83 | 8,900,623 | 128 | 4,091,197 | 143 | ||||||||||||||||||
|
Held by Corporación General Financiera, S.A.
|
55,207,640 | 469 | 7,740,902 | 96 | 57,436,183 | 577 | ||||||||||||||||||
|
Held by other subsidiaries
|
529 | 529 | 12,503 | |||||||||||||||||||||
|
Average purchase price in euros
|
9.53 | 9.34 | 12.60 | |||||||||||||||||||||
|
Average selling price in euros
|
9.48 | 8.95 | 12.52 | |||||||||||||||||||||
|
Net gain or losses on transactions (Shareholder’s
funds-Reserves)
|
(106 | ) | (238 | ) | (172 | ) | ||||||||||||||||||
The amount under the heading of “Sales and other
changes” in the above table in 2009 includes the allocation
of treasury stock to the shareholders as an additional
remuneration to complement the dividends for 2008 (see
Note 28).
The percentages of treasury stock held by the Group in 2010,
2009 and 2008 were as follows:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Treasury Stock
|
Min | Max | Min | Max | Min | Max | ||||||||||||||||||
|
% treasury stock
|
0.352 | % | 2.396 | % | 0.020 | % | 2.850 | % | 0.318 | % | 3.935 | % | ||||||||||||
The number of shares of BBVA accepted in pledge as of
December 31, 2010, 2009 and 2008 was as follows:
|
Shares of BBVA Accepted in Pledge
|
2010 | 2009 | 2008 | |||||||||
|
Number of shares in pledge
|
107,180,992 | 92,503,914 | 98,228,254 | |||||||||
|
Nominal value
|
0.49 | 0.49 | 0.49 | |||||||||
|
% of share capital
|
2.39 | % | 2.47 | % | 2.62 | % | ||||||
The number of BBVA shares owned by third parties but managed by
a company in the Group as of December 31, 2010, 2009 and
2008 was as follows:
|
Shares of BBVA Owned by Third Parties but
|
||||||||||||
|
Managed by the Group
|
2010 | 2009 | 2008 | |||||||||
|
Number of shares property of third parties
|
96,107,765 | 82,319,422 | 104,534,298 | |||||||||
|
Nominal value
|
0.49 | 0.49 | 0.49 | |||||||||
|
% of share capital
|
2.14 | % | 2.20 | % | 2.79 | % | ||||||
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Table of Contents
| 31. | VALUATION ADJUSTMENTS |
The breakdown of the balance under this heading in the
accompanying consolidated balance sheets is as follows:
|
Valuation Adjustments
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Available-for-sale
financial assets
|
12.4 | 333 | 1,951 | 931 | ||||||||||||
|
Cash flow hedging
|
49 | 188 | 207 | |||||||||||||
|
Hedging of net investments in foreign transactions
|
(158 | ) | 219 | 247 | ||||||||||||
|
Exchange differences
|
2.2.16 | (978 | ) | (2,236 | ) | (2,231 | ) | |||||||||
|
Non-current assets held for sale
|
— | — | — | |||||||||||||
|
Entities accounted for using the equity method
|
(16 | ) | (184 | ) | (84 | ) | ||||||||||
|
Other valuation adjustments
|
— | — | — | |||||||||||||
|
Total
|
(770 | ) | (62 | ) | (930 | ) | ||||||||||
The balances recognized under these headings are presented net
of tax.
| 32. | NON-CONTROLLING INTEREST |
The breakdown by consolidated company of the balance under the
heading “Non-controlling interests” of total equity in
the accompanying consolidated balance sheets was as follows:
|
Non-Controlling Interest
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
BBVA Colombia Group
|
36 | 30 | 26 | |||||||||
|
BBVA Chile Group
|
375 | 280 | 194 | |||||||||
|
BBVA Banco Continental Group
|
501 | 391 | 278 | |||||||||
|
BBVA Banco Provincial Group
|
431 | 590 | 413 | |||||||||
|
BBVA Banco Francés Group
|
161 | 127 | 88 | |||||||||
|
Other companies
|
52 | 45 | 50 | |||||||||
|
Total
|
1,556 | 1,463 | 1,049 | |||||||||
These amounts are broken down by consolidated company under the
heading “Net income attributed to non-controlling
interests” in the accompanying consolidated income
statements:
|
Net Income atributed to Non-Controlling Interests
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
BBVA Colombia Group
|
8 | 6 | 5 | |||||||||
|
BBVA Chile Group
|
89 | 64 | 31 | |||||||||
|
BBVA Banco Continental Group
|
150 | 126 | 97 | |||||||||
|
BBVA Banco Provincial Group
|
98 | 148 | 175 | |||||||||
|
BBVA Banco Francés Group
|
37 | 33 | 44 | |||||||||
|
Other companies
|
7 | 8 | 13 | |||||||||
|
Total
|
389 | 385 | 365 | |||||||||
| 33. | CAPITAL BASE AND CAPITAL MANAGEMENT |
Capital
base
Bank of Spain Circular 3/2008, of 22 May 2008, modified by
Circular 9/2010 of 22 December 2010, on the calculation and
control of minimum capital base requirements, and subsequent
amendments, regulates the minimum capital base requirements for
Spanish credit institutions — both as individual
entities and as consolidated
F-142
Table of Contents
groups— and how to calculate them, as well as the
various internal capital adequacy assessment processes they
should have in place and the information they should disclose to
the market.
Circular 3/2008 and subsequent amendments implement Spanish
legislation on capital base and consolidated supervision of
financial institutions, as well as adapting Spanish law to the
relevant European Union Directives, in compliance with the
Accord by the Basel Committee on Banking Supervision (Basel II).
The minimum capital base requirements established by Circular
3
/
2008
are calculated according to the Group’s exposure to credit
and dilution risk, counterparty and liquidity risk relating to
the trading portfolio, exchange rate risk and operational risk.
In addition, the Group must fulfill the risk concentration
limits established in said Circular and the internal Corporate
Governance obligations.
As of December 31, 2010, 2009 and 2008, the Group’s
capital exceeded the minimum capital base level required by
regulations in force on each date as shown below:
|
Capital Base
|
2010(*) | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Basic equity
|
34,352 | 27,114 | 22,107 | |||||||||
|
Common Stock
|
2,201 | 1,837 | 1,837 | |||||||||
|
Parent company reserves
|
28,738 | 20,892 | 21,394 | |||||||||
|
Reserves in consolidated companies
|
1,720 | 1,600 | (626 | ) | ||||||||
|
Non-controlling interests
|
1,325 | 1,245 | 928 | |||||||||
|
Other equity instruments
|
7,175 | 7,130 | 5,391 | |||||||||
|
Deductions (Goodwill and others)
|
(10,331 | ) | (8,177 | ) | (9,998 | ) | ||||||
|
Attributed net income (less dividends)
|
3,526 | 2,587 | 3,181 | |||||||||
|
Additional equity
|
7,472 | 12,116 | 12,543 | |||||||||
|
Other deductions
|
(4,477 | ) | (2,133 | ) | (957 | ) | ||||||
|
Additional equity due to mixed group(**)
|
1,291 | 1,305 | 1,129 | |||||||||
|
Total Equity
|
38,639 | 38,402 | 34,822 | |||||||||
|
Minimum equity required
|
25,066 | 23,282 | 24,124 | |||||||||
| (*) | Provisional data. | |
| (**) | Mainly insurance companies in the Group. |
The results of the stress tests of European financial
institutions, published on July 23, 2010, suggested that
the BBVA Group will maintain its current solvency levels in
2011, even in the most adverse scenario that incorporates the
additional impact of a possible sovereign risk crisis.
Capital
management
Capital management in the Group has a twofold aim: to preserve
the level of capitalization, in accordance with the business
objectives in all the countries in which it operates; and, at
the same time, to maximize the return on shareholders’
funds through the efficient allocation of capital to the
different units, good management of the balance sheet and
appropriate use of the various instruments forming the basis of
the Group’s equity: stock, preferential stock and
subordinate debt.
This capital management is carried out in accordance with the
criteria of the Bank of Spain Circular 3/2008 and subsequent
amendments both in terms of determining the capital base and the
solvency ratios. This regulation allows each entity to apply its
own internal ratings based (IRB) approach to risk and capital
management.
The Group carries out an integrated management of these risks,
in accordance with its internal policies (see
Note 7) and its internal capital estimation model has
received the Bank of Spain’s approval for certain
portfolios.
Capital is allocated to each business area (see
Note 6) according to economic risk capital (ERC)
criteria, which are based on the concept of unexpected loss with
a specific confidence level, as a function of a solvency target
F-143
Table of Contents
determined by the Group. This target is established at two
levels: Core equity: which determines the allocated capital and
serves as a reference to calculate the return generated on
equity (ROE) by each business; and total capital, which
determines the additional allocation in terms of subordinate
debt and preferred securities.
Because of its sensitivity to risk, ERC is an element linked to
policies for managing the actual businesses. The procedure
provides a harmonized basis for assigning capital to businesses
according to the risks incurred and makes it easier to compare
returns. The calculation of the CaR combines credit risk, market
risk, structural risk associated with the balance sheet equity
positions, operational risk, fixed assets risks and technical
risks in the case of insurance companies. These calculations are
carried out using internal models that have been defined
following the guidelines and requirements established under the
Basel II Capital Accord, with economic criteria prevailing
over regulatory ones.
| 34. | FINANCIAL GUARANTEES AND DRAWABLE BY THIRD PARTIES |
The breakdown of the balances of these items as of
December 31, 2010, 2009 and 2008 was as follows:
|
Financial Guarantees and Drawable by Third Parties
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Contingent Exposures
|
||||||||||||
|
Collateral, bank guarantees and indemnities
|
28,092 | 26,266 | 27,649 | |||||||||
|
Rediscounts, endorsements and acceptances
|
49 | 45 | 81 | |||||||||
|
Rest
|
8,300 | 6,874 | 8,222 | |||||||||
|
Total
|
36,441 | 33,185 | 35,952 | |||||||||
|
Contingent Commitments
|
||||||||||||
|
Drawable by third parties:
|
86,790 | 84,925 | 92,663 | |||||||||
|
Credit institutions
|
2,303 | 2,257 | 2,021 | |||||||||
|
Government and other government agency
|
4,135 | 4,567 | 4,221 | |||||||||
|
Other resident sectors
|
27,201 | 29,604 | 37,529 | |||||||||
|
Non-resident sector
|
53,151 | 48,497 | 48,892 | |||||||||
|
Other commitments
|
3,784 | 7,398 | 6,234 | |||||||||
|
Total
|
90,574 | 92,323 | 98,897 | |||||||||
Since a significant portion of these amounts will reach maturity
without any payment obligation materializing for the
consolidated companies, the aggregate balance of these
commitments cannot be considered as an actual future requirement
for financing or liquidity to be provided by the Group to third
parties.
In 2010, 2009 and 2008 no issuances of debt securities carried
out by associate entities, jointly controlled entities
(accounted for using the equity method) or non-Group entities
have been guaranteed.
| 35. | ASSETS ASSIGNED TO OTHER OWN AND THIRD-PARTY OBLIGATIONS |
In addition to those mentioned in other notes in these annual
financial statements as at December 31, 2010 and 2009 and
2008, (see Notes 13 and 26), the assets of consolidated
entities that guaranteed their own obligations amounted to
€81,631 million, €81,231 million and
€76,259 million. These amounts mainly correspond to
the issue of long-term covered bonds (Note 23.4) which,
pursuant to the Mortgage Market Act, are admitted as third-party
collateral and to assets allocated as collateral for certain
lines of short-term finance assigned to the Group by central
banks.
As of December 31, 2010, 2009 and 2008, none of the
Group’s assets were linked to any additional third-party
obligations apart from those described in the various notes to
the accompanying consolidated annual financial statements.
F-144
Table of Contents
| 36. | OTHER CONTINGENT ASSETS AND CONTINGENT LIABILITIES |
As of December 31, 2010, 2009 and 2008, there were no
significant contingent assets or liabilities registered in the
financial statements attached.
| 37. | PURCHASE AND SALE COMMITMENTS AND FUTURE PAYMENT OBLIGATIONS |
The breakdown of sale and purchase commitments of the BBVA Group
as of December 31, 2010, 2009 and 2008 was as follows:
|
Purchase and Sale Commitments
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Financial instruments sold with repurchase commitments
|
40,323 | 29,409 | 32,569 | |||||||||
|
Financial instruments purchased with resale commitments
|
8,693 | 7,023 | 11,515 | |||||||||
Below is a breakdown of the maturity of other future payment
obligations due later than December 31, 2010:
|
Maturity of Future Payment
|
Up to
|
|||||||||||||||||||
|
Obligations
|
1 Year | 1 to 3 Years | 3 to 5 Years | Over 5 Years | Total | |||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
Finance leases
|
— | — | — | — | — | |||||||||||||||
|
Operating leases
|
144 | 71 | 29 | 89 | 332 | |||||||||||||||
|
Purchase commitments
|
26 | — | — | — | 26 | |||||||||||||||
|
Technology and systems projects
|
14 | — | — | — | 14 | |||||||||||||||
|
Other projects
|
12 | — | — | — | 12 | |||||||||||||||
|
Total
|
170 | 71 | 29 | 89 | 358 | |||||||||||||||
| 38. | TRANSACTIONS ON BEHALF OF THIRD PARTIES |
As of December 31, 2010, 2009 and 2008, the details of the
most significant items under this heading were as follows:
|
Transactions on Behalf of Third Parties
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Financial instruments entrusted by third parties
|
534,243 | 530,109 | 510,019 | |||||||||
|
Conditional bills and other securities received for collection
|
4,256 | 4,428 | 5,208 | |||||||||
|
Securities received in credit
|
999 | 489 | 71 | |||||||||
F-145
Table of Contents
As of December 31, 2010, 2009 and 2008, the off-balance
sheet customer funds were as follows:
|
Off-Balance Sheet Customer Funds by Type
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Commercialized by the Group
|
||||||||||||
|
Investment companies and mutual funds
|
41,006 | 39,849 | 37,076 | |||||||||
|
Pension funds
|
72,598 | 57,264 | 42,701 | |||||||||
|
Saving insurance contracts
|
9,296 | 9,814 | 10,398 | |||||||||
|
Customer portfolios managed on a discretionary basis
|
25,435 | 26,501 | 24,582 | |||||||||
|
Of which:
|
||||||||||||
|
Portfolios managed on a discretionary
|
10,494 | 10,757 | 12,176 | |||||||||
|
Commercialized by the Group managed by third parties outside the
Group
|
||||||||||||
|
Investment companies and mutual funds
|
76 | 85 | 59 | |||||||||
|
Pension funds
|
21 | 24 | 24 | |||||||||
|
Saving insurance contracts
|
— | — | — | |||||||||
|
Total
|
148,432 | 133,537 | 114,840 | |||||||||
| 39. | INTEREST, INCOME AND SIMILAR EXPENSES |
| 39.1. | Interest And Similar Income |
The breakdown of the most significant interest and similar
income earned by the Group in 2010, 2009 and 2008 was as follows:
|
Interest and Similar Income. Breakdown by Origin.
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Central Banks
|
239 | 254 | 479 | |||||||||
|
Loans and advances to credit institutions
|
402 | 631 | 1,323 | |||||||||
|
Loans and advances to customers
|
16,002 | 18,119 | 23,580 | |||||||||
|
Government and other government agency
|
485 | 485 | 736 | |||||||||
|
Resident sector
|
5,887 | 7,884 | 11,177 | |||||||||
|
Non resident sector
|
9,630 | 9,750 | 11,667 | |||||||||
|
Debt securities
|
3,080 | 3,342 | 3,706 | |||||||||
|
Held for trading
|
956 | 1,570 | 2,241 | |||||||||
|
Available-for-sale
financial assets and
held-to-madurity
investments
|
2,124 | 1,772 | 1,465 | |||||||||
|
Rectification of income as a result of hedging transactions
|
63 | 177 | 175 | |||||||||
|
Insurance activity
|
975 | 940 | 812 | |||||||||
|
Other income
|
373 | 312 | 329 | |||||||||
|
Total
|
21,134 | 23,775 | 30,404 | |||||||||
The amounts recognized in consolidated equity as of
December 31, 2010, 2009 and 2008, in connection with
hedging derivatives and the amounts derecognized from
consolidated equity and taken to the consolidated income
statement during those years are disclosed in the accompanying
consolidated statements of recognized income and expenses.
F-146
Table of Contents
The following table shows the adjustments in income resulting
from hedge accounting, broken down by type of hedge:
|
Adjustments in Income Resulting
|
||||||||||||
|
from Hedge Accounting
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Cash flow hedging
|
213 | 295 | 152 | |||||||||
|
Fair value hedging
|
(150 | ) | (118 | ) | 23 | |||||||
|
Total
|
63 | 177 | 175 | |||||||||
The breakdown of the balance of this heading in the accompanying
consolidated income statements by geographical area is as
follows:
|
Interest and Similar Income.
|
||||||||||||
|
Breakdown by Geographical Area
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Domestic market
|
8,906 | 11,224 | 15,391 | |||||||||
|
Foreign
|
12,228 | 12,551 | 15,013 | |||||||||
|
European Union
|
744 | 1,089 | 1,974 | |||||||||
|
Rest of OECD
|
7,417 | 7,153 | 8,671 | |||||||||
|
Rest of countries
|
4,067 | 4,309 | 4,368 | |||||||||
|
Total
|
21,134 | 23,775 | 30,404 | |||||||||
| 39.2. | Interest And Similar Expenses |
The breakdown of the balance under this heading in the
accompanying consolidated income statements is as follows:
|
Interest and Similar Expenses. Breakdown by Origin
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Bank of Spain and other central banks
|
184 | 202 | 384 | |||||||||
|
Deposits from credit institutions
|
1,081 | 1,511 | 3,115 | |||||||||
|
Customers deposits
|
3,570 | 4,312 | 9,057 | |||||||||
|
Debt certificates
|
2,627 | 2,681 | 3,631 | |||||||||
|
Subordinated liabilities
|
829 | 1,397 | 1,121 | |||||||||
|
Rectification of expenses as a result of hedging transactions
|
(1,587 | ) | (1,215 | ) | 421 | |||||||
|
Cost attributable to pension funds (Note 26)
|
259 | 274 | 254 | |||||||||
|
Insurance activity
|
707 | 679 | 571 | |||||||||
|
Other charges
|
144 | 52 | 164 | |||||||||
|
Total
|
7,814 | 9,893 | 18,718 | |||||||||
The following table shows the adjustments in expenses resulting
from hedge accounting, broken down by type of hedge:
|
Adjustments in Expenses Resulting from Hedge Accounting
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Cash flow hedging
|
— | (35 | ) | (33 | ) | |||||||
|
Fair value hedging
|
(1,587 | ) | (1,180 | ) | 454 | |||||||
|
TOTAL
|
(1,587 | ) | (1,215 | ) | 421 | |||||||
F-147
Table of Contents
| 39.3. | Averages Return On Investments and Average Borrowing Cost |
The detail of the average return on investments in 2010, 2009
and 2008 was as follows:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
|
Interest and
|
Interest and
|
Interest and
|
||||||||||||||||||||||||||||||||||
|
Average
|
Similar
|
Interest
|
Average
|
Similar
|
Interest
|
Average
|
Similar
|
Interest
|
||||||||||||||||||||||||||||
|
ASSETS
|
Balances | Income | Rates (%) | Balances | Income | Rates (%) | Balances | Income | Rates (%) | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Cash and balances with central banks
|
21,342 | 239 | 1.12 | 18,638 | 253 | 1.36 | 14,396 | 479 | 3.32 | |||||||||||||||||||||||||||
|
Securities portfolio and derivatives
|
145,990 | 3,939 | 2.70 | 138,030 | 4,207 | 3.05 | 118,356 | 4,659 | 3.94 | |||||||||||||||||||||||||||
|
Loans and advances to credit institutions
|
25,561 | 501 | 1.96 | 26,152 | 697 | 2.66 | 31,229 | 1,367 | 4.38 | |||||||||||||||||||||||||||
|
Euros
|
15,888 | 210 | 1.32 | 16,190 | 353 | 2.18 | 21,724 | 933 | 4.30 | |||||||||||||||||||||||||||
|
Foreign currency
|
9,673 | 291 | 3.01 | 9,962 | 344 | 3.45 | 9,505 | 434 | 4.57 | |||||||||||||||||||||||||||
|
Loans and advances to customers
|
333,021 | 16,296 | 4.89 | 328,969 | 18,498 | 5.62 | 321,498 | 23,720 | 7.38 | |||||||||||||||||||||||||||
|
Euros
|
219,857 | 7,023 | 3.19 | 222,254 | 9,262 | 4.17 | 218,634 | 13,072 | 5.98 | |||||||||||||||||||||||||||
|
Foreign currency
|
113,164 | 9,273 | 8.19 | 106,715 | 9,236 | 8.65 | 102,864 | 10,648 | 10.35 | |||||||||||||||||||||||||||
|
Other finance income
|
— | 159 | — | — | 120 | — | — | 179 | — | |||||||||||||||||||||||||||
|
Other assets
|
32,894 | — | — | 31,180 | — | — | 32,377 | — | — | |||||||||||||||||||||||||||
|
ASSETS/INTEREST AND SIMILAR INCOME
|
558,808 | 21,134 | 3.78 | 542,969 | 23,775 | 4.38 | 517,856 | 30,404 | 5.87 | |||||||||||||||||||||||||||
The average borrowing cost in 2010, 2009 and 2008 was as follows:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
|
Interest and
|
Interest and
|
Interest and
|
||||||||||||||||||||||||||||||||||
|
Average
|
Similar
|
Interest
|
Average
|
Similar
|
Interest
|
Average
|
Similar
|
Interest
|
||||||||||||||||||||||||||||
|
LIABILITIES
|
Balances | Expenses | Rates (%) | Balances | Expenses | Rates (%) | Balances | Expenses | Rates (%) | |||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Deposits from central banks and credit institutions
|
80,177 | 1,515 | 1.89 | 74,017 | 2,143 | 2.89 | 77,159 | 3,809 | 4.94 | |||||||||||||||||||||||||||
|
Euros
|
45,217 | 863 | 1.91 | 35,093 | 967 | 2.75 | 32,790 | 1,604 | 4.89 | |||||||||||||||||||||||||||
|
Foreign currency
|
34,960 | 652 | 1.87 | 38,924 | 1,176 | 3.02 | 44,369 | 2,205 | 4.97 | |||||||||||||||||||||||||||
|
Customer deposits
|
259,330 | 3,550 | 1.37 | 249,106 | 4,056 | 1.63 | 237,387 | 8,390 | 3.53 | |||||||||||||||||||||||||||
|
Euros
|
121,956 | 1,246 | 1.02 | 116,422 | 1,326 | 1.14 | 115,166 | 3,765 | 3.27 | |||||||||||||||||||||||||||
|
Foreign currency
|
137,374 | 2,304 | 1.68 | 132,684 | 2,730 | 2.06 | 122,221 | 4,625 | 3.78 | |||||||||||||||||||||||||||
|
Debt certificates and subordinated liabilities
|
119,684 | 2,334 | 1.95 | 120,228 | 3,098 | 2.58 | 119,249 | 6,100 | 5.12 | |||||||||||||||||||||||||||
|
Euros
|
89,020 | 1,569 | 1.76 | 91,730 | 2,305 | 2.51 | 96,764 | 5,055 | 5.22 | |||||||||||||||||||||||||||
|
Foreign currency
|
30,664 | 765 | 2.49 | 28,498 | 793 | 2.78 | 22,485 | 1,045 | 4.65 | |||||||||||||||||||||||||||
|
Other finance expenses
|
— | 415 | — | — | 596 | — | — | 418 | — | |||||||||||||||||||||||||||
|
Other liabilities
|
66,541 | — | — | 70,020 | — | — | 56,867 | — | — | |||||||||||||||||||||||||||
|
Equity
|
33,076 | — | — | 29,598 | — | — | 27,194 | — | — | |||||||||||||||||||||||||||
|
LIABILITIES+EQUITY/INTEREST AND SIMILAR EXPENSES
|
558,808 | 7,814 | 1.40 | 542,969 | 9,893 | 1.82 | 517,856 | 18,717 | 3.61 | |||||||||||||||||||||||||||
F-148
Table of Contents
The change in the balance under the headings “Interest and
similar income” and “Interest and similar
expenses” in the accompanying consolidated income
statements is the result of changing prices (price effect) and
changing volume of activity (volume effect), as can be seen
below:
| 2010/2009 | 2009/2008 | |||||||||||||||||||||||
|
Interest Income and Expense and Similar Items.
|
Volume
|
Price
|
Volume
|
Total
|
||||||||||||||||||||
|
Change in the Balance
|
Effect(1) | Effect (2) | Total Effect | Effect(1) | Price Effect(2) | Effect | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
Cash and balances with central banks
|
37 | (51 | ) | (14 | ) | 141 | (366 | ) | (225 | ) | ||||||||||||||
|
Securities portfolio and derivatives
|
243 | (511 | ) | (268 | ) | 774 | (1,226 | ) | (452 | ) | ||||||||||||||
|
Loans and advances to credit institutions
|
(16 | ) | (179 | ) | (195 | ) | (222 | ) | (448 | ) | (670 | ) | ||||||||||||
|
Euros
|
(7 | ) | (136 | ) | (142 | ) | (238 | ) | (342 | ) | (580 | ) | ||||||||||||
|
Foreign currency
|
(10 | ) | (43 | ) | (53 | ) | 21 | (112 | ) | (91 | ) | |||||||||||||
|
Loans and advances to customers
|
228 | (2,429 | ) | (2,201 | ) | 551 | (5,774 | ) | (5,222 | ) | ||||||||||||||
|
Euros
|
(100 | ) | (2,139 | ) | (2,239 | ) | 216 | (4,027 | ) | (3,810 | ) | |||||||||||||
|
Foreign currency
|
558 | (521 | ) | 37 | 399 | (1,811 | ) | (1,412 | ) | |||||||||||||||
|
Other financial incomes
|
— | 39 | 39 | — | (59 | ) | (59 | ) | ||||||||||||||||
|
INTEREST AND SIMILAR INCOME
|
693 | (3,333 | ) | (2,641 | ) | 1,474 | (8,104 | ) | (6,629 | ) | ||||||||||||||
|
Deposits from central banks and credit institutions
|
178 | (806 | ) | (628 | ) | (155 | ) | (1,512 | ) | (1,667 | ) | |||||||||||||
|
Euros
|
279 | (382 | ) | (104 | ) | 113 | (750 | ) | (637 | ) | ||||||||||||||
|
Foreign currency
|
(120 | ) | (404 | ) | (524 | ) | (271 | ) | (759 | ) | (1,029 | ) | ||||||||||||
|
Customer deposits
|
166 | (672 | ) | (505 | ) | 414 | (4,748 | ) | (4,334 | ) | ||||||||||||||
|
Euros
|
63 | (143 | ) | (80 | ) | 41 | (2,480 | ) | (2,439 | ) | ||||||||||||||
|
Foreign currency
|
96 | (522 | ) | (425 | ) | 396 | (2,291 | ) | (1,895 | ) | ||||||||||||||
|
Debt certificates and subordinated liabilities
|
(14 | ) | (750 | ) | (764 | ) | 50 | (3,052 | ) | (3,002 | ) | |||||||||||||
|
Euros
|
(68 | ) | (668 | ) | (736 | ) | (263 | ) | (2,481 | ) | (2,744 | ) | ||||||||||||
|
Foreign currency
|
60 | (88 | ) | (27 | ) | 280 | (537 | ) | (258 | ) | ||||||||||||||
|
Other financial expenses
|
— | (181 | ) | (181 | ) | — | 178 | 178 | ||||||||||||||||
|
INTEREST AND SIMILAR EXPENSES
|
288 | (2,367 | ) | (2,079 | ) | 908 | (9,733 | ) | (8,825 | ) | ||||||||||||||
|
NET INTEREST INCOME
|
(562 | ) | 2,197 | |||||||||||||||||||||
| (1) | The volume effect is calculated as the result of the interest rate of the initial period multiplied by the difference between the average balances of both periods. | |
| (2) | The price effect is calculated as the result of the average balance of the last period multiplied by the difference between the interest rates of both periods. |
| 40. | DIVIDEND INCOME |
The balances for this heading in the accompanying consolidated
income statements correspond to dividends on shares and equity
instruments other than those from shares in entities accounted
for using the equity method (see Note 41), as can be seen
in the breakdown below:
|
Dividend Income
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Dividends from:
|
||||||||||||
|
Financial assets held for trading
|
157 | 131 | 110 | |||||||||
|
Available-for-sale
financial assets
|
372 | 312 | 337 | |||||||||
|
Total
|
529 | 443 | 447 | |||||||||
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| 41. | SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD |
The breakdown of the share of profit or loss of entities
accounted for using the equity method in the accompanying
consolidated income statements is as follows:
|
Investments in Entities Accounted for Using the Equity
Method
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
CITIC Group
|
337 | 164 | 18 | |||||||||
|
Corporación IBV Participaciones Empresariales, S.A.
|
16 | 18 | 233 | |||||||||
|
Tubos Reunidos, S.A.
|
— | 1 | 20 | |||||||||
|
Occidental Hoteles Management, S.L.
|
(29 | ) | (31 | ) | (9 | ) | ||||||
|
Hestenar, S.L.
|
— | (13 | ) | (1 | ) | |||||||
|
Las Pedrazas Golf, S.L.
|
1 | (7 | ) | — | ||||||||
|
Servired Española de Medios de Pago, S.A.
|
8 | (2 | ) | 26 | ||||||||
|
Rest
|
2 | (10 | ) | 6 | ||||||||
|
Total
|
335 | 120 | 293 | |||||||||
| 42. | FEE AND COMMISSION INCOME |
The breakdown of the balance under this heading in the
accompanying consolidated income statements is as follows:
|
Fee and Commission Income. Breakdown by Main Items
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Commitment fees
|
133 | 97 | 62 | |||||||||
|
Contingent liabilities
|
282 | 260 | 243 | |||||||||
|
Letters of credit
|
45 | 42 | 45 | |||||||||
|
Bank and other guarantees
|
237 | 218 | 198 | |||||||||
|
Arising from exchange of foreign currencies and banknotes
|
19 | 14 | 24 | |||||||||
|
Collection and payment services
|
2,500 | 2,573 | 2,655 | |||||||||
|
Securities services
|
1,651 | 1,636 | 1,895 | |||||||||
|
Counselling on and management of one-off transactions
|
11 | 7 | 9 | |||||||||
|
Financial and similar counselling services
|
60 | 43 | 24 | |||||||||
|
Factoring transactions
|
29 | 27 | 28 | |||||||||
|
Non-banking financial products sales
|
102 | 83 | 96 | |||||||||
|
Other fees and commissions
|
595 | 565 | 503 | |||||||||
|
Total
|
5,382 | 5,305 | 5,539 | |||||||||
| 43. | FEE AND COMMISSION EXPENSES |
The breakdown of the balance under this heading in the
accompanying consolidated income statements is as follows:
|
Fee and Commission Expenses. Breakdown by Main Items
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Brokerage fees on lending and deposit transactions
|
5 | 7 | 8 | |||||||||
|
Fees and commissions assigned to third parties
|
578 | 610 | 728 | |||||||||
|
Other fees and commissions
|
262 | 258 | 276 | |||||||||
|
Total
|
845 | 875 | 1,012 | |||||||||
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Table of Contents
| 44. | NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES |
The breakdown of the balance under this heading, by source of
the related items, in the accompanying consolidated income
statements was as follows:
|
Gains (Losses) on Financial Assets and Liabilities (Net)
|
2010 | 2008 | 2009 | |||||||||
| Millions of euros | ||||||||||||
|
Financial assets held for trading
|
643 | 321 | 265 | |||||||||
|
Other financial assets designated at fair value through profit
or loss
|
83 | 79 | (17 | ) | ||||||||
|
Other financial instruments not designated at fair value through
profit or loss
|
715 | 492 | 1,080 | |||||||||
|
Available-for-sale
financial assets
|
653 | 504 | 996 | |||||||||
|
Loans and receivables
|
25 | 20 | 13 | |||||||||
|
Rest
|
37 | (32 | ) | 71 | ||||||||
|
Total
|
1,441 | 892 | 1,328 | |||||||||
The balance under this heading in the accompanying consolidated
income statements, broken down by the nature of the financial
instruments, is as follows:
|
Net Gains (Losses) on Financial Assets and Liabilities
|
||||||||||||
|
Breakdown by Nature of the Financial Instrument
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Debt instruments
|
783 | 875 | (143 | ) | ||||||||
|
Equity instruments
|
(318 | ) | 1,271 | (1,986 | ) | |||||||
|
Loans and advances to customers
|
33 | 38 | 106 | |||||||||
|
Derivatives
|
847 | (1,318 | ) | 3,305 | ||||||||
|
Customer deposits
|
— | (2 | ) | 13 | ||||||||
|
Rest
|
96 | 28 | 33 | |||||||||
|
Total
|
1,441 | 892 | 1,328 | |||||||||
The breakdown of the balance of the impact of the derivatives
(trading and hedging) on this heading in the accompanying
consolidated income statements was as follows:
|
Derivatives Trading and Hedging
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Trading derivatives
|
||||||||||||
|
Interest rate agreements
|
133 | (213 | ) | 568 | ||||||||
|
Security agreements
|
712 | (993 | ) | 2,621 | ||||||||
|
Commodity agreements
|
(5 | ) | (2 | ) | 42 | |||||||
|
Credit derivative agreements
|
(63 | ) | (130 | ) | 217 | |||||||
|
Foreign-exchange agreements
|
79 | 64 | (152 | ) | ||||||||
|
Other agreements
|
(1 | ) | 10 | (57 | ) | |||||||
|
Subtotal
|
855 | (1,264 | ) | 3,239 | ||||||||
|
Hedging Derivatives Ineffectiveness
|
||||||||||||
|
Fair value hedging
|
(8 | ) | (55 | ) | 66 | |||||||
|
Hedging derivative
|
(127 | ) | 58 | 2,513 | ||||||||
|
Hedged item
|
119 | (113 | ) | (2,447 | ) | |||||||
|
Cash flow hedging
|
— | 1 | — | |||||||||
|
Subtotal
|
(8 | ) | (54 | ) | 66 | |||||||
|
Total
|
847 | (1,318 | ) | 3,305 | ||||||||
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Table of Contents
In addition, in 2010 and 2009, negative €287 million
and positive €52 million, respectively, have been
recognized under the heading “Net Exchange
differences” in the accompanying consolidated income
statement, through foreign exchange trading derivatives.
| 45. | OTHER OPERATING INCOME AND EXPENSES |
The breakdown of the balance under the heading “Other
operating income” in the accompanying consolidated income
statements was as follows:
|
Other Operating Income. Breakdown by main Items
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Income on insurance and reinsurance contracts
|
2,597 | 2,567 | 2,512 | |||||||||
|
Financial income from non-financial services
|
647 | 493 | 485 | |||||||||
|
Of which:
|
||||||||||||
|
Real estate agencies
|
202 | 42 | 40 | |||||||||
|
Rest of other operating income
|
299 | 340 | 562 | |||||||||
|
Of which:
|
||||||||||||
|
Net operating profit from rented buildings
|
60 | 57 | 20 | |||||||||
|
Total
|
3,543 | 3,400 | 3,559 | |||||||||
The breakdown of the balance under the heading “Other
operating expense” in the accompanying consolidated income
statements was as follows:
|
Other Operating Expenses. Breakdown by main Item
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Expenses on insurance and reinsurance contracts
|
1,815 | 1,847 | 1,896 | |||||||||
|
Change in inventories
|
554 | 417 | 403 | |||||||||
|
Of which:
|
||||||||||||
|
Real estate agencies
|
171 | 29 | 27 | |||||||||
|
Rest of other operating expenses
|
879 | 889 | 794 | |||||||||
|
Of which:
|
||||||||||||
|
Contributions to guaranted banks deposits funds
|
386 | 323 | 251 | |||||||||
|
Total
|
3,248 | 3,153 | 3,093 | |||||||||
| 46. | ADMINISTRATIVE COSTS |
| 46.1 | PERSONNEL EXPENSES |
The breakdown of the balance under this heading in the
accompanying consolidated income statements was as follows:
|
Personnel Expenses. Breakdown by main Concepts
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Wages and salaries
|
3,740 | 3,607 | 3,593 | |||||||||||||
|
Social security costs
|
567 | 531 | 566 | |||||||||||||
|
Defined-benefit plan expense
|
26.2 | 37 | 44 | 56 | ||||||||||||
|
Defined-contribution plan expense
|
26.1 | 84 | 68 | 71 | ||||||||||||
|
Other personnel expenses
|
386 | 401 | 430 | |||||||||||||
|
Total
|
4,814 | 4,651 | 4,716 | |||||||||||||
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Table of Contents
The breakdown of number of employees in the Group in 2010, 2009
and 2008, by professional categories and geographical areas, was
as follows:
| Average number of employees | ||||||||||||
|
Average Number of Employees by Geographical Areas
|
2010 | 2009 | 2008 | |||||||||
|
Spanish banks
|
||||||||||||
|
Executive managers
|
1,084 | 1,043 | 1,053 | |||||||||
|
Other line personnel
|
20,901 | 20,700 | 21,268 | |||||||||
|
Clerical staff
|
4,644 | 5,296 | 6,152 | |||||||||
|
Branches abroad
|
666 | 653 | 720 | |||||||||
|
Subtotal
|
27,295 | 27,692 | 29,193 | |||||||||
|
Companies abroad
|
||||||||||||
|
Mexico
|
26,693 | 26,675 | 27,369 | |||||||||
|
Venezuela
|
5,592 | 5,935 | 6,154 | |||||||||
|
Argentina
|
4,247 | 4,156 | 4,242 | |||||||||
|
Colombia
|
4,317 | 4,289 | 4,382 | |||||||||
|
Peru
|
4,379 | 4,222 | 3,836 | |||||||||
|
United States
|
11,033 | 10,705 | 12,029 | |||||||||
|
Other
|
4,796 | 4,839 | 4,918 | |||||||||
|
Subtotal
|
61,057 | 60,821 | 62,930 | |||||||||
|
Pension fund managers
|
6,229 | 5,642 | 8,470 | |||||||||
|
Other non-banking companies
|
10,174 | 10,261 | 11,343 | |||||||||
|
Total
|
104,755 | 104,416 | 111,936 | |||||||||
The breakdown of the average number of employees in the Group in
2010, 2009 and 2008, by gender, was as follows:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
| Male | Female | Male | Female | Male | Female | |||||||||||||||||||
|
Average Number of Employees
|
50,804 | 53,951 | 50,755 | 53,661 | 54,356 | 57,580 | ||||||||||||||||||
|
Of which:
|
||||||||||||||||||||||||
|
BBVA, S.A.
|
15,616 | 11,218 | 15,947 | 11,213 | 16,874 | 11,643 | ||||||||||||||||||
The total number of employees in the Group as of
December 31, 2010, 2009 and 2008, broken down by
professional category and gender, was as follows:
|
Number of Employees
|
||||||||||||||||||||||||
|
by Professional
|
2010 | 2009 | 2008 | |||||||||||||||||||||
|
Category and Gender
|
Male | Female | Male | Female | Male | Female | ||||||||||||||||||
|
Executive managers
|
1,659 | 338 | 1,646 | 328 | 1,627 | 319 | ||||||||||||||||||
|
Other line personnel
|
23,779 | 20,066 | 21,960 | 18,687 | 22,983 | 19,092 | ||||||||||||||||||
|
Clerical staff
|
26,034 | 35,100 | 26,913 | 34,187 | 29,169 | 35,782 | ||||||||||||||||||
|
Total
|
51,472 | 55,504 | 50,519 | 53,202 | 53,779 | 55,193 | ||||||||||||||||||
Equity-instrument-based
employee remuneration
BBVA has a variable multi-year remuneration scheme in place as
part of the remuneration policy established for its executive
team. It is based on the award of Bank shares that are
instrumented through annual overlapping medium- and long-term
programs. These consist of allocating individuals theoretical
shares (“units”) that at the end of each program are
converted into real BBVA shares, provided certain initially
established conditions are met, with
F-153
Table of Contents
the number depending on a scale linked to an indicator of value
generation for the shareholder, and dependent on the individual
performing well during the period the program is in operation.
At the conclusion of each program, the final number of shares to
be granted will be equal to the result of multiplying the
initial number of assigned “units” by a coefficient on
a scale of between 0 and 2, which is linked to the movement of
the Total Shareholders Return (TSR) indicator. This indicator
measures the return on investment for shareholders as the sum of
the revaluation of the Bank’s shares plus dividends or
other similar concepts during the period of each program/plan by
comparing the movement of this indicator for a group of banks of
reference in Europe and the United States.
Below are the main features of each of the equity-based
remuneration schemes currently in force in the BBVA Group.
Multi-Year
Variable Share-Based Remuneration Plans for the BBVA Executive
Team
The beneficiaries of these programs are the members of the
Group’s executive team, including executive directors and
the BBVA’s Management Committee members (see Note 56):
• 2009-2010
program
The Bank’s AGM on March 13, 2009 approved the
2009-2010
Program, with a completion date of December 31, 2010.
As of December 31, 2010, the total number of
“units” assigned to the beneficiaries of this program
was 6,752,579.
Once the 2009/2010 Program period was completed, the TSR for
BBVA and the 18 reference banks was then determined; given the
final positioning of BBVA, it resulted in the application of a
multiplier ratio of 0 to the assigned units, the Program will be
settled without the allocation of shares to the beneficiaries.
| • | 2010-2011 program |
The Bank’s AGM on March 12, 2010 approved the
2010-2011
Program, with a completion date of December 31, 2011.
This program incorporates some restrictions to granting shares
to the beneficiaries after the settlement. These shares are
available as follows:
| • | 40 percent of the shares received shall be freely transferable by the beneficiaries at the time of their delivery; | |
| • | 30 percent of the shares are transferable a year after the settlement date of the program; and | |
| • | 30 percent are transferable starting two years after the settlement date of the program. |
As of December 31, 2010, the total number of
“units” assigned to the beneficiaries of this program
was 3,314,050.
BBVA
Compass long-term incentive plan
The Remuneration Committee of BBVA Compass has approved various
long-term remuneration plans with BBVA shares for members of the
management team and key employees of BBVA Compass and its
affiliates.
Currently, BBVA Compass is operating the following plans:
| • | 2008-2010 plan |
The starting date of this plan was January 1, 2008, and its
completion date will be December 31, 2010.
The plan consists in assigning “restricted share
units” to the beneficiaries. Each of these units represents
an obligation on the part of BBVA Compass to grant an equivalent
number of BBVA American Depositary Shares (ADS) after a certain
period, conditional on compliance with specific criteria.
F-154
Table of Contents
The total number of “restricted share units” assigned
to the beneficiaries of this plan was 821,511.
| • | 2009-2011 plan |
On November 27, 2009, the Remuneration Committee of BBVA
Compass agreed to increase the number of ADS in the existing
plan and set up a new plan for the period
2009-2011,
with a completion date of December 31, 2011.
This plan consists of granting “units” or theoretical
shares to management staff (as described at the start of this
section on remuneration based on equity instruments.
The total number of “units” and “restricted share
units” assigned to the beneficiaries of this plan was
1,128,628.
| • | 2010-2012 plan |
In May 2010, the Remuneration Committee of BBVA Compass approved
a new long-term share-based remuneration plan solely for members
of the executive team of BBVA Compass and its affiliates, for
the period
2010-2012,
with the completion date on December 31, 2012.
The total number of “units” assigned to the
beneficiaries of this plan was 986,542.
During the period of operation of each of the schemes mentioned
above, the sum of the commitment to be accounted for at the date
of the accompanying consolidated financial statements was
obtained by multiplying the number of “units” assigned
by the expected share price and the expected value of the
coefficient, both estimated at the date of the entry into force
of each of the schemes.
The cost of these programs/plans is broken up throughout their
operational life. The expense associated in 2010, 2009 and 2008
for those programs/plans reached $33 million,
€18 million and €46 million, respectively.
It is recognized under the heading “Personnel
expenses — Other personnel expenses” in the
accompanying consolidated income statements, and a balancing
entry has been made under the heading “Stockholders’
funds — Other equity instruments” in the
consolidated balance sheets, net of tax effect.
| 46.2 | GENERAL AND ADMINISTRATIVE EXPENSES |
The breakdown of the balance under this heading in the
accompanying consolidated income statements for 2010, 2009 and
2008 was as follows:
|
General and Administrative Expenses.
|
||||||||||||
|
Breakdown by Main concepts
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Technology and systems
|
563 | 577 | 598 | |||||||||
|
Communications
|
284 | 254 | 260 | |||||||||
|
Advertising
|
345 | 262 | 273 | |||||||||
|
Property, fixtures and materials
|
750 | 643 | 617 | |||||||||
|
Of which:
|
||||||||||||
|
Rent expenses(*)
|
397 | 304 | 268 | |||||||||
|
Taxes
|
322 | 266 | 295 | |||||||||
|
Other administration expenses
|
1,129 | 1,009 | 997 | |||||||||
|
Total
|
3,393 | 3,011 | 3,040 | |||||||||
| (*) | The consolidated companies do not expect to terminate the lease contracts early. |
F-155
Table of Contents
| 47. | DEPRECIATION AND AMORTIZATION |
The breakdown of the balance under this heading in the
accompanying consolidated income statements is as follows:
|
Depreciation and Amortization
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Tangible assets
|
19 | 470 | 435 | 443 | ||||||||||||
|
For own use
|
448 | 416 | 434 | |||||||||||||
|
Investment properties
|
15 | 11 | 1 | |||||||||||||
|
Operating lease
|
7 | 8 | 8 | |||||||||||||
|
Other Intangible assets
|
20.2 | 291 | 262 | 256 | ||||||||||||
|
Total
|
761 | 697 | 699 | |||||||||||||
| 48. | PROVISIONS (NET) |
The net allowances charged to the income statement under the
headings “Provisions for pensions and similar
obligations”, “Provisions for contingent exposures and
commitments”, “Provisions for taxes and other legal
contingencies” and “Other provisions”
(Note 25) in the accompanying consolidated income
statements were as follows:
|
Provisions (Net)
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Provisions for pensions and similar obligations
|
26 | 405 | 552 | 985 | ||||||||||||
|
Provisions for contingent exposures and commitments
|
22 | (170 | ) | (118 | ) | |||||||||||
|
Provisions for taxes and other legal contingencies
|
6 | 5 | 4 | |||||||||||||
|
Other Provisions
|
49 | 71 | 560 | |||||||||||||
|
Total
|
482 | 458 | 1,431 | |||||||||||||
| 49. | IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) |
The breakdown of impairment losses on financial assets broken
down by the nature of these assets in the accompanying
consolidated income statements was as follows:
|
Impairment Losses on Financial Assets (Net)
|
||||||||||||||||
|
Breakdown by main concepts
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Available-for-sale
financial assets
|
12 | 155 | 277 | 145 | ||||||||||||
|
Debt securities
|
4 | 167 | 144 | |||||||||||||
|
Other equity instruments
|
151 | 110 | 1 | |||||||||||||
|
Held-to-maturity
investments
|
14 | — | (3 | ) | (1 | ) | ||||||||||
|
Loans and receivables
|
7 | 4,563 | 5,199 | 2,797 | ||||||||||||
|
Of which:
|
||||||||||||||||
|
Recovery of written-off assets
|
7 | 253 | 187 | 192 | ||||||||||||
|
Total
|
4,718 | 5,473 | 2,941 | |||||||||||||
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Table of Contents
| 50. | IMPAIRMENT LOSSES ON OTHER ASSETS (NET) |
The breakdown of impairment losses of non-financial assets
broken down by the nature of these assets in the accompanying
consolidated income statements was as follows:
|
Impairment Losses on Other Assets (Net)
|
Notes | 2010 | 2009 | 2008 | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Goodwill
|
20.1 - 17 | 13 | 1,100 | — | ||||||||||||
|
Other intangible assets
|
20.2 | — | — | 1 | ||||||||||||
|
Tangible assets
|
19 | 92 | 155 | 13 | ||||||||||||
|
For own use
|
9 | 62 | 8 | |||||||||||||
|
Investment properties
|
83 | 93 | 5 | |||||||||||||
|
Inventories
|
22 | 370 | 334 | 26 | ||||||||||||
|
Rest
|
14 | 29 | 5 | |||||||||||||
|
Total
|
489 | 1,618 | 45 | |||||||||||||
| 51. | GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE |
The breakdown of the balances under these headings in the
accompanying consolidated income statements for 2010, 2009 and
2008 was as follows:
|
Gains and Losses on Derecognized Assets Not
|
||||||||||||
|
Classified as Non-current Assets Held for Sale
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Gains
|
||||||||||||
|
Disposal of investments in entities
|
40 | 6 | 27 | |||||||||
|
Disposal of intangible assets and other
|
17 | 28 | 75 | |||||||||
|
Losses:
|
||||||||||||
|
Disposal of investments in entities
|
(11 | ) | (2 | ) | (14 | ) | ||||||
|
Disposal of intangible assets and other
|
(5 | ) | (12 | ) | (16 | ) | ||||||
|
Total
|
41 | 20 | 72 | |||||||||
| 52. | GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS |
The details under the heading “Gains and losses in
non-current assets held for sale not classified as discontinued
operations” in the accompanying consolidated income
statements for 2010, 2009 and 2008 were as follows:
|
Gains and Losses in Non-current Assets Held for
|
||||||||||||
|
Sale
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Gains for real estate
|
374 | 986 | 61 | |||||||||
|
Of which:
|
||||||||||||
|
Foreclosed
|
17 | 5 | (40 | ) | ||||||||
|
Sale of buildings for own use (Note 16.1)
|
285 | 925 | 64 | |||||||||
|
Impairment of non-current assets held for sale
|
(247 | ) | (127 | ) | (40 | ) | ||||||
|
Gains on sale of
available-for-sale
financial assets
|
— | — | 727 | |||||||||
|
Total
|
127 | 859 | 748 | |||||||||
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Table of Contents
“Gains for real estate” above refer mainly to the
Group’s sales of property with leaseback in Spain
(€273 million and €914 million) in 2010 and
2009, respectively, and the sale of a Bancomer property in 2008
(€61 million) (see Note 16.1).
The “Gains (losses) on
available-for-sale
financial assets” correspond to several sales of stakes in
Bradesco during 2008.
| 53. | CONSOLIDATES STATEMENT OF CASH FLOWS |
Cash flows from operating activities increased in 2010 by
€8,503 million, compared with the increase of
€2,567 million in 2009. The most significant changes
occurred in the headings of “Loans and receivables”,
“Financial liabilities at amortized cost” and
“Financial assets held for trading”.
Cash flows from investment activities decreased in 2010 by
€7,078 million, compared with the decrease of
€643 million in 2009. The most significant change is
included under the heading
“Held-to-maturity
investments”.
Cash flows from financing activities increased in 2010 by
€1,148 million, compared with the decrease of
€74 million in 2009. The most significant movements
are shown in the line detailing the acquisition and amortization
of own equity instruments.
The table below breaks down the main cash flows in investing
activities as of December 31, 2010, 2009 and 2008:
|
Main Cash Flows in Investing Activities
|
Cash Flows in Investment Activities | |||||||
|
2010
|
Investments (−) | Divestments (+) | ||||||
| Millions of euros | ||||||||
|
Tangible assets
|
1,040 | 261 | ||||||
|
Intangible assets
|
464 | 6 | ||||||
|
Investments
|
1,209 | 1 | ||||||
|
Subsidiaries and other business units
|
77 | 69 | ||||||
|
Non-current assets held for sale and associated liabilities
|
1,464 | 1,347 | ||||||
|
Held-to-maturity
investments
|
4,508 | — | ||||||
|
Other settlements related to investement activities
|
— | — | ||||||
|
Main Cash Flows in Investing Activities
|
Cash Flows in Investment Activities | |||||||
|
2009
|
Investments (−) | Divestments (+) | ||||||
| Millions of euros | ||||||||
|
Tangible assets
|
931 | 793 | ||||||
|
Intangible assets
|
380 | 147 | ||||||
|
Investments
|
2 | 1 | ||||||
|
Subsidiaries and other business units
|
7 | 32 | ||||||
|
Non-current assets held for sale and associated liabilities
|
920 | 780 | ||||||
|
Held-to-maturity
investments
|
156 | — | ||||||
|
Other settlements related to investement activities
|
— | — | ||||||
|
Main Cash Flows in Investing Activities
|
Cash Flows in Investment Activities | |||||||
|
2008
|
Investments (−) | Divestments (+) | ||||||
| Millions of euros | ||||||||
|
Intangible assets
|
402 | 31 | ||||||
|
Investments
|
672 | 9 | ||||||
|
Subsidiaries and other business units
|
1,559 | 13 | ||||||
|
Non-current assets held for sale and associated liabilities
|
515 | 374 | ||||||
|
Held-to-maturity
investments
|
— | 283 | ||||||
|
Other settlements related to investement activities
|
270 | 874 | ||||||
F-158
Table of Contents
| 54. | ACCOUNTANT FEES AND SERVICES |
The details of the fees for the services contracted by the
companies of the Group in 2010 with their respective auditors
and other audit companies were as follows:
|
Fees for Audits Conducted
|
Millions of euros | |||
|
Audits of the companies audited by firms belonging to the
Deloitte worldwide organization and other reports related with
the audit
|
16.4 | |||
|
Other reports required pursuant to applicable legislation and
tax regulations issued by the national supervisory bodies of the
countries in which the Group operates, reviewed by firms
belonging to the Deloitte worldwide organization
|
3.8 | |||
|
Fees for audits conducted by other firms
|
— | |||
Other companies in the Group contracted other services (other
than audits) as of December 31, 2010, as follows:
|
Other Services Contracted
|
Millions of euros | |||
|
Firms belonging to the Deloitte worldwide organization
|
2.6 | |||
|
Other firms
|
17.6 | |||
| (*) | Including €1.3 million related to fees for tax services. |
The services provided by our accountants meet the independence
requirements established under Law 44/2002, of 22 November,
on Measures Reforming the Financial System and by the
Sarbanes-Oxley Act of 2002 adopted by the Securities and
Exchange Commission (SEC); accordingly they did not include the
performance of any work that is incompatible with the auditing
function.
| 55. | RELATED PARTY TRANSACTIONS |
As financial institutions, BBVA and other companies in the Group
engage in transactions with related parties in the normal course
of their business. All these transactions are of little
relevance and are carried out in normal market conditions.
| 55.1 | TRANSACTIONS WITH SIGNIFICANT SHAREHOLDERS |
As of December 31, 2010, the balances of transactions with
significant shareholders (see Note 27) correspond to
“Customer deposits”, at €57 million,
“Loans and advances to customers”, at
€49 million and “Contingent exposures”, at
€20 million, all of them in normal market conditions.
F-159
Table of Contents
| 55.2 | TRANSACTIONS WITH THE BBVA GROUP |
The balances of the main aggregates in the accompanying
consolidated balance sheets arising from the transactions
carried out by the Group with associates and jointly controlled
companies accounted for using the equity method (see
Note 2.1), were as follows:
|
Balances arising from transactions with Entities of the
|
||||||||||||
|
Group
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Assets:
|
||||||||||||
|
Loans and advances to credit institutions
|
87 | 45 | 27 | |||||||||
|
Loans and advances to customers
|
457 | 613 | 507 | |||||||||
|
Liabilities:
|
||||||||||||
|
Deposits from credit institutions
|
— | 3 | 1 | |||||||||
|
Customer deposits
|
89 | 76 | 23 | |||||||||
|
Debt certificates
|
8 | 142 | 344 | |||||||||
|
Memorandum accounts:
|
||||||||||||
|
Contingent exposures
|
55 | 36 | 37 | |||||||||
|
Contingents commitments
|
327 | 340 | 415 | |||||||||
The balances of the main aggregates in the accompanying
consolidated income statements resulting from transactions with
associated and jointly controlled entities that consolidated by
the equity method, were as follows:
|
Balances of Income Statement arising from
|
||||||||||||
|
transactions with Entities of the Group
|
2010 | 2009 | 2008 | |||||||||
| Millions of euros | ||||||||||||
|
Income statement:
|
||||||||||||
|
Financial incomes
|
14 | 18 | 36 | |||||||||
|
Financial costs
|
2 | 6 | 22 | |||||||||
There are no other material effects in the accompanying
consolidated financial statements of the Group arising from
dealings with these companies, other than the effects arising
from using the equity method (see Note 2.1), and from the
insurance policies to cover pension or similar commitments (see
Note 26).
As of December 31, 2010, the notional amount of the futures
transactions arranged by the Group with the main companies
mentioned above amounted to €1,373 million (of which
€1,282 million in 2010 correspond to futures
transactions with the CITIC Group).
In addition, as part of its normal activity, the Group has
entered into agreements and commitments of various types with
shareholders of subsidiaries and associates, which have no
material effects on the accompanying consolidated financial
statements.
| 55.3 | TRANSACTIONS WITH MEMBERS OF THE BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE |
The information on the remuneration of members of the Board of
Directors of BBVA and of the Group’s Management Committee
is included in Note 56.
The amount disposed of the loans granted to members of Board of
Directors as of December 31, 2010 and 2009 totaled
€531 and €806 thousand, respectively.
The amount disposed of the loans granted as of December 31,
2010 and 2009 to the Management Committee, excluding the
executive directors, amounted to €4,924 and €3,912
thousand, respectively.
As of December 31, 2010 and 2009, there were no guarantees,
finance leases or commercial loans provided on behalf of members
of the Bank’s Board of Directors or Management Committee.
F-160
Table of Contents
The loans granted to parties related to key personnel (the
members of the Board of Directors of BBVA and of the Management
Committee as mentioned above) as of December 31, 2010 and
2009 amounted to €28,493 thousand and €51,882
thousand, respectively.
As of December 31, 2010 and 2009, the other exposure,
guarantees, financial leases and commercial loans to parties
related to key personnel amounted to €4,424 thousand and
€24,514 thousand, respectively.
| 55.4 | TRANSACTIONS WITH OTHER RELATED PARTIES |
As of December 31, 2010 and 2009, the Group did not perform
any transactions with other related parties that did not belong
to the normal course of their business, that was not under
market conditions and that was relevant for the equity, income
or the entity and financial situation of the BBVA Group.
| 56. | REMUNERATION OF THE BOARD OF DIRECTORS AND MEMBERS OF THE BANK’S MANAGEMENT COMMITTEE |
Remuneration and other benefits of the members of the Board of
Directors and members of the Management Committee.
| • | Remuneration of non-executive directors |
The remuneration paid to individual non-executive members of the
Board of Directors in 2010 is indicated below, broken down by
type of remuneration:
|
Appointments
|
||||||||||||||||||||||||||||||||
|
Standing-
|
and
|
Appointments
|
Compensation
|
|||||||||||||||||||||||||||||
|
Board of
|
Executive
|
Audit
|
Risk
|
Compensation
|
Committee
|
Committee
|
||||||||||||||||||||||||||
|
Year 2010 Remuneration of Non-Executive Directors
|
Directors | Committee | Committee | Committee | Committee(4) | (5) | (5) | Total | ||||||||||||||||||||||||
| Thousand of euros | ||||||||||||||||||||||||||||||||
|
Tomás Alfaro Drake
|
129 | — | 71 | — | — | 59 | — | 259 | ||||||||||||||||||||||||
|
Juan Carlos Alvarez Mezquiriz
|
129 | 167 | — | — | 18 | — | 25 | 339 | ||||||||||||||||||||||||
|
Rafael Bermejo Blanco
|
129 | — | 179 | 107 | — | — | — | 415 | ||||||||||||||||||||||||
|
Ramón Bustamante y de la Mora
|
129 | — | 71 | 107 | — | — | — | 307 | ||||||||||||||||||||||||
|
José Antonio Fernández Rivero(1)
|
129 | — | — | 214 | — | 23 | — | 366 | ||||||||||||||||||||||||
|
Ignacio Ferrero Jordi
|
129 | 167 | — | — | 18 | — | 25 | 339 | ||||||||||||||||||||||||
|
Carlos Loring Martinez de Irujo
|
129 | — | 71 | — | 45 | — | 62 | 307 | ||||||||||||||||||||||||
|
José Maldonado Ramos(2)
|
129 | — | — | 107 | — | 23 | 25 | 284 | ||||||||||||||||||||||||
|
Enrique Medina Fernández
|
129 | 167 | — | 107 | — | — | — | 403 | ||||||||||||||||||||||||
|
Susana Rodríguez Vidarte
|
129 | — | 71 | — | 18 | 23 | 25 | 266 | ||||||||||||||||||||||||
|
Total(3)
|
1,290 | 501 | 463 | 642 | 99 | 128 | 162 | 3,284 | ||||||||||||||||||||||||
| (1) | Mr. José Antonio Fernández Rivero, apart from the amounts detailed in the table above, also received a total of €652 thousand in early retirement benefit as a former director of BBVA. | |
| (2) | Mr. José Maldonado Ramos, who resigned as chief executive of BBVA on December 22, 2009, received in the year 2010 apart from the amounts detailed in the table above, a total of €805 thousand in accrued variable compensation in 2009 by his former post of Company Secretary. | |
| (3) | Mr. Roman Knörr Borras, who resigned as executive director on March 23, 2010, received in the year 2010 the total amount of €74 thousand as compensation for their membership of the Board of Directors and Standing-Executive Committee until that date. | |
| (4) | By agreement of the Board of Directors on May 25, 2010, created two new Appointments and Compensation Committees, which replaced the former Appointments and Compensation Committee. | |
| (5) | Remuneration received from June 1, 2010. |
F-161
Table of Contents
| • | Remuneration of executive directors |
The remuneration paid to individual executive directors in 2010
is indicated below, broken down by type of remuneration:
|
Fixed
|
Variable
|
|||||||||||
|
Year 2010 Remuneration of Executive Directors
|
Remuneration | Remuneration(1) | Total | |||||||||
| Thousand of euros | ||||||||||||
|
Chairman and CEO
|
1,928 | 3,388 | 5,316 | |||||||||
|
President and COO(2)
|
1,249 | 1,482 | 2,731 | |||||||||
|
Total
|
3,177 | 4,870 | 8,046 | |||||||||
| (1) | The figures relate to variable remuneration for 2009 paid in 2010. | |
| (2) | The variable remuneration for 2009 of COO, who was appointed on September 29, 2009, includes the remuneration received as Director of Resources and Media in the period of 2009 in which he occupied that function (9 months ) and earned as COO since his appointment. |
In addition, the executive directors received
payment-in-kind
during 2010 totaling €32 thousand, of which €10
thousand relates to Chairman and CEO, €22 thousand relates
to President and COO.
The Executive Directors accrued variable remuneration for 2010,
to be paid in 2011, amounting to €3,011 thousand in the
case of the Chairman and CEO and €1,889 thousand in the
case of the President and COO.
These amounts are recognized under the item “Other
liabilities — Accruals” on the liability side in
the accompanying consolidated balance sheet as of
December 31, 2010.
| • | Remuneration of the members of the management committee(*) |
The remuneration paid in 2010 to the members of BBVA’s
Management Committee amounted to €7,376 thousand in fixed
remuneration and €15,174 thousand in variable remuneration
accrued in 2009 and paid in 2010.
In addition, the members of the Management Committee received
remuneration in kind and other items totaling €807 thousand
in 2010.
| (*) | This section includes information on the members of the Management Committee as of December 31, 2010, excluding the executive directors. |
| • | variable multi-year stock remuneration program for executive directors and members of the management committee |
Settlement
of the multi-year variable share-based remuneration plan for
2009-2010
The AGM of the Bank held on March 13, 2009 approved a
Multi-Year Variable Share-Based Remuneration Plan for shares for
2009/2010 (hereinafter, the 2009/2010 Program) for the members
of the BBVA’s executive team, and whose result is obtained
by multiplying the initial number of assigned “units”
by a coefficient on a scale of between 0 and 2, which is linked
to the movement of the Total Shareholders Return (TSR) indicator
of the Bank during 2009/2010 compared with the change of this
same indicator in a group of international banks of reference.
The number of “units” allocated to executive directors
under this program, in accordance with the resolution of the
AGM, was 215,000 for the Chairman and CEO, and 131,707 for the
President and COO, and 817,464 for the members of the Management
Committee who held this position as of December 31, 2010,
excluding executive directors.
Once the 2009/2010 Program period was completed, on
December 31, 2010, the TSR for BBVA and the 18 reference
banks was then determined; given the final positioning of BBVA,
it resulted in the application of a multiplier ratio of 0 to the
assigned units, the Program was settled without the allocation
of shares to the beneficiaries.
F-162
Table of Contents
Multi-year
variable share-based remuneration plan for
2010-2011
The AGM of the Bank on March 12, 2010, approved a new
multi-year variable share-based remuneration scheme for
2010-2011
(hereinafter “the
2010-2011
program”) aimed at members of the BBVA executive team. It
is to end on December 31, 2011 and will be settled on
April 15, 2012, although the Regulation that governs it
includes provisions for early settlement.
The precise number of shares to be given to each beneficiary of
the Program 2010/2011 will also be determined by multiplying the
number of units allocated by a coefficient of between 0 and 2.
This coefficient reflects the relative performance of
BBVA’s total stockholder return (TSR) during the period
2010-2011
compared with the TSR of a group of the Bank’s
international peers.
These shares will be given to the beneficiaries after the
settlement of the program. They will be able to use these shares
as follows: (i) 40 percent of the shares received will
be freely transferable by the beneficiaries at the moment they
are received; (ii) 30 percent of the shares received
will be transferable one year after the settlement date of the
program; and (iii) the remaining 30 percent will be
transferable starting two years after the settlement date of the
program.
The number of units assigned for the executive directors under
the AGM resolution is 105,000 for the Chairman and CEO and
90,000 for the President and COO.
The total number of units assigned under this Program to the
Management Committee members who held this position on
December 31, 2010, excluding executive directors, was
385.000.
| • | Scheme for remuneration of non-executive directors with deferred distribution of shares |
The Bank’s AGM on March 18, 2006 resolved under agenda
item eight to establish a remuneration scheme using deferred
distribution of shares to the Bank’s non-executive
directors, to replace the earlier post-employment scheme in
place for these directors.
The plan is based on the annual assignment to non-executive
directors of a number of “theoretical shares”
equivalent to 20% of the total remuneration received by each of
them in the previous year, The share price used in the
calculation is the average closing price of the BBVA shares in
the seventy stock market sessions before the dates of the
ordinary AGMs that approve the annual accounts for each year.
The shares will be given to each beneficiary on the date he or
she leaves the position of director for any reason except
serious breach of duties.
The number of “theoretical shares” allocated to
non-executive director beneficiaries under the deferred share
distribution scheme approved by the AGM for 2010, corresponding
to 20% of the total remuneration paid to each in 2009, is set
out below:
|
Theorical
|
Accumulated
|
|||||||
|
Scheme for Remuneration of Non-Executive Directors
|
Shares
|
Theorical
|
||||||
|
with Deferred Distribution of Shares
|
Assigned in 2010 | Shares | ||||||
|
Tomás Alfaro Drake
|
3,521 | 13,228 | ||||||
|
Juan Carlos Alvarez Mezquiriz
|
5,952 | 39,463 | ||||||
|
Rafael Bermejo Blanco
|
7,286 | 23,275 | ||||||
|
Ramón Bustamante y de la Mora
|
5,401 | 38,049 | ||||||
|
José Antonio Fernández Rivero
|
6,026 | 30,141 | ||||||
|
Ignacio Ferrero Jordi
|
5,952 | 40,035 | ||||||
|
Carlos Loring Martínez de Irujo
|
5,405 | 25,823 | ||||||
|
Enrique Medina Fernández
|
7,079 | 51,787 | ||||||
|
Susana Rodríguez Vidarte
|
4,274 | 24,724 | ||||||
|
Total(*)
|
50,896 | 286,525 | ||||||
| (*) | Additionally, were also assigned to Don Roman Knorr Borras, who resigned as director as of March 23, 2010, 5,198 theoretical shares equivalent to 20% of the remuneration received by him in 2009. |
F-163
Table of Contents
| • | Pension commitments |
The provisions registered as of December 31, 2010 for
pension commitments to the President and COO are €14,551
thousand, of which €941 thousand were charged against 2010
earnings. As of this date, there are no other pension
obligations to executive directors.
In addition, insurance premiums amounting to €95 thousand
were paid on behalf of the non-executive members on the Board of
Directors.
The provisions registered as of December 31, 2010 for
pension commitments for the Management Committee members,
excluding executive directors, amounted to €51,986
thousand. Of these, €6,756 thousand were charged against
2010 earnings.
| • | Termination of the contractual relationship. |
There were no commitments as of December 31, 2010 for the
payment of compensation to executive directors.
In the case of the COO, the provisions of his contract stipulate
that in the event that he loses this position for any reason
other than of his own will, retirement, invalidity or serious
dereliction of duty, he will take early retirement with a
pension that may be received as a life annuity or a capital sum
equal to 75% of his pensionable salary if this should occur
before he reaches 55 years of age, or 85% after this age.
| 57. | DETAIL OF THE DIRECTORS’ HOLDINGS IN COMPANIES WITH SIMILAR BUSINESS ACTIVITIES |
Pursuant to Article 229.2 of the Spanish Corporations Act,
approved by Legislative Royal Decree 1/2010 of 2 July 2010,
as of December 31, 2010, no members of the Board of
Directors have a direct or indirect holding in the common stock
of companies engaging in an activity that is identical, similar
or complementary to that which constitutes the corporate purpose
of BBVA. None of the directors hold executive or administrative
positions or functions at these companies.
Furthermore, it indicates that individuals associated to the
members of the Board of Directors, as of December 31, 2010
were holders of 6,594 shares of Banco Santander, S.A. and
of 414 shares of Banco Español de Crédito, S.A.
(Banesto).
| 58. | OTHER INFORMATION |
58.1. ENVIRONMENTAL
IMPACT
Given the activities in which the Group companies engage, the
Group has no environmental liabilities, expenses, assets,
provisions or contingencies that could have a significant effect
on its consolidated equity, financial situation and profits.
Consequently, as of December 31, 2010, there is no item in
the Group’s consolidated financial statements that requires
disclosure in an environmental information report pursuant to
the Ministry of Economy Order of October 8, 2001, and no
specific disclosure of information on environmental matters is
included in these statements.
58.2. OTHER
INFORMATION
The Group is party to certain legal actions in a number of
jurisdictions, including, among others, Spain, Mexico and the
United States, arising out of its ordinary business operations.
BBVA considers that none of those actions is material and none
is expected to result in a significant adverse effect on
BBVA’s financial position at either the individual or
consolidated level. Management believes that adequate provisions
have been made in respect of the litigation arising out of its
ordinary business operations. BBVA has not disclosed to the
markets any contingent liability that could arise from said
legal actions as it does not consider them material.
F-164
Table of Contents
| 59. | SUBSEQUENT EVENTS |
The Directors of the entities Finanzia Banco de Crédito,
S.A.U. and Banco Bilbao Vizcaya Argentaria, S.A., in meetings of
their respective boards of directors held on January 28,
2011 and February 1, 2011, respectively, have approved a
project for the takeover of Finanzia Banco de Crédito,
S.A.U. by Banco Bilbao Vizcaya Argentaria, S.A. and the
subsequent transfer of all its equity interest to Banco Bilbao
Vizcaya Argentaria, S.A., which will acquire all the rights and
obligations of the companies it had purchased through universal
succession.
The merger agreement will be submitted to shareholders for
approval at the AGM during the first quarter of the year. Given
that the merged company is fully owned by Banco Bilbao Vizcaya
Argentaria, S.A. in accordance with Article 49.1 of Act
3/2009 of 3 April 2009 on the structural modifications of
trading corporations, it will not be necessary to carry out any
share capital increase of Banco Bilbao Vizcaya Argentaria, S.A.
or prepare reports by the managers of the companies involved in
the merger, or by independent experts on the merger proposal.
As of January 17, 2011, Banco Bilbao Vizcaya Argentaria,
S.A. acquired its condition as sole shareholder as a result of
the acquisition of shares in possession of the Corporación
General Financiera, S.A. and Cidessa Uno, S.L. as of
December 31, 2010.
Since January 1, 2011 until the preparation of these annual
consolidated financial statements, no other events, not
mentioned above, have taken place that have significantly
affected the Group’s results or its equity position.
As of March 22, 2011 after having obtained the necessary
authorizations, BBVA has completed the acquisition of 24.89% of
the total issued capital of the turkish bank garanti (see Note
3).
| 60. | DIFFERENCES BETWEEN EU-IFRS REQUIRED TO BE APPLIED UNDER THE BANK OF SPAIN’S CIRCULAR 4/2004 AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND OTHER REQUIRED DISCLOSURES. |
As described in Note 1, the accompanying Consolidated
Financial Statements of the BBVA Group are presented in the
formats stipulated by the Bank of Spain’s Circular and were
prepared by applying the EU-IFRS required to be applied under
the Bank of Spain’s Circular 4/2004. Such formats and
accounting principles vary in certain respects from those
generally accepted in the United States
(“U.S. GAAP”).
Following is a summary of components of the main differences
between EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 and U.S. GAAP:
|
• Net income attributed to parent company
and Shareholders’ equity reconciliation between
EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004 and U.S. GAAP(*)
|
A | |
|
• Consolidated Financial Statements
|
B | |
|
• Main disclosures required by U.S.
accounting regulations for banks and additional disclosures
required under U.S. GAAP
|
C |
| (*) | BBVA is availing itself of the accommodation in Item 17(c)(2)(iv) of Form 20-F with respect to the application of IAS 21 for highly inflationary economies (Venezuela). Therefore, this reconciliation has been prepared in accordance with Item 18 of Form 20-F which is different from that required by US GAAP. See Item 16 below and the discussion under Venezuela for additional information. |
The preparation of these Consolidated Financial Statements
requires management to make estimates and assumptions that
affect the reported amounts and allocations of assets and
liabilities and disclosures of contingent assets and liabilities
and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those
estimated but any difference should not be material.
IFRS 1
First-time adoption of International Financial
Reporting Standards
provides a number of exemptions and
exceptions from full retrospective application. Net income
attributed to parent company, shareholders’ equity and the
reconciliation to U.S. GAAP shown below would have been
different if the EU-IFRS required to be applied under the Bank
of Spain’s Circular 4/2004 had been applied fully
retrospectively.
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A) NET INCOME ATTRIBUTED TO PARENT COMPANY AND
SHAREHOLDERS’ EQUITY RECONCILIATION BETWEEN EU-IFRS
REQUIRED TO BE APPLIED UNDER THE BANK OF SPAIN’S CIRCULAR
4/2004 AND U.S. GAAP.
Accounting practices used by the Bank in preparing the
Consolidated Financial Statements conform to
EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004, but do not conform to U.S. GAAP. A summarized
reconciliation of shareholders’ equity as of
December 31, 2010, 2009 and 2008 and net income attributed
to parent company for the years ended December 31, 2010,
2009 and 2008 to U.S. GAAP is set forth below.
The following tables set forth the adjustments to consolidated
net income attributed to parent company and to consolidated
shareholders’ equity which would be required if
U.S. GAAP had been applied to the accompanying Consolidated
Financial Statements:
| Increase (Decrease) | ||||||||||||||||
| Year Ended December 31, | ||||||||||||||||
| Item | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros, except per share data | ||||||||||||||||
|
NET INCOME
|
||||||||||||||||
|
Net income for the year under EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004
|
4,995 | 4,595 | 5,385 | |||||||||||||
|
Net income attributed to non-controlling interests under EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004
|
(389 | ) | (385 | ) | (365 | ) | ||||||||||
|
Net income attributed to parent company under EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004
|
4,606 | 4,210 | 5,020 | |||||||||||||
|
Adjustments to conform to U.S. GAAP:
|
||||||||||||||||
|
Business combination with Argentaria
|
1 | (22 | ) | (22 | ) | (36 | ) | |||||||||
|
Valuation of assets
|
2 | (276 | ) | (910 | ) | (32 | ) | |||||||||
|
Valuation of financial instruments
|
3 | — | — | — | ||||||||||||
|
Accounting of goodwill
|
4 | (2 | ) | 713 | (2 | ) | ||||||||||
|
Accounting of derivatives
|
6 | (34 | ) | (34 | ) | (128 | ) | |||||||||
|
Loans adjustments
|
7 | — | — | (1,152 | ) | |||||||||||
|
Pension plan cost
|
8 | (64 | ) | (221 | ) | — | ||||||||||
|
Tax effect of U.S. GAAP adjustments and deferred taxation
|
9 | 91 | 89 | 402 | ||||||||||||
|
Net income attributed to parent company in accordance with
U.S. GAAP(*)
|
4,299 | 3,825 | 4,070 | |||||||||||||
|
Other comprehensive income, (loss) net of tax:
|
||||||||||||||||
|
Foreign currency translation adjustments and others
|
1,784 | (76 | ) | (1,001 | ) | |||||||||||
|
Unrealized gains on securities:
|
||||||||||||||||
|
Unrealized holding gains (losses) arising during period, net of
tax
|
(1,680 | ) | 943 | (2,657 | ) | |||||||||||
|
Derivative instruments and hedging activities
|
(531 | ) | (4 | ) | 175 | |||||||||||
|
Comprehensive income (losses) in accordance with U.S. GAAP
(*)
|
10 | 3,872 | 4,688 | 587 | ||||||||||||
|
Earning per share (Euros)
(see note 60. A.11) (**)
|
1.14 | 1.03 | 1.10 | |||||||||||||
| (*) | In accordance with Item 18 of Form 20-F. | |
| (**) | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo Option”) mentioned in Note 4 is not distributed. Therefore, the conditions to restate the Earning Per Share under IAS 33 and ASC 260 are not met. |
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Table of Contents
| Increase (Decrease) | ||||||||||||||||
| As of December 31, | ||||||||||||||||
| Item | 2010 | 2009 | 2008 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
TOTAL EQUITY
|
||||||||||||||||
|
Total equity under EU-IFRS required to be applied under the Bank
of Spain’s Circular 4/2004
|
37,475 | 30,763 | 26,705 | |||||||||||||
|
Non-controlling interests under EU-IFRS
|
(1,556 | ) | (1,463 | ) | (1,049 | ) | ||||||||||
|
Total equity without non-controlling interests under EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004
|
35,919 | 29,300 | 25,656 | |||||||||||||
|
Adjustments to conform to U.S. GAAP:
|
||||||||||||||||
|
Business combination with Argentaria
|
1 | 5,425 | 5,447 | 5,469 | ||||||||||||
|
Valuation of assets
|
2 | (1,260 | ) | (984 | ) | (74 | ) | |||||||||
|
Valuation of financial instruments
|
3 | — | 18 | 36 | ||||||||||||
|
Accounting of goodwill
|
4 | 3,657 | 3,332 | 2,573 | ||||||||||||
|
Adjustments related to inflation-due to IFRS-1
|
5 | (229 | ) | (199 | ) | (192 | ) | |||||||||
|
Accounting of derivatives
|
6 | (48 | ) | 7 | 35 | |||||||||||
|
Loans adjustments
|
7 | — | — | 36 | ||||||||||||
|
Tax effect of U.S. GAAP adjustments and deferred taxation
|
9 | (651 | ) | (749 | ) | (795 | ) | |||||||||
|
Total shareholders’ equity in accordance with U.S.
GAAP(*) (**)
|
42,813 | 36,172 | 32,744 | |||||||||||||
| (*) | In accordance with Item 18 of Form 20-F. | |
| (**) | Under US GAAP “Shareholders’ equity” is equivalent to “Total equity” net of “Non controlling interest in subsidiaries”. |
The differences included in the tables above are explained in
the following items:
| 1. | BUSINESS COMBINATION WITH ARGENTARIA — |
Banco Bilbao Vizcaya, S.A. and Argentaria, Caja Postal y Banco
Hipotecario, S.A. (Argentaria) merged, being January 28,
2000 the date from which such merger was legally effective.
According to Spanish GAAP at that date, this business
combination was accounted for using the method of pooling of
interest and therefore no goodwill was accounted. IFRS 1
First-time adoption of International Financial Reporting
Standards
grants an exemption to apply IFRS 3
Business
Combinations
prospectively and thus not to restate business
combinations that occurred before the date of transition to
IFRS, which is January 1, 2004. Therefore, this merger has
been accounted for using the method of pooling of interest and
no goodwill was accounted. Since the transaction did not comply
with the U.S. GAAP requirements for pooling of interest
method, under U.S. GAAP this business combination was
accounted for using the purchase method. The excess of the fair
value of the new shares issued in exchange for the Argentaria
shares over the net worth of Argentaria under U.S. GAAP as
of the date of the merger, was
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approximately €6,316 million and was calculated
considering the necessary adjustments to the net worth of
Argentaria as of January 28, 2000 under Spanish GAAP, as
described below:
| Millions of euros | ||||
|
Approximate Argentaria net worth as of January 28, 2000
under Spanish GAAP
|
3,454 | |||
|
(i) Reversal of the net effect of the restatement of fixed
assets and equity securities
|
(129 | ) | ||
|
(ii) Reduction for employees and third party loans issued to
purchase shares of capital stock
|
(123 | ) | ||
|
(iii) Goodwill amortization adjustments
|
101 | |||
|
(iv) Up-front premium reversal
|
108 | |||
|
(v) Valuation of investment securities
|
1,926 | |||
|
(vi) Effect of adjustments to conform to U.S. GAAP for
investments in affiliated Companies
|
(87 | ) | ||
|
(vii) Tax effect of above mentioned adjustments
|
(608 | ) | ||
|
(viii) Other adjustments
|
35 | |||
|
Subtotal
|
1,223 | |||
|
Approximate Argentaria net worth as of January 28, 2000
under U.S. GAAP
|
4,677 | |||
| i. | Revaluation of property and equity securities |
Certain of the Spanish and foreign consolidated companies had
stepped up (increased) the cost and accumulated depreciation of
property and equipment and, where appropriate, the carrying
values of their equity investment securities pursuant to the
relevant local legislation. Also, the buildings and equity
securities owned by certain of the companies in the Group, whose
shareholders’ meetings adopted merger resolutions in 1991,
were stepped up. Under U.S. GAAP these step ups are not
permitted to be reflected in the financial statements.
ii. —
Employee and other third party loans
Certain Group banks granted loans to shareholders, employees and
customers for the acquisition of Argentaria, Caja Postal y Banco
Hipotecario, S.A. shares. Under Spanish GAAP, these loans were
recorded in the Consolidated Financial Statements under the
caption “Credit, Loans and Discounts”. Under
U.S. GAAP, these loans should be recorded as a reduction of
total shareholders’ equity because the only recourse for
collection is the shares themselves.
iii. —
Goodwill
Under Spanish GAAP, the general policy of the Group was to
amortize goodwill over a maximum period of 10 years.
However, a different period was used to amortize goodwill in
some of the subsidiaries acquired. Until 2001, for purposes of
calculating the effect of applying U.S. GAAP, goodwill
arising on acquisitions was amortized in 10 years. Since
July 2001, as required by ASC 350, goodwill is no longer
amortized.
Additionally, in 1998 and as a result of the merger, goodwill
from Banco Exterior de España, S.A. was fully written off
for Spanish GAAP purposes. Until June 2001, under U.S. GAAP
this goodwill was amortized over the estimated economic life as
there was no economic or fair value basis for the impairment
made under Spanish GAAP. Since July 2001, as required by
ASC 350, goodwill is no longer amortized.
iv. —
Up-front premium reversal
In 1998 the Bank arranged hedging transactions for which it paid
a premium, which was recorded under the “Extraordinary
Losses” caption in the income statement for 1998, to
mitigate the adverse effect of the negative spread that arise
between the average return on the mortgage loans financed by
certain mortgage bonds and the fixed interest rates of such
mortgage bonds. Under U.S. GAAP, the premium was recognized
at inception as an
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asset, amortized over the life of the hedging transaction and
that upon adoption of ASC 815, the derivative has been
recorded at fair value through income, as it does not qualify
for hedge accounting under U.S. GAAP.
v. —
Valuation of investment securities
Under
ASC 320-10-35-1b,
available-for-sale
securities shall be measured at fair value and the unrealized
holding gains and losses shall be reported in “Other
comprehensive income”.
vi. —
Investments in affiliated companies
Under Spanish GAAP, investments in non-consolidated listed
affiliated companies owned over 3% and in non-consolidated
unlisted affiliated companies owned over 20% were recorded by
the equity method. Under U.S. GAAP investments in
affiliated companies over 20% but less than 50% are accounted
for by the equity method and those exceeding 50% by the
consolidation method. Listed investments of less than 20% are
accounted for at market value.
The excess of the fair value of the new shares issued in
exchange for the Argentaria shares over the net worth of
Argentaria, was allocated to the following specific items:
|
2000
|
Millions of euros | |||
|
Net lending
|
611 | |||
|
Investment securities-held to maturity
|
306 | |||
|
Premises and equipment
|
129 | |||
|
Other assets and liabilities
|
(113 | ) | ||
|
Long term debt
|
(173 | ) | ||
|
Tax effect
|
(220 | ) | ||
|
Goodwill
|
5,776 | |||
| 6,316 | ||||
For U.S. GAAP purposes, BBVA amortizes the excess of the
fair value assigned to the specific items over their remaining
economic life. The amortization of the excess allocated to
specific assets and liabilities was €22 million (net
of tax), €22 million (net of tax) and
€36 million (net of tax) for the years ended
December 31, 2010, 2009 and 2008, respectively.
Until December 31, 2001 BBVA amortized the goodwill on a
straight line basis over a period of 25 years. Since
January, 2002 BBVA stopped the amortization of the remaining
goodwill pursuant to ASC 350, and it has been assigned to
different reporting units and tested for impairment as described
in Note 2.2.8. As of December 31, 2010 goodwill was
€5,333 million.
The adjustment to total shareholders’ equity, that reflects
both effects, was €5,425 million,
€5,447 million and €5,469 million as of
December 31, 2010, 2009 and 2008, respectively.
| 2. | VALUATION OF ASSETS — |
This adjustment basically relates to the following:
| • | Revaluation of property |
As described in Note 29.3. of the Consolidated Financial
Statements, certain of the Spanish and foreign consolidated
companies restated the cost and accumulated depreciation of
property and equipment pursuant to the relevant legislation.
Fixed asset depreciation is computed on that restated value and
the total amount charged to income is deductible for corporate
income tax purposes. In addition, results on sales or
dispositions of fixed assets are determined as the difference
between the selling price and the net restated value.
Under U.S. GAAP these revaluations are not permitted to be
reflected in the financial statements.
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The amounts of the adjustments indicated below have been
calculated to reflect the reversal of the additional
depreciation on the revalued property and equipment
(€4 million, €4 million and
€4 million as of December 31, 2010, 2009 and
2008, respectively) and the additional income that would have
resulted if the Group had not restated the fixed assets that
have been sold (€8 million, €9 million and
€6 million for the years ended December 31, 2010,
2009 and 2008, respectively). The adjustment to total
shareholders’ equity reflects the reversal of the
unamortized revaluation surplus (a decrease of
€123 million, €135 million and
€148 million as of December 31, 2010, 2009 and
2008, respectively).
| • | Valuation of property |
In accordance with the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004, certain property and
equipment items were revalued and, therefore, this value was
used as deemed cost on January 1, 2004 taking into
consideration that, at the date of the revaluation, this deemed
cost was comparable to fair value.
Under U.S. GAAP, these adjustments to the deemed cost are
not permitted due to the fact that they do not reflect an actual
impairment.
Consequently, there is an adjustment in the reconciliation to
U.S. GAAP to reflect in the income statement the additional
depreciation on the revalued property and equipment
(€3 million, €3 million and
€3 million for the years ended December 31, 2010,
2009 and 2008, respectively). The adjustment to total
shareholders’ equity reflects the reversal of the
adjustments to the attributed cost (an increase of
€61 million, €64 million and
€67 million as of December 31, 2010, 2009 and
2008, respectively).
| • | Sale and leaseback of fixed assets |
In 2009, 1,150 properties (offices and other singular buildings)
belonging to the Group in Spain were reclassified to heading
“Non-current assets held for sale” at an amount of
€426 million, for which a sales plan had been
established.
In 2010 and 2009, the Bank sold 164 and 971 of mentioned
properties, respectively, in Spain to investors not related to
BBVA Group for a total sale price of €404 million and
€1,263 million at market prices, respectively, without
making funds available to the buyers to pay the price of these
transactions.
At the same time the Bank signed long-term operating leases with
these investors on the aforementioned properties for periods of
10, 15, 20, 25 or 30 years (according to the property) and
renewable.
The sale agreements also established call options for each of
the properties at the termination of each of the lease
agreements so that the Bank can repurchase these properties The
repurchasing price of these call options will be the market
value as determined by an independent expert. Therefore, the
Group made a gross profit of €273 and
€914 million, recognized under the heading “Gains
(losses) in non-current assets held for sale not classified as
discontinued operations” in the accompanying consolidated
income statements for 2010 and 2009.
Under EU-IFRS (IAS 17), we accounted for this transaction as a
sale and lease-back because of:
| • | We considered that there is no reasonable certainty that the repurchase option will be exercised, because it is at fair value, and there are no other indicators that we expect would economically force us to exercise the repurchase option; and | |
| • | We completed an analysis of the other main factors of the transaction and concluded that the lease agreements had the characteristics of operating leases, the sale price and lease payments were at fair value so, in effect, there had been a normal sale transaction and the gain on the sale of the properties was recognized immediately in the consolidated statement of income for the year 2009 and 2010. |
Under U.S. GAAP (ASC
840-40-25-13)
this transaction does not qualify as a sale and lease-back
because the existence of a repurchase option of the properties
at fair value implies a continuing involvement of the
seller-lessee and, consequently, the transaction cannot be
considered as a sale.
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Accordingly, in order to account for the transaction in
conformity with the financing method under
ASC 840-40-25-13,
we have made an adjustment to:
| • | undo the sale, place the properties under repurchase agreement back in the accounting books (€404 million as of December 31, 2010 and €301 million as of December 31,2009) and continue to depreciate them for the year 2010 and 2009 (€11 million and €4 million, respectively); | |
| • | eliminate the profit on sale (€273 million of income as of the date of the transaction in 2010 and €914 million of income as of the date of the transaction in 2010) and create a liability for the total amount of the cash received; and | |
| • | reclassify the operating leases rental payments incurred by the Group (€113 million for the year 2010 and €31 million for year 2009) as interest expense. |
| 3. | VALUATION OF FINANCIAL INSTRUMENTS — |
Group’s criteria of accounting for such securities are
described in Note 2.2.1. The recognition, measurement and
disclosure criteria included in IAS 32 and 39, were applied
retrospectively to January 1, 2004 (the date of transition
to the EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004). Certain debt securities were
recognized at fair value of that date under EU-IFRS required to
be applied under the Bank of Spain’s Circular 4/2004
through total shareholders’ equity. Therefore in 2009 and
2008, there is an adjustment in the reconciliation of
shareholders’ equity to U.S. GAAP to reflect the
reversal of the adjustments to the fair value. As of
December 31, 2010, such debt securities were amortizated
and for that reason there is no adjustment in the reconciliation
to US GAAP that affected shareholders’ equity for that
concept.
| 4. | ACCOUNTING OF GOODWILL — |
The breakdown of this adjustment is as follows:
|
Net Income Attributed
|
||||||||||||||||||||||||
| Shareholders’ Equity | to Parent Company | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
| Millions of Euros | ||||||||||||||||||||||||
|
Goodwill previous to IFRS1
|
981 | 981 | 981 | — | — | — | ||||||||||||||||||
|
Reversal of Step Acquisition
|
2,704 | 2,330 | 2,310 | — | — | — | ||||||||||||||||||
|
Step Acquisition of BBVA Bancomer
|
(1,194 | ) | (1,171 | ) | (1,170 | ) | (1 | ) | 2 | 1 | ||||||||||||||
|
Adquisition and impairment of Compass
|
1,182 | 1,095 | 398 | — | 711 | — | ||||||||||||||||||
|
Others
|
(16 | ) | 97 | 54 | (1 | ) | — | (3 | ) | |||||||||||||||
|
Adjustment 4 in reconciliation to U.S. GAAP
|
3,657 | 3,332 | 2,573 | (2 | ) | 713 | (2 | ) | ||||||||||||||||
The main reasons that generate a difference between EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004 and U.S. GAAP in goodwill are the following:
Adjustments
related to goodwill previous to IFRS 1
The item “Goodwill previous to IFRS 1” refers to
certain impairments or amortizations of goodwill accounted for
under Spanish GAAP previous to the date of adoption of IFRS-1.
These impairments or amortizations were not acceptable under
U.S. GAAP because they did not satisfy the ASC 350
requirements. Therefore, there is an adjustment in the
reconciliation of shareholders’ equity to U.S. GAAP to
reflect the reversal of these impairments and amortizations of
goodwill recorded prior to January 1, 2004.
Reversal
of step acquisition
Investments acquired subsequent to obtaining control over a
company (i.e. transactions involving the purchase of equity
interests from minority shareholders) were treated as
“equity transactions”. The amount of goodwill recorded
under prior GAAP, as of January 1, 2004, transition date to
the EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004, was recorded on the transactions
performed after control was obtained. These amounts were charged
to “non-controlling interests” and the surplus amount
was charged to total shareholders’ equity.
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Under U.S. GAAP, these acquisitions are accounted for using
the “purchase method” and, consequently, there is an
adjustment in the reconciliation to U.S. GAAP to reflect
the reversal of goodwill recorded prior to January 1, 2004,
and the increase of shareholders’ equity.
Step
Acquisition of BBVA Bancomer
On March 20, 2004, BBVA completed the tender offer on 40.6%
of the capital stock of Grupo Financiero BBVA Bancomer, S.A. de
C.V. (“Bancomer”). The final number of shares
presented in the offer and accepted by BBVA was 3,660,295,210,
which represent 39.45% of the capital stock of Bancomer.
Following the acquisition of these shares through the tender
offer, the ownership interest held by BBVA in the capital of
Bancomer was 98.88%. Lastly, as of December 31, 2006, as a
result of the purchase of shares subsisting in the market,
BBVA’s holding in Bancomer increased to 99.96%.
BBVA Bancomer, S.A. de C.V. has been consolidated by Group BBVA
since July 2000, when the merger of Grupo Financiero
BBV-Probursa, S.A. de C.V. (a wholly-owned subsidiary of BBVA)
and Grupo Financiero BBVA Bancomer, S.A. de C.V. was carried out.
Since March 20, 2004 the BBVA Group’s consolidated
income statement reflected a decrease in “Non-controlling
interests” caption related to the business combination
described above while the rest of consolidated the income
statement’s captions did not change because Bancomer was
already a fully consolidated company before the acquisition of
non controlling interest.
The cash paid for the acquired entity was
€3,324 million. In connection with this business
combination there are no contingent payments, options, or
commitments specified in the acquisition agreement.
Under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004, the business combination is
registered as equity transaction and no amounts were allocated
to assets or liabilities of the company acquired.
Under U.S. GAAP, after allocating the purchase price to all
acquired assets and assumed liabilities of the company acquired,
the goodwill was €1,060 million. The entire amount of
goodwill was allocated to the Mexico reporting unit. This unit
is included in the “Mexico” segment. The
reconciliation of the net worth acquired and the fair value of
the assets and liabilities acquired for purposes of
U.S. GAAP was as follows:
| Millions of euros | ||||
|
Net Worth Adquired
|
1,207 | |||
|
Investment securities
|
(32 | ) | ||
|
Net loans and leases
|
622 | |||
|
Permises and equipment
|
(28 | ) | ||
|
Intangible assets
|
970 | |||
|
Other assets
|
189 | |||
|
Time deposits
|
(124 | ) | ||
|
Long term debt
|
(50 | ) | ||
|
Other liabilities
|
(490 | ) | ||
|
Fair value under U.S. GAAP
|
2,264 | |||
The identified intangible assets were related to “core
deposits”, which were calculated according to the purchase
method and were amortized over a period of 40 months. As of
December 31, 2010, all core deposits are amortized.
Additionally, the allocated amount of net loans and leases were
amortized over a weighted-average period of 3 years.
The “Other liabilities” caption includes basically
temporary differences arising from different accounting and tax
values of assets and liabilities allocated in the acquisition.
Because the amounts allocated to certain assets are non
deductible under Spanish Tax Law, additional goodwill and the
corresponding deferred tax liabilities have been considered
under U.S. GAAP.
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Since Bancomer was consolidated by Group BBVA as of July 1,
2000, there are no purchased research and development assets
that were acquired and written off.
Acquisition
of Compass
On February 16, 2007, BBVA entered into a definitive
agreement to acquire 100% of the share capital of Compass. On
September 7, 2007, BBVA completed the acquisition.
Under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004, the amount of goodwill was
calculated at the date in which BBVA obtained the control
(September 7, 2007). Under US GAAP, EITF Issue
No. 99-12,
Determination of the Measurement Date for the Market Price of
Acquirer Securities Issued in a Purchase Business Combination
provides guidance on the measurement date to be used in a
business combination.
EITF 99-12
specifies that the value of acquirer’s marketable equity
securities issued to effect a purchase business combination
should be determinated, pursuant to the guidance in
paragraph 22 of FASB Statement No. 141 (ACS
805-20),
Business Combinations, based on the market price of the
securities over a reasonable period of time before and after the
terms of the acquisition are agreed to and announced. The date
of measurement of the value of the acquirer’s marketable
equity securities should not be influenced by the need to obtain
shareholder or regulatory approvals. In addition,
paragraph 7 of Issue 2 of ASC 805 states that the
measurement date is the earliest date, from the date the terms
of the acquisition are agreed to and announced to the date of
financial applications of the formula do not result in a change
in the number of shares or the amount of other consideration.
According to this BBVA considered the announcement date
(February 16, 2007) as the measurement date under US
GAAP. Consequently, there is an adjustment in the reconciliation
to U.S. GAAP to reflect the different amount of goodwill.
This difference resulted in a reconciling item to
shareholders’ equity (an increase of
€415 million, €384 million and
€398 million as of December 31, 2010, 2009 and
2008, respectively).
Goodwill
impairment test
As indicated in Note 2.2.8 of the Consolidated Financial
Statements, the Group performed the goodwill impairment test
under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004.
In accordance with the applicable accounting guidance under U.S.
GAAP, the Group performs annual tests to identify potential
impairment of goodwill. The tests are required to be performed
annually and more frequently if events or circumstances indicate
a potential impairment may exist. In the first step (“step
one”) of the impairment test, the Group compares the fair
value of each reporting unit with its carrying amount, including
goodwill. If the carrying amount of a reporting unit exceeds its
fair value, the second step of the impairment test is required
to be performed to measure the amount of impairment loss, if
any. The second step (“step two”) of the impairment
test compares the implied fair value of goodwill attributed to
each reporting unit to the carrying amount of that goodwill. The
implied fair value of goodwill is determined in the same manner
as the amount of goodwill recognized in a business combination;
the Group allocates the fair value determined in the step one
for the Reporting Unit (RU) to all of the assets and liabilities
of that unit as if the reporting unit had been acquired in
business combination. If the carrying amount of the reporting
unit goodwill exceeds the implied fair value of that goodwill,
an impairment loss is recognized in an amount equal to that
excess.
As of December 31, 2010, there were no losses due to
impairments under US GAAP.
As of December 31, 2009, the results of the goodwill
impairment test under EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004 estimated impairment losses
of €1,097 million in the United States Cash-Generating
Unit (“CGU”) which were recognized under
“Impairment losses on other assets (net) —
Goodwill and other tangible assets” in the income statement
for 2009. The impairment loss of this unit is attributed to the
significant decline in economic and credit conditions in the
states in which the Group operates in the United States. The
valuations were verified by an independent expert, not the
Group’s statutory auditor.
Under U.S. GAAP, the Group tested its identified Reporting Units
for impairment as of December 31, 2009. This test indicated
a goodwill impairment of €385 million within the
United States reporting unit; accordingly, the Group recorded
this goodwill impairment charges in 2009. The impairment
recognized in the United States
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Reporting Unit is attributed to the decrease in revenues caused
by the significant decline in U.S. economic conditions.
Both the step one fair values of the reporting units and the
step two allocations of the fair values of the reporting
units’ assets and liabilities are based upon
management’s estimates and assumptions. Although management
has used the estimates and assumptions it believes to be most
appropriate in the circumstances, it should be noted that even
relatively minor changes in certain valuation assumptions used
in management’s calculations would result in significant
differences in the results of the impairment tests.
There is a difference in the impairment test of goodwill because
under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 there is no step two as required by
U.S. GAAP. This difference resulted in a reconciling item to the
Net income for the year ended December 31, 2009. This
adjustment reflects the reversal of the excess of charges in
2009 to the United States Reporting Unit’s goodwill
amounted to €711 million as of December 31, 2009.
Under U.S. GAAP, the BBVA Group’s goodwill assigned to
each Reporting Unit as of December, 31, 2010, 2009 and 2008 for
impairment test purposes are the following:
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
The United States
|
6,975 | 6,472 | 7,098 | |||||||||
|
Spain and Portugal
|
4,282 | 4,294 | 4,286 | |||||||||
|
Mexico
|
2,636 | 2,302 | 2,265 | |||||||||
|
Wholesale Banking & Global Market
|
1,489 | 1,489 | 1,489 | |||||||||
|
Pension in South América
|
294 | 252 | 208 | |||||||||
|
Chile
|
121 | 104 | 86 | |||||||||
|
Colombia
|
236 | 205 | 192 | |||||||||
|
Other Reporting Units
|
13 | 10 | 10 | |||||||||
|
Total
|
16,047 | 15,128 | 15,634 | |||||||||
| 5. | ADJUSTMENTS RELATED TO INFLATION-DUE TO IFRS-1 |
After the transition date to the EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004, which is
January 1, 2004, none of the functional currencies of the
consolidated subsidiaries and associates and their branches
located abroad relate to hyperinflationary economies, except for
Venezuela which is discussed in Item 16 below.
Accordingly, excluding Venezuela, as of December 31, 2010,
2009 and 2008 it was not necessary to adjust the financial
statements of any of the consolidated subsidiaries or associates
to correct for the effect of inflation.
In accordance to the exemption provided by IFRS 1 First-time
Adoption of International Financial Reporting Standards, the
cumulative effect of inflation recorded prior to January 1,
2004 (transition date to EU-IFRS required to be applied under
the Bank of Spain’s Circular 4/2004) mainly relating to
items of property, plant and equipment has not been removed.
Therefore, the previous GAAP restated amounts have been used as
deemed cost of property, plant and equipment as of the
transition date.
Under U.S. GAAP, in prior years the financial statements of
operating units in a highly inflationary economy were remeasured
as if the functional currency of the operating unit were the
same as that of the parent reporting currency. For the purposes
of this requirement, a highly inflationary economy is one that
has cumulative inflation of approximately 100 percent or
more over a 3 year period. None of the countries where BBVA
owned subsidiaries are currently highly inflationary countries,
except Venezuela.
The adjustment reflects the reversal of the credits to
shareholders’ equity arising from inflation registered in
subsidiaries established in “non highly inflationary
economies” (decrease of €229 million,
€199 million and €192 million as of
December 31, 2010, 2009 and 2008, respectively).
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| 6. | ACCOUNTING OF DERIVATIVES — |
As of December 31, 2010, the main differences between IAS
39 and ASC 815 that have resulted in reconciling items to
net income and shareholders’ equity between IFRS and
U.S. GAAP were as follows:
Fair
value option
The EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 allows for the designation of a
financial asset or a financial liability as held at fair value
through the profit or loss if one of the criteria described in
IAS 39 is met.
ASC 320 allows for the designation of a financial asset or a
financial liability as held for trading only if these are
acquired and held primarily for resale in the near term to make
a profit from short-term movements in market prices.
As of December 31, 2010, 2009 and 2008, we maintained
certain financial assets and financial liabilities registered at
fair value through the profit or loss under EU-IFRS required to
be applied under the Bank of Spain’s Circular 4/2004 which
did not meet the conditions to be designated as financial asset
or financial liability held for trading under ASC 320. With
the adoption of
ASC 815-15-25
those financial assets and financial liabilities meet the
conditions to be designated as financial asset or financial
liability held for trading. However,
ASC 815-15-25
not allow retrospective application and for that reason we
maintain an adjustment in the reconciliation to U.S. GAAP
to reflect in the net income attributable to parent company (an
increase of €10 million, a decrease of
€6 million and a decrease of €116 million
for the years ended December 31, 2010, 2009 and 2008,
respectively) and shareholders’ equity (a decrease of
€67 million, a decrease of €76 million and a
decrease of €70 million as of December 31,
2010,2009 and 2008, respectively).
Retrospective
application
As of December 31, 2003, in accordance with Spanish GAAP,
certain fair value hedges of fixed income securities and cash
flow hedges of exchange rate risk were considered to be
speculative in our U.S. GAAP reconciliation adjustment,
since the required documentation was not available at the date
on which the aforementioned hedges were designated as such.
As of January 1, 2004, the transition date to the EU-IFRS
required to be applied under the Bank of Spain’s Circular
4/2004, these transactions continued to be designated as hedges,
since they met all the requirements for hedge accounting.
As of December 31, 2004, in accordance with U.S. GAAP
the Group maintained the criteria established in prior years and
considered these transactions to be speculative, which accounted
for a portion of the reconciliation adjustment for derivatives
and hedges.
Consequently, there is an adjustment in the reconciliation to
U.S. GAAP to reflect in the net income (an increase of
€15 million, a decrease of €34 million and a
decrease of €10 million for the years ended
December 31, 2010, 2009 and 2008, respectively) and in
shareholders’ equity (an increase of €62 million,
an increase of €69 million and an increase of
€96 million as of December 31, 2010, 2009 and
2008, respectively) the speculative nature of these transactions
under U.S. GAAP.
Methods
used to assess hedge effectiveness
Even though the methodology to assess the hedge effectiveness is
the same under both GAAPs, there are certain adjustments made in
order to validate the hedge effectiveness that is permitted
under the EU-IFRS required to be applied under the Bank of
Spain’s Circul ar 4/2004 and not under U.S. GAAP.
The EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 allows to designate a hedging
instrument as hedging only a portion of the time period to
maturity, and therefore adjust the effectiveness test to comply
with the hedging objective. Under U.S. GAAP such hedges are
not allowed.
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Table of Contents
Consequently, there is an adjustment to reverse these partial
hedging transactions under U.S. GAAP. This difference
resulted in a reconciling item to net income (a decrease of
€15 million, an increase of €6 million and a
decrease of €2 million for the years ended
December 31, 2010, 2009 and 2008) and
shareholders’ equity (no impact as of December 31,
2010, an increase of €14 million as of
December 31, 2009 and an increase of €9 million
as of December 31, 2008) in the reconciliation to
U.S. GAAP.
Macro
hedges
The EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004 allows for the designation of a
fixed-interest deposit portfolio as a hedged item in a
macro-hedge under IAS 39 (see note 15 of the Consolidated
Financial Statements) . Under US GAAP those macro hedges are not
allowed.
Consequently, there is an adjustment to reverse these macro
hedges under U.S. GAAP. This difference resulted in a
reconciling item to net income (a decrease of
€44 million) and shareholders’ equity (a decrease
of €44 million) in the reconciliation to
U.S. GAAP as of December 31, 2010.
Other
disclosures
The fair value of derivatives that afforded hedge accounting
treatment under the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004 but did not qualify as
hedges under U.S. GAAP as of December 31, 2010, 2009
and 2008 amounted positive to €281 million, negative
to €4 million, and negative to €8 million,
respectively.
The fair value of derivatives that afforded hedge accounting
treatment under the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004 and qualify as hedges under
U.S. GAAP as of December 31, 2010, 2009 and 2008
amounted to €1,618 million, €2,290 million
and €2,615 million, respectively.
| 7. | LOANS ADJUSTMENTS — |
We described in Note 2.2.1.b of the Consolidated Financial
Statements, our methodology to estimate the “Allowance for
loan losses” under EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004. The “Allowance for
loan losses” under U.S. GAAP is calculated by using
our internal risk models based on our historical experience.
Given the increase in past-due loans beginning in mid-2007 as a
result of the economic crisis, during 2008 our best estimate for
the impairment of the loan portfolio required a provision for
loan losses under U.S. GAAP of €3,956 million,
which was €1,152 million higher than the provision
required to be recorded under EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004.
For this reason, we included an adjustment in the reconciliation
of net income attributed to parent company in 2008 which
resulted in a decrease of €1,152 million in net income
attributed to parent company in accordance with U.S. GAAP.
As a result of the foregoing, as of December 31, 2008, the
“Allowance for loan losses” under U.S. GAAP was
very similar to the “Allowance for loan losses” under
EU-IFRS required to be applied under the Bank of Spain’s
Circular 4/2004: €7,412 million under EU-IFRS required
to be applied under the Bank of Spain’s Circular 4/2004
versus €7,384 million under U.S. GAAP.
As of December 31, 2010 and 2009, there is no significant
difference in the balance of “Allowance for loan
losses” under the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004 and U.S. GAAP; for
that reason there is no adjustment in the reconciliation to US
GAAP that affected net income attributed to parent company
statement and shareholders’ equity for that concept.
| 8. | PENSION PLAN COST — |
Under U.S. GAAP, the Group recognized the actuarial gains
or losses in the income statement for the year when these losses
have been incurred instead of using the corridor approach.
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Table of Contents
Under EU-IFRS required to be applied under the Bank of
Spain’s Circular 4/2004, as we mentioned in
Note 2.2.12 in the accompanying Consolidated Financial
Statements, the Group recognizes the actuarial gains or losses
arising on certain defined benefit post-employment commitments
directly under the heading “Reserves”
For this reason, we have included an adjustment in the
reconciliation of net income attributed to parent company for
the year ended December 31, 2010 and 2009 which resulted in
a decrease of €64 million and €221 million,
respectively, in net income attributed to parent company in
accordance with U.S. GAAP and no effect in in
shareholders’ equity as of December 31, 2010 and 2009.
| 9. | TAX EFFECT OF U.S. GAAP ADJUSTMENTS AND DEFERRED TAXATION — |
The previous adjustments to net income attributed to parent
company and shareholders’ equity do not include their
related effects on corporate tax (except for the adjustments
mentioned in Item 1, part of Item 4 and Item 5),
which are disclosed under “Tax effect of U.S. GAAP
adjustments and deferred taxation” item in the respective
reconciliation statements.
As described in Note 2.2.10 of the Consolidated Financial
Statements deferred tax assets and liabilities include temporary
differences measured at the amount expected to be payable or
recoverable on differences between the carrying amounts of
assets and liabilities and their tax bases, and tax loss and tax
credit carryforwards. These amounts are measured at the tax
rates that are expected to apply in the year when the asset will
be realized or the liability settled.
As a result of the application of
ASC 740-10,
Accounting for Income Taxes, the timing differences originated
by the revaluation of property and equity securities and by
certain provision for coverage of loan losses have been reversed.
On July 13, 2006, the FASB issued
ASC 740-10.
This statement was issued to provide additional guidance and
clarification on accounting for uncertainty in income tax
positions. The interpretation prescribes a recognition threshold
and measurement attribute for financial statement recognition
and measurement of tax positions, as well as increased
disclosure requirements with regards to uncertain tax positions.
This interpretation of
ASC 740-10
uses a two-step approach wherein a tax benefit is recognized if
a position is more likely than not to be sustained. The amount
of the benefit is then measured to be the highest tax benefit
which is greater than fifty percent likely to be realized.
ASC 740 also sets out disclosure requirements to enhance
transparency of an entity’s tax reserves.
As a result of the application of
ASC 740-10,
the Group recorded a decrease of €2 million, a
decrease of €19 million and an increase of
€7 million in net income attributed to parent company
as of December 31, 2010, 2009 and 2008 respectively.
Consequently,
ASC 740-10
provokes a decrease of €80 million,
€78 million and €59 million in
shareholders’ equity as of as of December 31, 2010,
2009 and 2008, respectively.
The Group is currently under audit by taxing authorities in
major taxing jurisdictions around the world. It is thus
reasonably possible that changes in the gross balance of
unrecognized tax benefits may occur within the next
12 months (an estimate of the range of such gross changes
cannot be made), but the Group does not expect such audits to
result in amounts that would cause a significant change to its
effective tax rate.
ASC
740-10
requires providing a valuation allowance when it is more likely
than not that some portion of the deferred tax asset will not be
realized. As of December 31, 2010, 2009 and 2008 the
valuation allowance was €19 million,
€20 million and €22 million, respectively.
As required by
ASC 740-10,
the effects of the change in Spanish tax laws were included in
income (see Note 21.3 of theConsolidated Financial
Statements).
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Table of Contents
The following is a reconciliation of the income tax provision
under IFRS to that under U.S. GAAP:
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Income tax provision under IFRS
|
1,427 | 1,141 | 1,541 | |||||||||
|
Tax effect of U.S. GAAP adjustments and deferred taxation
|
(103 | ) | (103 | ) | (416 | ) | ||||||
|
Income tax provision under U.S. GAAP
|
1,324 | 1,038 | 1,125 | |||||||||
The following is a reconciliation of the deferred tax assets and
liabilities recorded under the EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004 and those that
should be recorded under
ASC 740-10:
|
As of December 31,
|
As of December 31,
|
As of December 31,
|
||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Deferred
|
Deferred
|
Deferred
|
Deferred
|
Deferred
|
Deferred
|
|||||||||||||||||||
|
Tax
|
Tax
|
Tax
|
Tax
|
Tax
|
Tax
|
|||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
As reported under the EU-IFRS required to be applied under the
Bank of Spain’s Circular 4/2004
|
5,442 | (1,591 | ) | 4,993 | (1,669 | ) | 5,055 | (1,282 | ) | |||||||||||||||
|
Less —
|
||||||||||||||||||||||||
|
Timing differences recorded under the EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004 and
reversed in the reconciliation to U.S. GAAP
|
(467 | ) | (434 | ) | (504 | ) | (417 | ) | (548 | ) | (171 | ) | ||||||||||||
|
Tax effect of the EU-IFRS required to be applied under the Bank
of Spain’s Circular 4/2004 to U.S. GAAP reconciliation
adjustments
|
— | — | — | — | (1 | ) | — | |||||||||||||||||
|
Plus —
|
||||||||||||||||||||||||
|
Tax effect of the EU-IFRS required to be applied under the Bank
of Spain’s Circular 4/2004 to U.S. GAAP reconciliation
adjustments
|
377 | (49 | ) | 302 | (66 | ) | 119 | (106 | ) | |||||||||||||||
|
As reported under ASC 740 (gross)
|
5,352 | (2,074 | ) | 4,791 | (2,152 | ) | 4,625 | (1,559 | ) | |||||||||||||||
|
Valuation reserve
|
(19 | ) | — | (20 | ) | — | (22 | ) | — | |||||||||||||||
|
As reported under ASC 740 (net)
|
5,333 | (2,074 | ) | 4,771 | (2,152 | ) | 4,603 | (1,559 | ) | |||||||||||||||
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Table of Contents
The following is an analysis of deferred tax assets and
liabilities as of December 31, 2010, 2009 and 2008
estimated in accordance with U.S. GAAP:
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Deferred Tax assets
|
||||||||||||
|
Investments, derivatives and other
|
1,889 | 1,360 | 862 | |||||||||
|
Loan loss reserves
|
1,648 | 1,632 | 1,440 | |||||||||
|
Unrealized losses on securities pension liability
|
1,405 | 1,485 | 1,684 | |||||||||
|
Fixed assets
|
392 | 286 | 44 | |||||||||
|
Net operating loss carryforward
|
17 | 26 | 38 | |||||||||
|
Goodwill
|
2 | 2 | 557 | |||||||||
|
Total deferred tax assets
|
5,352 | 4,791 | 4,625 | |||||||||
|
Valuation reserve
|
(19 | ) | (20 | ) | (22 | ) | ||||||
|
Net tax asset
|
5,333 | 4,771 | 4,603 | |||||||||
|
Deferred tax liabilities
|
||||||||||||
|
Unrealized gains on securities pension liability
|
(67 | ) | (22 | ) | (1 | ) | ||||||
|
Investments and derivatives
|
(1,195 | ) | (951 | ) | (335 | ) | ||||||
|
Fixed assets
|
(179 | ) | (91 | ) | (11 | ) | ||||||
|
Goodwill
|
(434 | ) | (465 | ) | (238 | ) | ||||||
|
Other
|
(199 | ) | (622 | ) | (974 | ) | ||||||
|
Total deferred tax liabilities
|
(2,074 | ) | (2,152 | ) | (1,559 | ) | ||||||
Reconciliation between the federal statutory tax rate and the
effective income tax rate is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| Percentages | ||||||||||||
|
Corporate income tax at the standard rate
|
30.00 | 30.00 | 30.00 | |||||||||
|
Decrease arising from permanent differences
|
(8.70 | ) | (11.04 | ) | (9.96 | ) | ||||||
|
Adjustments to the provision for prior years’ corporate
income tax and other taxes
|
0.92 | 0.92 | 2.21 | |||||||||
|
Income tax provision under the EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004
|
22.22 | 19.89 | 22.25 | |||||||||
|
Tax effect of U.S. GAAP adjustments and deferred taxation under
ASC 740
|
(0.24 | ) | (0.11 | ) | (2.03 | ) | ||||||
|
Income tax provision under U.S. GAAP
|
21.98 | 19.78 | 20.22 | |||||||||
| 10. | OTHER COMPREHENSIVE INCOME — |
ASC
220-10,
Reporting Comprehensive Income establishes standards for
disclosing information related to comprehensive income and its
components in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other
events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from
investments by owners and distributions to owners.
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Table of Contents
The accumulated balances of other comprehensive income as of
December 31, 2010, 2009 and 2008 were as follows:
|
Foreign
|
||||||||||||||||
|
Currency
|
Derivative
|
|||||||||||||||
|
Translation
|
Unrealized
|
Instruments and
|
Total Other
|
|||||||||||||
|
Adjustments
|
Gains on
|
Hedging
|
Comprehensive
|
|||||||||||||
| and Others | Securities | Activities | Income | |||||||||||||
| Millions of euros | ||||||||||||||||
|
Balance as of December 31, 2008
|
(6,166 | ) | 1,070 | 477 | (4,619 | ) | ||||||||||
|
Changes in 2009
|
(76 | ) | 943 | (4 | ) | 863 | ||||||||||
|
Balance as of December 31, 2009
|
(6,242 | ) | 2,013 | 473 | (3,756 | ) | ||||||||||
|
Changes in 2010
|
1,784 | (1,680 | ) | (531 | ) | (427 | ) | |||||||||
|
Balance as of December 31, 2010
|
(4,458 | ) | 333 | (58 | ) | (4,183 | ) | |||||||||
Taxes allocated to each component of other comprehensive income
as of December 31, 2010, 2009 and 2008 were as follows:
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
|
Tax
|
Tax
|
Tax
|
||||||||||||||||||||||||||||||||||
|
Before
|
Expense
|
Net of
|
Before
|
Expense
|
Net of
|
Before
|
Expense
|
Net of
|
||||||||||||||||||||||||||||
|
Tax
|
or
|
Tax
|
Tax
|
or
|
Tax
|
Tax
|
or
|
Tax
|
||||||||||||||||||||||||||||
| Amount | Benefit | Amount | Amount | Benefit | Amount | Amount | Benefit | Amount | ||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||
|
Foreign Currency Translation Adjustments and Others
|
1,784 | — | 1,784 | (76 | ) | — | (76 | ) | (1,001 | ) | — | (1,001 | ) | |||||||||||||||||||||||
|
Unrealized Gains on Securities
|
(2,184 | ) | 504 | (1,680 | ) | 1,221 | (278 | ) | 943 | (3,454 | ) | 797 | (2,657 | ) | ||||||||||||||||||||||
|
Derivative Instruments and Hedging Activities
|
(691 | ) | 159 | (531 | ) | (5 | ) | 1 | (4 | ) | 228 | (53 | ) | 175 | ||||||||||||||||||||||
|
Total Other Comprehensive Income
|
(1,091 | ) | 663 | (427 | ) | 1,140 | (277 | ) | 863 | (4,227 | ) | 744 | (3,483 | ) | ||||||||||||||||||||||
| 11. | EARNINGS PER SHARE — |
ASC 260, Earnings per Share, specifies the computation,
presentation and disclosure requirements for earnings per share
(EPS).
Basic earnings per share is computed by dividing income
available to common shareholders (the numerator) by the
weighted-average number of common shares outstanding (the
denominator), which may include contingently issuable shares
where all necessary conditions for issuance have been satisfied.
Diluted earnings per share include the determinants of basic
earnings per share and, in addition, give effect to dilutive
potential common shares that were outstanding during the period.
The computation of basic and diluted earnings per share for the
year ended December 31, 2010, 2009 and 2008 is presented in
the following table:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros, except per share data | ||||||||||||
|
Numerator for basic earnings per share:
|
||||||||||||
|
Income available to common shareholders (IFRS)(*)
|
4,676 | 4,228 | 5,020 | |||||||||
|
Income available to common shareholders (U.S. GAAP)
|
4,299 | 3,825 | 4,070 | |||||||||
|
Numerator for diluted earnings per share:
|
||||||||||||
|
Income available to common shareholders (IFRS)(*)
|
4,676 | 4,228 | 5,020 | |||||||||
|
Income available to common shareholders (U.S. GAAP)
|
4,369 | 3,843 | 4,070 | |||||||||
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| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros, except per share data | ||||||||||||
|
Denominator for basic earnings per share
|
||||||||||||
|
IFRS(*)
|
3,982,754,198 | 3,899,289,696 | 3,846,156,552 | |||||||||
|
U.S. GAAP
|
3,761,698,126 | 3,719,162,366 | 3,706,204,569 | |||||||||
|
Denominator for diluted earnings per share
|
||||||||||||
|
IFRS(*)
|
3,982,754,198 | 3,899,289,696 | 3,846,156,552 | |||||||||
|
U.S. GAAP
|
3,982,754,198 | 3,758,316,634 | 3,706,204,569 | |||||||||
|
IFRS(*)(**)
|
||||||||||||
|
Basic earnings per share (Euros)
|
1.17 | 1.08 | 1.31 | |||||||||
|
Diluted earnings per share (Euros)
|
1.17 | 1.08 | 1.31 | |||||||||
|
U.S. GAAP(**)
|
||||||||||||
|
Basic earnings per share (Euros)
|
1.14 | 1.03 | 1.10 | |||||||||
|
Diluted earnings per share (Euros)
|
1.10 | 1.02 | 1.10 | |||||||||
| (*) | EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. The presentation and disclosure requirements for earnings per share (EPS) under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 is presented in Note 5 of the Consolidated Financial Statements. | |
| (**) | At the date of the issuance of these financial statements, the scrip dividend (“Dividendo Opción”) mentioned in Note 4 to the Consolidated Financial Statements is not distributed. Therefore, the conditions to restate the Earning per share under IAS 33 and ASC 260 are not met. |
| 12. | ASC 810- CONSOLIDATION OF SPECIAL PURPOSE ENTITIES — |
We arranged the issuance of preferred shares using special
purpose vehicles (See Note 23.4.3.2 of the Consolidated
Financial Statements). Our preferred security transactions are
based on the following model:
| • | We are the sponsor in the issuance of certain debentures by special purpose vehicles (SPEs) (the issuer of preference shares) that we incorporated and for which we hold 100% of the common stock and voting rights. |
The SPEs issue preferred securities to 3rd party investors.
The terms of the preferred securities are issued in perpetuity
with fixed dividend coupon and can be called by the SPEs.
| • | The SPEs lend both the proceeds raised from the preferred securities and the common stock back to us through intercompany loans with fixed maturities and fixed interest rate similar to that the dividend coupon on the preferred securities issued by the SPEs. Consequently, the SPEs use the cash received from interest payments on BBVA loans to pay dividends to the preferred securities holders. | |
| • | We guarantee the dividend payments on the preferred securities. |
We consolidated the SPEs under EU-IFRS required to be applied
under the Bank of Spain’s Circular 4/2004 according to SIC
12 as we controlled them. However, under U.S. GAAP, BBVA
does not consolidate the special purpose vehicle (issuer) as we
have concluded that we are not the primary beneficiary as
considered by ASC 810 for the reasons described below.
We as sponsor of the issuer of the preference shares neither
have a significant residual interest held since our common
shares are not viewed as equity at risk as our investment is
returned back to us through the intercompany loan, nor the loan
payable to the special purpose vehicle would be considered
variable interests since they assume variability. Additionally,
the fact that BBVA unconditionally guarantees the trust
preferred securities is not relevant, since BBVA is guaranteeing
its own obligations.
Under U.S. GAAP we consider the investments in the common
stock of this class of special purpose vehicles as equity-method
investees.
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As a result of the deconsolidation of the SPEs, the loans
received from the SPEs are presented as financial liabilities
under U.S. GAAP.
Consequently, the deconsolidation of the entities described in
Note 23.4.3.2 of the Consolidated Financial Statements, has
no impact on shareholders
’
equity or net income
attributed to parent company under U.S. GAAP. These financial
instruments that are presented under EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004 in the
caption “Subordinated liabilities — preferences
shares” are presented under U.S. GAAP under the
caption “Time deposits” (€5,233 million).
| 13. | OTHER ACCOUNTING STANDARDS EFFECTIVE IN 2010 — |
ASC
860 — Transfers and Servicing 166 —
Accounting for Transfers of Financial Assets — an
amendment of FASB Statement No. 140
The Board’s objective in issuing this Statement is to
improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity
provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in transferred
financial assets.
On and after the effective date of this SFAS, the concept of a
qualifying special-purpose entity is no longer relevant for
accounting purposes. Therefore, formerly qualifying
special-purpose entities (as defined under previous accounting
standards) should be evaluated for consolidation by reporting
entities in accordance with the applicable consolidation
guidance. If the evaluation on the effective date results in
consolidation, the reporting entity should apply the transition
guidance provided in the pronouncement that requires
consolidation.
This Statement is applied as of the beginning of each reporting
entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first
annual reporting period and for interim and annual reporting
periods thereafter. Earlier application is prohibited. This
Statement must be applied to transfers occurring on or after the
effective date. The adoption of this new statement did not have
a significant effect in our results of operations, financial
position or cash flows.
ASC
810 — Consolidation — Amendments to FASB
Interpretation No. 46(R)
This Statement amends Interpretation 46(R) (ASC 810) to
require an enterprise to perform an analysis to determine
whether the enterprise’s variable interest or interests
give a controlling financial interest in a variable interest
entity. This analysis identifies the primary beneficiary of a
variable interest entity as the enterprise that has both of the
following characteristics:
a. The power to direct the activities of a variable
interest entity that most significantly impact the entity’s
economic performance.
b. The obligation to absorb losses of the entity that could
potentially be significant to the variable interest entity or
the right to receive benefits from the entity that could
potentially be significant to the variable interest entity.
This Statement is effective as of the beginning of each
reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within
that first annual reporting period, and for interim and annual
reporting periods thereafter. Earlier application is prohibited.
The adoption of this new statement did not have a significant
effect in our results of operations, financial position or cash
flows.
ASU
No. 2009-5
Fair Value Measurements and Disclosures (ASC
820-10) —
Measuring Liabilities at Fair Value
This ASU amends Subtopic
820-10,
Fair
Value Measurements and Disclosures — Overall, to
clarify that in circumstances in which a quoted price in an
active market for the identical liability is not available, a
reporting entity is required to measure fair value using one or
more of the following techniques:
1. A valuation technique that uses:
| • | The quoted prices of the identical liability when traded as an asset | |
| • | Quoted prices for similar liabilities or similar liabilities when traded as assets. |
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2. Another valuation technique that is consistent with the
principles of ASC 820, for example a present value
technique, or a technique that is based on the amount at the
measurement date that the reporting entity would pay to transfer
the identical liability or would receive to enter into the
identical liability.
The Update is effective for the first reporting period
(including interim periods) beginning after August 2009. The
adoption of this new statement did not have a significant effect
in our results of operations, financial position or cash flows.
ASU
No. 2009-15 —
Accounting for Own-Share Lending Agreements in Contemplation of
Convertible Debt Issuance
This ASU modifies Subtopic
470-20
Debt — Debt with Conversion and Other options.
ASC 470-20
addresses the issues arisen when an entity for which the cost to
an investment banking firm or third-party investors of borrowing
its shares is prohibitive enters into share-lending arrangements
that are executed separately but in connection with a
convertible debt offering.
The amendments establish that at the date of issuance, the share
lending arrangement shall be measured at fair value and
recognised as an issuance cost, with an offset to additional
paid-in capital in the financial statements of the entity. The
loaned shares will be excluded from basic and diluted earnings
per share unless default of the share-lending arrangement
occurs, at which time the loaned shares would be included in the
basic and diluted earnings- per- share calculation.
Additionally, if it becomes probable that the counterparty to a
share- lending arrangement will default, the issuer of the
share- lending arrangement shall recognize an expense equal to
the fair value of the unreturned shares, net of the fair value
of probable recoveries, with an offset to additional paid- in
capital and subsequent changes in the amount of the probable
recoveries should also be recognized in earnings.
The Update is effective for fiscal years beginning on or after
December 15, 2009, and interim periods within those fiscal
years for arrangement outstanding as of the beginning of those
fiscal years. Additionally the amendments are to be applied
retrospectively for all arrangements outstanding as of the
beginning of fiscal years beginning on or after
December 15, 2009. The adoption of this new statement did
not have a significant effect in our results of operations,
financial position or cash flows.
ASU
2010-06
Fair
Value Measurements and Disclosures (ASC 820): Improving
Disclosures about Fair Value Measurements
This ASU provides amendments to Subtopic
820-10
that
require new disclosures and clarify existing disclosures related
to Fair Value Measurements. Entities will be required to present
new disclosures about transfers in and out Levels 1 and 2
and about purchases, sales, issuances and settlements in the
reconciliation for fair value measurements using significant
unobservable inputs (Level 3). The amendments also clarify
existing disclosures to require disclosures about fair value
measurement for each class of assets and liabilities and about
the valuation techniques and inputs used to measure fair value
for both recurring and nonrecurring fair value measurements that
fall in either Level 2 or Level 3.
The Update is effective for interim and annual reporting periods
beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances and settlements in
Level 3 that will be effective for fiscal years beginning
after December 15, 2010, and for interim periods within
those fiscal years. The adoption of this new statement did not
have a significant effect in our results of operations,
financial position or cash flows.
ASU
2010-09
Subsequent Events (ASC 855)- Amendments to Certain Recognition
and Disclosure Requirements
This ASU modifies as follows Subtopic
855-10,
in
order to alleviate potential conflicts with current SEC
requirements:
| • | An entity that is a SEC filer is required to evaluate subsequent events through the date that the financial statements are issued, but is not required to disclose the date through which subsequent events have been evaluated. |
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| • | An entity that is a conduit bond obligor for conduit debt securities that are traded in a public market is required to evaluate subsequent events through the date that the financial statements are issued and must disclose such date. | |
| • | All other entities will continue to be required to evaluate subsequent events through the date the financial statements are available to be issued, and must disclose such date |
The scope of the reissuance disclosure requirements have been
refined to apply only to “revised” financial
statements. Revised financial statements include financial
statements revised either as a result of (a) correction of
an error or (b) retrospective application of
U.S. generally accepted accounting principles. If the
financial statements of an entity, other than an SEC filer, are
revised, as defined, the entity should retain the initial date,
but also disclose the date through which subsequent events have
been evaluated in the revised financial statements.
For entities, other than conduit bond obligors, the provisions
of ASU
2010-09,
Amendments to Certain Recognition and Disclosure Requirements,
are effective upon issuance. Conduit bond obligors are required
to apply the ASU’s requirements in fiscal periods ending
after June 15, 2010. The adoption of this new statement did
not have a significant effect in our results of operations,
financial position or cash flows.
ASU
2010-10
Consolidation (ASC 810): Amendments for Certain Investment
Funds
This ASU amends ASC 810 to defer the application of the
consolidation requirements resulting from the issuance of
Statement 167 for a reporting entity’s interest in an
entity (1) that has all the attributes of an investment
company or (2) for which it is industry practice to apply
measurement principles for financial reporting purposes that are
consistent with those followed by investment companies.
An entity that qualifies for the deferral will continue to be
assessed under the overall guidance on the consolidation of
variable interest entities in Subtopic
810-10
(before the Statement 167 amendments) or other applicable
consolidation guidance, such as the guidance for the
consolidation of partnerships in Subtopic
810-20.
The amendments in this Update are effective as of the beginning
of a reporting entity’s first annual period that begins
after November 15, 2009, and for interim periods within
that first annual reporting period. The effective date coincides
with the effective date for the Statement 167 amendments to
ASC 810. Early application is not permitted. The adoption
of this new statement did not have a significant effect in our
results of operations, financial position or cash flows.
ASU
2010-19
Foreign Currency (Topic 830) — Foreign Currency
Issues: Multiple Foreign Currency Exchange Rates
This ASU amends Section S99 -
SEC Materials
of
Subtopic
830-30 —
Foreign Currency Matters — Translation of Financial
Statements
to establish that, for any SEC registrants, in
cases where reported balances for financial reporting purposes
differ from the actual U.S. dollar denominated balances,
the registrant should make disclosures that inform users of the
financial statements as to the nature of these differences.
Venezuela has met the thresholds for being considered highly
inflationary and accordingly, calendar year entities that have
not previously accounted for their Venezuelan investment as
highly inflationary will begin applying highly inflationary
accounting beginning January 1, 2010. Upon the application
of highly inflationary accounting requirements, a
U.S. reporting currency parent and subsidiary effectively
utilize the same currency (U.S. dollars) and accordingly
there should no longer be any differences between the amounts
reported for financial reporting purposes and the amount of any
underlying U.S. dollar denominated values that are held by
the subsidiary.
This ASU also amends section S99 of Subtopic
830-30
to
require that, for any SEC registrants, any differences that may
have existed prior to applying highly inflationary accounting
requirements between the reported balances for financial
reporting and the U.S. dollar denominated balances should
be recognized in the income statement at the time of adoption of
highly inflationary accounting, unless the registrant can
document that the difference was previously recognized as a
cumulative translation adjustment (in which case the difference
should be recognized as an adjustment to the cumulative
translation adjustment).
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The provisions of this ASU are effective upon issuance
(May 11, 2010). The adoption of this new statement did not
have a significant effect in our results of operations,
financial position or cash flows.
ASU
2010-20
Receivables (Topic 310) — Disclosures about the
Credit Quality of Financing Receivables and the Allowance for
Credit Losses and ASU
2011-01
Receivables (Topic 310 ) Deferral of the Effective date of
Disclosures about Troubled Debt Restructurings in Update
No. 2010-20
ASU
2010-20
amends Topic 605 to enhance disclosures about the credit quality
of financing receivables and the allowance for credit losses.
Existing disclosures are amended to require an entity to provide
the following disclosures about its financing receivables on a
disaggregated basis:
| • | A rollforward schedule of the allowance for credit losses from the beginning of the reporting period to the end of the reporting period on a portfolio segment basis, with the ending balance further disaggregated on the basis of the impairment method | |
| • | For each disaggregated ending balance in item (1) above, the related recorded investment in financing receivables | |
| • | The nonaccrual status of financing receivables by class of financing receivables | |
| • | Impaired financing receivables by class of financing receivables. |
The ASU also requires an entity to provide the following
additional disclosures about its financing receivables:
| • | Credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables | |
| • | The aging of past due financing receivables at the end of the reporting period by class of financing receivables | |
| • | The nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses | |
| • | The nature and extent of financing receivables modified as troubled debt restructurings within the previous 12 months that defaulted during the reporting period by class of financing receivables and their effect on the allowance for credit losses | |
| • | Significant purchases and sales of financing receivables during the reporting period disaggregated by portfolio segment. |
For public entities the amendments in this update are effective
for interim and annual reporting periods ending on or after
December 15, 2010.
ASU
2011-01
defers the effective date of ASU
2010-20
for
the new disclosures about troubled debt restructurings for
public entities so that it will be the same as the effective
date for the guidance for determining what constitutes a
troubled debt restructuring. Currently, that guidance is
anticipated to be effective for interim and annual periods
ending after June 15, 2011. The Bank does not anticipate
that the adoption of this new statement at the required
effective date will have a significant effect in its results of
operations, financial position or cash flows.
ASU
2010-25
Plan
Accounting — Defined Contribution Pension Plans (Topic
962)
This ASU amends Topic 962 to clarify how loans to participants
should be classified and measured by defined contribution
pension benefit plans.
Participant loans are currently classified as investments and
are usually measured at fair value. The amendments in this
Update require that participant loans be classified as notes
receivable from participants, which are segregated from plan
investments and measured at their unpaid principal balance plus
any accrued but unpaid interest.
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The amendments in this Update should be applied retrospectively
to all prior periods presented, effective for fiscal years
ending after December 15, 2010. Early adoption is
permitted. The adoption of this new statement did not have a
significant effect in our results of operations, financial
position or cash flows.
| 14. | NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE AS OF DECEMBER 31, 2010 |
ASU
No. 2009-13
Revenue Recognition (ASC
605-25) —
Multiple-Deliverable Revenue Arrangements
This ASU provides amendments to the criteria in Subtopic
605-25
for
separating consideration in multiple-derivable arrangements to
establish a selling price hierarchy for determining the selling
price of a deliverable. The selling price used for each
deliverable will be based on vendor- specific objective evidence
if available, third-party evidence if vendor- specific objective
evidence is not available, or estimated selling price if neither
vendor- specific objective evidence nor third- party evidence is
available.
The amendments eliminate the residual method of allocation and
require that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. The ASU also requires that a
vendor determine its best estimate of selling price in a manner
that is consistent with that used to determine the price to sell
the deliverable on a standalone basis.
The Update will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption
permitted. The Bank does not anticipate that the adoption of
this new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
ASU
No. 2009-14
Software (ASC
985-605) —
Certain Revenue Arrangements That Include Software
Elements
This ASU changes the accounting model for revenue arrangements
that include both tangible products and software elements.
Tangible products containing software components and nonsoftware
components those functions together to deliver the tangible
product’s essential functionality are no longer within the
scope of the software revenue guidance in subtopic
958-605.
Additionally, the amendments establish that if an undelivered
element relates to a deliverable within the scope of Subtopic
985-605
and
a deliverable excluded from the scope of Subtopic
985-605,
the
undelivered element shall be bifurcated into a software
deliverable and a nonsoftware deliverable.
The Update will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption
permitted. A vendor is required to adopt the amendments in the
same period using the same transition method that it uses to
adopt the amendments in Update
2009-13
Revenue Recognition (ASC
605-25)
-Multiple-Deliverable Revenue Arrangements. The Bank does not
anticipate that the adoption of this new statement at the
required effective date will have a significant effect in its
results of operations, financial position or cash flows.
ASU
2010-13
Compensation — Stock Compensation (Topic
718) — Effect of Denominating the Exercise Price
of a Share-Based Payment Award in the Currency of the Market in
Which the Underlying Equity Security Trades
This ASU amends Topic 718 to clarify that an employee
share-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the
entity’s equity securities trades should not be considered
to contain a condition that is not a market, performance, or
service condition. Therefore, an entity would not classify such
an award as a liability if it otherwise qualifies as equity.
The amendments in this Update are effective for fiscal years,
and interim periods within those fiscal years, beginning on or
after December 15, 2010. The amendments in this Update
should be applied by recording a cumulative-effect adjustment to
the opening balance of retained earnings. Earlier application is
permitted. The Bank does not anticipate that the adoption of
this new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
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ASU
2010-15
Financial Services — Insurance (Topic
944) — How Investments Held through Separate
Accounts Affect an Insurer’s Consolidation Analysis of
Those Investments
This ASU amendmends Subtopic
944-80
Financial
Services — Insurance — Separate
Accounts
to clarify that:
| • | An insurance entity should not consider any separate account interests held for the benefit of policy holders in an investment to be the insurer’s interests and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for the benefit of a related party policy holder as defined in the Variable Interest Subsections of Subtopic 810-10 Consolidation-Overall and those subsections require the consideration of related parties. | |
| • | For the purpose of evaluating whether the retention of specialized accounting for investments in consolidation is appropriate, a separate account arrangement should be considered a subsidiary. | |
| • | An insurer is not required to consolidate an investment in which a separate account holds a controlling financial interest if the investment is not or would not be consolidated in the standalone financial statements of the separate account. |
This ASU also provides guidance on how an insurer should
consolidate an investment fund in situations in which the
insurer concludes that consolidation is required.
The amendments in this Update are effective for fiscal years,
and interim periods within those fiscal years, beginning after
December 15, 2010. Early adoption is permitted. The
amendments in this Update should be applied retrospectively to
all prior periods upon the date of adoption. The Bank does not
anticipate that the adoption of this new statement at the
required effective date will have a significant effect in its
results of operations, financial position or cash flows.
ASU
2010-17
Revenue Recognition — Milestone Method (Topic
605) — Milestone Method of Revenue
Recognition
This ASU amends Topic 605 to determine when it may be
appropriate to apply the milestone method of revenue recognition
for research or development transactions. The amendments
establish that a vendor can recognize consideration that is
contingent upon achievement of a milestone in its entirety as
revenue in the period in which the milestone is achieved only if
the milestone meets all criteria to be considered substantive.
A milestone should be considered substantive in its entirety and
may not be bifurcated. Whether a milestone is substantive has to
be determined at the inception of the arrangement and the
following criteria should be met for a milestone to be
considered substantive:
| • | Be commensurate with either a)The vendor’s performance to achieve the milestone, or b)The enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone | |
| • | Relate solely to past performance | |
| • | Be reasonable relative to all deliverables and payment terms in the arrangement. |
An arrangement may include more than one milestone, and each
milestone should be evaluated separately to determine whether
the milestone is substantive. Accordingly, an arrangement may
contain both substantive and nonsubstantive milestones.
A vendor’s decision to use the milestone method of revenue
recognition for transactions within the scope of the amendments
in this Update is a policy election. Other proportional revenue
recognition methods also may be applied as long as the
application of those other methods does not result in the
recognition of consideration in its entirety in the period the
milestone is achieved.
The amendments in this Update are effective on a prospective
basis for milestones achieved in fiscal years, and interim
periods within those years, beginning on or after June 15,
2010. Early adoption is permitted. A vendor may
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elect, but is not required, to adopt the amendments in this
Update retrospectively for all prior periods. The Bank does not
anticipate that the adoption of this new statement at the
required effective date will have a significant effect in its
results of operations, financial position or cash flows.
ASU
2010-18
Receivables (Topic 310) — Effect of a Loan
Modification When the Loan Is Part of a Pool That Is Accounted
for as a Single Asset
As a result of the amendments in this Update, modifications of
loans that are accounted for within a pool under Subtopic
310-30
Receivables-Loans and Debt Securities acquired with
Deteriorated Credit Quality
do not result in the removal of
those loans from the pool even if the modification of those
loans would otherwise be considered a troubled debt
restructuring. Accounting for troubled debt restructuring would
not apply to individual loans within a pool, and modified loans
should remain within the pool. An entity will continue to be
required to consider whether the pool of assets in which the
loan is included is impaired if expected cash flows for the pool
change.
The amendments in this Update are effective for modifications of
loans accounted for within pools under Subtopic
310-30
occurring in the first interim or annual period ending on or
after July 15, 2010. The amendments are to be applied
prospectively. Early application is permitted. Upon initial
adoption of the guidance in this Update, an entity may make a
onetime election to terminate accounting for loans as a pool
under Subtopic
310-30.
This
election may be applied on a
pool-by-pool
basis. The Bank does not anticipate that the adoption of this
new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
ASU
2010-26
Financial Services — Insurance (Topic
944) Accounting for Costs Associated with Acquiring or
Renewing Insurance Contracts
This ASU amends Topic 944 to clarify which costs relating to the
acquisition of new or renewal insurance contracts qualify for
deferral, and specify that the following costs incurred in the
acquisition of new and renewal contracts should be capitalized:
1. Incremental direct costs of contract acquisition.
Incremental direct costs are those costs that result directly
from and are essential to the contract transaction(s) and would
not have been incurred by the insurance entity had the contract
transaction(s) not occurred.
2. Certain costs related directly to the following
acquisition activities performed by the insurer for the contract:
a. Underwriting
b. Policy issuance and processing
c. Medical and inspection
d. Sales force contract selling.
The costs related directly to those activities include only the
portion of an employee’s total compensation (excluding any
compensation that is capitalized as incremental direct costs of
contract acquisition) and payroll-related fringe benefits
related directly to time spent performing those activities for
actual acquired contracts and other costs related directly to
those activities that would not have been incurred if the
contract had not been acquired.
3. Advertising costs should be included in deferred
acquisition costs only if the capitalization criteria in the
direct-response advertising guidance in Subtopic
340-20,
Other Assets and Deferred Costs — Capitalized
Advertising Costs, are met.
The amendments in this Update should be applied prospectively
for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2011. Retrospective
application to all prior periods presented upon the date of
adoption also is permitted, but not required. Early adoption is
permitted, but only at the beginning of an entity’s annual
reporting period. The Bank does not anticipate that the adoption
of this new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
F-188
Table of Contents
ASU
2010-28
Intangibles — Goodwill and Other (Topic 350) When
to Perform Step 2 of the Goodwill Impairment Test for Reporting
Units with Zero or Negative Carrying Amounts
Under Topic 350 on goodwill and other intangible assets, testing
for goodwill impairment is a two-step test. When a goodwill
impairment test is performed (either on an annual or interim
basis), an entity must assess whether the carrying amount of a
reporting unit exceeds its fair value (Step 1). If it does, an
entity must perform an additional test to determine whether
goodwill has been impaired and to calculate the amount of that
impairment (Step 2).
The amendments in this Update modify Step 1 of the goodwill
impairment test for reporting units with zero or negative
carrying amounts. For those reporting units, an entity is
required to perform Step 2 of the goodwill impairment test if it
is more likely than not that a goodwill impairment exists. In
determining whether it is more likely than not that goodwill
impairment exists, an entity should consider whether there are
any adverse qualitative factors indicating that an impairment
may exist.
For public entities, the amendments in this Update are effective
for fiscal years, and interim periods within those years,
beginning after December 15, 2010. Early adoption is not
permitted. The Bank does not anticipate that the adoption of
this new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
ASU
2010-29
Business Combinations (Topic 805) Disclosure of
Supplementary Pro Forma Information for Business
Combinations
This ASU amends Topic 805 to clarify that if a public entity
presents comparative financial statements, the entity should
disclose revenue and earnings of the combined entity as though
the business combination(s) that occurred during the current
year had occurred as of the beginning of the comparable prior
annual reporting period only.
The amendments also expand the supplemental pro forma
disclosures under Topic 805 to include a description of the
nature and amount of material, nonrecurring pro forma
adjustments directly attributable to the business combination
included in the reported pro forma revenue and earnings.
The amendments in this Update are effective prospectively for
business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period
beginning on or after December 15, 2010. Early adoption is
permitted. The Bank does not anticipate that the adoption of
this new statement at the required effective date will have a
significant effect in its results of operations, financial
position or cash flows.
| 15. | OTHER INFORMATION — VENEZUELA |
As indicated in Note 2.2.23 of the Consolidated Financial
Statements, the Venezuelan economy was considered to be
hyperinflationary as defined by the EU-IFRS required to be
applied under the Bank of Spain’s Circular 4/2004.
Accordingly, as of December 31, 2010 and 2009, it was
necessary to adjust the financial statements of the Group’s
subsidiaries established in Venezuela to correct them for the
effect of inflation.
However, until 2010 the Venezuelan economy has not met the
requirements to be considered highly inflationary economy under
U.S. GAAP.
This difference, along with differences in accounting for the
effects of hyperinflation, would result in a reconciling item to
the Consolidated Financial Statements as of and for the year
ended December 31, 2010 and 2009. However, as BBVA accounts
for hyperinflationary economies in accordance with IAS 21
“The Effects of Changes in Foreign Exchange Rates”, it
is availing itself of the accommodation in
Item 17(c)(2)(iv) of
Form 20-F
to exclude from the reconciliation to US GAAP the effects of
differences in accounting for Venezuela as a highly inflationary
economy. Therefore, the reconciliation complies with
Item 18 of
Form 20-F,
which is different from the requirements of US GAAP in this
regard.
F-189
Table of Contents
| B) | CONSOLIDATED FINANCIAL STATEMENTS |
| 1. | DIFFERENCES RELATING TO THE FINANCIAL STATEMENTS PRESENTATION — |
In addition to differences described in Note 60.A affecting
net income
and/or
shareholders’ equity, there are differences relating to the
financial statements presentation between the EU-IFRS required
to be applied under the Bank of Spain’s Circular
4
/
2004
and U.S. GAAP presentation following the formatting
guidelines in
Regulation S-X
of the Securities and Exchange Commission of the United States.
Although these differences do not cause differences between both
GAAP reported net income
and/or
shareholders’ equity.
| 2. | CONSOLIDATED FINANCIAL STATEMENTS UNDER REGULATION S-X — |
Following are the consolidated balance sheets of the BBVA Group
as of December 31, 2010, 2009 and 2008 and the consolidated
statement of income for each of the years ended
December 31, 2010, 2009 and 2008, in the format for banks
and bank holding companies required by
Regulation S-X
of the Securities and Exchange Commission of the United States
of America, and, accordingly, prepared under U.S. GAAP
(after reconciliation adjustments described above in
Note 60.A)
F-190
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2010, 2009 AND 2008
(U.S.
GAAP)
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
ASSETS
|
||||||||||||
|
Cash and due from banks
|
7,435 | 7,568 | 11,862 | |||||||||
|
Interest-bearing deposits in other banks
|
34,714 | 28,350 | 31,831 | |||||||||
|
Securities purchased under agreements to resell
|
2,331 | 3,652 | 6,480 | |||||||||
|
Trading securities
|
66,057 | 72,070 | 75,063 | |||||||||
|
Investment securities
|
66,401 | 68,978 | 53,416 | |||||||||
|
Net Loans & Leases:
|
||||||||||||
|
Loans and leases net of unearned income
|
349,642 | 331,693 | 340,958 | |||||||||
|
Less: Allowance for loan losses
|
(9,801 | ) | (9,004 | ) | (7,404 | ) | ||||||
|
Hedging Derivatives
|
3,665 | 3,663 | 3,929 | |||||||||
|
Premises and equipment, net
|
6,605 | 6,353 | 6,462 | |||||||||
|
Investments in affiliated companies
|
4,547 | 2,922 | 1,467 | |||||||||
|
Intangible assets
|
1,058 | 852 | 780 | |||||||||
|
Due from customers on acceptances
|
— | — | — | |||||||||
|
Goodwill in consolidation
|
16,047 | 15,128 | 15,634 | |||||||||
|
Accrual Accounts
|
538 | 581 | 383 | |||||||||
|
Other assets
|
12,528 | 10,788 | 8,176 | |||||||||
|
Total assets
|
561,767 | 543,594 | 549,037 | |||||||||
| LIABILITIES AND EQUITY | ||||||||||||
|
Liabilities
|
||||||||||||
|
Bank acceptances outstanding
|
— | — | — | |||||||||
|
Demand Deposits
|
74,763 | 68,655 | 69,009 | |||||||||
|
Saving deposits
|
51,141 | 50,639 | 46,732 | |||||||||
|
Time deposits
|
148,884 | 152,933 | 166,322 | |||||||||
|
Due to Bank of Spain
|
2 | 10,930 | 37 | |||||||||
|
Trading account liabilities
|
37,212 | 32,830 | 43,009 | |||||||||
|
Hedging derivatives
|
1,704 | 1,306 | 1,226 | |||||||||
|
Short term borrowings
|
63,844 | 68,985 | 61,832 | |||||||||
|
Long-term debt
|
111,251 | 92,843 | 100,147 | |||||||||
|
Taxes payable
|
2,678 | 2,690 | 1,835 | |||||||||
|
Accounts payable
|
6,596 | 5,624 | 7,420 | |||||||||
|
Accrual accounts
|
2,162 | 2,079 | 1,918 | |||||||||
|
Pension allowance
|
5,981 | 6,246 | 6,359 | |||||||||
|
Other provisions
|
2,341 | 2,313 | 2,319 | |||||||||
|
Others liabilities
|
9,032 | 8,054 | 7,242 | |||||||||
|
Total liabilities
|
517,591 | 506,127 | 515,407 | |||||||||
|
Shareholder’s equity
|
||||||||||||
|
Common stocks
|
2,201 | 1,836 | 1,836 | |||||||||
|
Additional paid-in capital
|
17,104 | 12,453 | 12,770 | |||||||||
|
Dividends
|
(1,067 | ) | (1,000 | ) | (1,820 | ) | ||||||
|
Other capital instruments
|
(553 | ) | (224 | ) | (720 | ) | ||||||
|
Retained earnings
|
25,128 | 23,107 | 20,678 | |||||||||
|
Total shareholder’s equity
|
42,813 | 36,172 | 32,744 | |||||||||
|
Non-controlling interest
|
1,363 | 1,295 | 886 | |||||||||
|
Total Equity
|
44,176 | 37,467 | 33,630 | |||||||||
|
Total liabilities and equity
|
561,767 | 543,594 | 549,037 | |||||||||
F-191
Table of Contents
BANCO
BILBAO VIZCAYA ARGENTARIA GROUP
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008
(U.S. GAAP)
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008
(U.S. GAAP)
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Interest Income
|
||||||||||||
|
Interest and fees on loans and leases
|
16,448 | 18,670 | 24,141 | |||||||||
|
Interest on deposits in other banks
|
1,326 | 1,489 | 1,722 | |||||||||
|
Interest on securities purchased under agreements to resell
|
123 | 201 | 517 | |||||||||
|
Interest on investment securities
|
3,652 | 3,829 | 4,479 | |||||||||
|
Total interest income
|
21,549 | 24,188 | 30,859 | |||||||||
|
Interest Expense
|
||||||||||||
|
Interest on deposits
|
(4,838 | ) | (6,139 | ) | (12,982 | ) | ||||||
|
Interest on Bank of Spain & Deposit Guarantee Fund
|
(120 | ) | (79 | ) | (368 | ) | ||||||
|
Interest on short-term borrowings
|
(1,283 | ) | (1,504 | ) | (2,168 | ) | ||||||
|
Interest on long term debt
|
(1,102 | ) | (1,749 | ) | (3,199 | ) | ||||||
|
Total interest expense
|
(7,343 | ) | (9,471 | ) | (18,717 | ) | ||||||
|
Net Interest Income
|
14,206 | 14,718 | 12,142 | |||||||||
|
Provision for loan losses
|
(4,563 | ) | (5,199 | ) | (3,956 | ) | ||||||
|
Net Interest Income after provison for loan losses
|
9,643 | 9,519 | 8,186 | |||||||||
|
Non-interest income
|
||||||||||||
|
Contingent liabilities (collected)
|
282 | 260 | 243 | |||||||||
|
Collection and payments services (collected)
|
2,500 | 2,573 | 2,656 | |||||||||
|
Securities services (collected)
|
1,651 | 1,636 | 1,895 | |||||||||
|
Other transactions (collected)
|
949 | 835 | 746 | |||||||||
|
Ceded to other entities and correspondents (paid)
|
(545 | ) | (572 | ) | (662 | ) | ||||||
|
Other transactions (paid)
|
(254 | ) | (263 | ) | (326 | ) | ||||||
|
Gains (losses) from:
|
||||||||||||
|
Affiliated companies’ securities
|
364 | 122 | 306 | |||||||||
|
Investment securities
|
497 | 231 | 1,578 | |||||||||
|
Foreign exchange, derivatives and other ,net
|
1,174 | 970 | 382 | |||||||||
|
Other gains (losses)
|
3,415 | 3,474 | 3,657 | |||||||||
|
Total non-interest income
|
10,033 | 9,267 | 10,473 | |||||||||
|
Non-interest expense
|
||||||||||||
|
Salaries and employee benefits
|
(4,814 | ) | (4,651 | ) | (4,716 | ) | ||||||
|
Occupancy expense of premises, depreciation and maintenance, net
|
(1,400 | ) | (1,306 | ) | (1,348 | ) | ||||||
|
General and administrative expenses
|
(2,642 | ) | (2,368 | ) | (2,423 | ) | ||||||
|
Impairment of goodwill
|
(14 | ) | (388 | ) | — | |||||||
|
Net provision for specific allowances
|
(547 | ) | (680 | ) | (1,431 | ) | ||||||
|
Other expenses
|
(4,247 | ) | (4,145 | ) | (3,182 | ) | ||||||
|
Total non-interest expense
|
(13,664 | ) | (13,539 | ) | (13,100 | ) | ||||||
|
Income Before Taxes
|
6,012 | 5,248 | 5,559 | |||||||||
|
Income Tax expense
|
(1,324 | ) | (1,038 | ) | (1,124 | ) | ||||||
|
Net Income
|
4,688 | 4,210 | 4,435 | |||||||||
|
Less: net income attributed to the non-controlling interests
|
(389 | ) | (385 | ) | (365 | ) | ||||||
|
Net income attributed to parent company
|
4,299 | 3,825 | 4,070 | |||||||||
F-192
Table of Contents
| 3. | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — |
Composition of shareholders’ equity (considering the final
dividend) as of December 31, 2010, 2009 and 2008, is
presented in Note 27, 28, 29 and 30. The variation in
shareholders’ equity under U.S. GAAP as of
December 31, 2010, 2009 and 2008 is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Balance at the begining of the year
|
36,172 | 32,744 | 35,384 | |||||||||
|
Capital increase
|
5,015 | — | — | |||||||||
|
Net income of the year
|
4,299 | 3,825 | 4,070 | |||||||||
|
Interim Dividends
|
(1,067 | ) | (1,000 | ) | (1,820 | ) | ||||||
|
Other Comprehensive income
|
(427 | ) | 863 | (3,481 | ) | |||||||
|
Foreign currency translation adjust
|
1,784 | (76 | ) | (1,001 | ) | |||||||
|
Unrelaized Gains on Securities
|
(1,680 | ) | 943 | (2,656 | ) | |||||||
|
Derivatives Instruments and Hedging activities (SFAS 133)
|
(531 | ) | (4 | ) | 176 | |||||||
|
Other variation(*)
|
(1,179 | ) | (260 | ) | (1,409 | ) | ||||||
|
Balance at the end of the year
|
42,813 | 36,172 | 32,744 | |||||||||
| (*) | Includes €558 million and €1,002 million in 2010 and 2008, respectively, corresponding to the final dividend of 2009 and 2007, respectively. |
F-193
Table of Contents
| C) | MAIN DISCLOSURES REQUIRED BY U.S. ACCOUNTING REGULATIONS FOR BANKS AND ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GAAP |
1.
Investment Securities
— The breakdown
of the Group’s investment securities portfolio by issuer is
as follows:
| As of December 31, 2010 | As of December 31, 2009 | As of December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
|||||||||||||||||||||||||||||||||||||
| Cost | Value | Gains | Losses | Cost | Value | Gains | Losses | Cost | Value | Gains | Losses | |||||||||||||||||||||||||||||||||||||
| Millions of euros | Millions of euros | Millions of euros | ||||||||||||||||||||||||||||||||||||||||||||||
|
DEBT SECURITIES -
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
AVAILABLE FOR SALE PORTFOLIO
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Domestic -
|
21,929 | 20,566 | 107 | (1,470 | ) | 24,577 | 24,869 | 487 | (195 | ) | 11,743 | 11,910 | 229 | (62 | ) | |||||||||||||||||||||||||||||||||
|
Spanish Government
|
16,543 | 15,337 | 58 | (1,264 | ) | 18,312 | 18,551 | 309 | (70 | ) | 6,233 | 6,371 | 138 | — | ||||||||||||||||||||||||||||||||||
|
Other debt securities
|
5,386 | 5,229 | 50 | (206 | ) | 6,265 | 6,318 | 178 | (125 | ) | 5,510 | 5,539 | 91 | (62 | ) | |||||||||||||||||||||||||||||||||
|
Central Banks
|
— | — | — | — | — | — | — | — | 9 | 9 | — | — | ||||||||||||||||||||||||||||||||||||
|
Credit institutions
|
4,221 | 4,090 | 24 | (156 | ) | 5,097 | 5,202 | 134 | (29 | ) | 4,330 | 4,338 | 44 | (36 | ) | |||||||||||||||||||||||||||||||||
|
Other issuers
|
1,165 | 1,139 | 25 | (50 | ) | 1,168 | 1,116 | 44 | (96 | ) | 1,171 | 1,192 | 47 | (26 | ) | |||||||||||||||||||||||||||||||||
|
International -
|
30,108 | 30,309 | 1,081 | (880 | ) | 31,868 | 32,202 | 1,067 | (733 | ) | 28,108 | 27,920 | 586 | (774 | ) | |||||||||||||||||||||||||||||||||
|
United States -
|
6,850 | 6,832 | 216 | (234 | ) | 6,804 | 6,805 | 174 | (173 | ) | 10,573 | 10,442 | 155 | (286 | ) | |||||||||||||||||||||||||||||||||
|
U.S. Treasury and other U.S. Government agencies
|
579 | 578 | 6 | (8 | ) | 414 | 416 | 4 | (2 | ) | 444 | 444 | — | — | ||||||||||||||||||||||||||||||||||
|
States and political subdivisions
|
187 | 193 | 7 | (1 | ) | 214 | 221 | 7 | — | 382 | 396 | 15 | (1 | ) | ||||||||||||||||||||||||||||||||||
|
Other debt securities
|
6,084 | 6,061 | 203 | (225 | ) | 6,176 | 6,168 | 163 | (171 | ) | 9,747 | 9,602 | 140 | (285 | ) | |||||||||||||||||||||||||||||||||
|
Central Banks
|
— | — | — | — | — | — | — | — | 240 | 242 | 13 | (12 | ) | |||||||||||||||||||||||||||||||||||
|
Credit institutions
|
2,982 | 2,873 | 83 | (191 | ) | 2,597 | 2,610 | 50 | (37 | ) | 4,341 | 4,327 | 55 | (70 | ) | |||||||||||||||||||||||||||||||||
|
Other issuers
|
3,102 | 3,188 | 120 | (34 | ) | 3,579 | 3,558 | 113 | (134 | ) | 5,166 | 5,033 | 71 | (204 | ) | |||||||||||||||||||||||||||||||||
|
Other countries — (*)
|
23,258 | 23,477 | 865 | (646 | ) | 25,064 | 25,397 | 893 | (560 | ) | 17,535 | 17,478 | 431 | (488 | ) | |||||||||||||||||||||||||||||||||
|
Securities of other foreign Governments(**)
|
15,733 | 15,958 | 610 | (386 | ) | 17,058 | 17,363 | 697 | (392 | ) | 9,624 | 9,653 | 261 | (232 | ) | |||||||||||||||||||||||||||||||||
|
Other debt securities
|
7,525 | 7,519 | 254 | (261 | ) | 8,006 | 8,034 | 196 | (168 | ) | 7,911 | 7,825 | 170 | (256 | ) | |||||||||||||||||||||||||||||||||
|
Central Banks
|
945 | 945 | 1 | (0 | ) | 1,296 | 1,297 | 1 | — | 1,045 | 1,045 | — | — | |||||||||||||||||||||||||||||||||||
|
Credit institutions
|
4,983 | 4,998 | 205 | (190 | ) | 4,795 | 4,893 | 185 | (87 | ) | 5,934 | 5,958 | 167 | (143 | ) | |||||||||||||||||||||||||||||||||
|
Other institutions
|
1,597 | 1,576 | 49 | (70 | ) | 1,915 | 1,844 | 10 | (81 | ) | 932 | 823 | 3 | (113 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL AVAILABLE FOR SALE PORTFOLIO
|
52,037 | 50,875 | 1,188 | (2,350 | ) | 56,445 | 57,071 | 1,554 | (928 | ) | 39,851 | 39,830 | 815 | (836 | ) | |||||||||||||||||||||||||||||||||
|
HELD TO MATURITY PORTFOLIO
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Domestic -
|
7,503 | 6,771 | 2 | (734 | ) | 2,626 | 2,624 | 29 | (31 | ) | 2,392 | 2,339 | 7 | (60 | ) | |||||||||||||||||||||||||||||||||
|
Spanish Government
|
6,611 | 5,942 | 2 | (671 | ) | 1,674 | 1,682 | 21 | (13 | ) | 1,412 | 1,412 | 7 | (7 | ) | |||||||||||||||||||||||||||||||||
|
Other debt securities
|
892 | 829 | 0 | (63 | ) | 952 | 942 | 8 | (18 | ) | 980 | 927 | — | (53 | ) | |||||||||||||||||||||||||||||||||
|
Central Banks
|
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
|
Credit institutions
|
290 | 277 | — | (13 | ) | 342 | 344 | 6 | (4 | ) | 342 | 344 | — | (10 | ) | |||||||||||||||||||||||||||||||||
|
Other institutions
|
602 | 552 | — | (50 | ) | 610 | 598 | 2 | (14 | ) | 638 | 583 | — | (43 | ) | |||||||||||||||||||||||||||||||||
|
International -
|
2,443 | 2,418 | 16 | (41 | ) | 2,811 | 2,869 | 71 | (13 | ) | 2,890 | 2,882 | 25 | (33 | ) | |||||||||||||||||||||||||||||||||
|
Securities of other foreign Governments
|
2,181 | 2,171 | 10 | (20 | ) | 2,399 | 2,456 | 64 | (7 | ) | 2,432 | 2,437 | 22 | (17 | ) | |||||||||||||||||||||||||||||||||
|
Other debt securities. Credit Institutions
|
262 | 247 | 6 | (21 | ) | 412 | 413 | 7 | (6 | ) | 458 | 445 | 3 | (16 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL HELD TO MATURITY PORTFOLIO
|
9,946 | 9,189 | 18 | (775 | ) | 5,437 | 5,493 | 100 | (44 | ) | 5,282 | 5,221 | 32 | (93 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL DEBT SECURITIES
|
61,983 | 60,064 | 1,206 | (3,125 | ) | 61,882 | 62,564 | 1,654 | (972 | ) | 45,133 | 45,051 | 847 | (929 | ) | |||||||||||||||||||||||||||||||||
| (*) | Includes Mexico. As of December 31, 2010 the total fair value of Mexican debt securities amounted to €10,547 million of which Mexican Government and other government agency debt securities amounted to € 9,858 million and credit institutions amounted to €579 million. | |
| (**) | Consists mainly of securities held by our subsidiaries issued by the Governments of the countries where they operate. As of December 31, 2010 the fair value of Securities of other foreign Governments included €9,858 million of Mexican Government and other government agency debt securities. |
F-194
Table of Contents
For credit quality information related with the rating of the
debt securities see Note 12 and 14 of the Consolidated
Financial Statements.
| As of December 31, 2010 | As of December 31, 2009 | As of December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
Amortized
|
Fair
|
Unrealized
|
Unrealized
|
|||||||||||||||||||||||||||||||||||||
| Cost | Value | Gains | Losses | Cost | Value | Gains | Losses | Cost | Value | Gains | Losses | |||||||||||||||||||||||||||||||||||||
| (Millions of euros) | (Millions of euros) | (Millions of euros) | ||||||||||||||||||||||||||||||||||||||||||||||
|
EQUITY SECURITIES -
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
AVAILABLE FOR SALE PORTFOLIO
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Domestic -
|
3,403 | 4,608 | 1,212 | (7 | ) | 3,682 | 5,408 | 1,738 | (12 | ) | 3,581 | 4,675 | 1,189 | (96 | ) | |||||||||||||||||||||||||||||||||
|
Equity listed
|
3,378 | 4,583 | 1,212 | (7 | ) | 3,656 | 5,383 | 1,738 | (12 | ) | 3,545 | 4,639 | 1,189 | (95 | ) | |||||||||||||||||||||||||||||||||
|
Equity Unlisted
|
25 | 25 | — | — | 25 | 25 | — | — | 37 | 36 | — | (1 | ) | |||||||||||||||||||||||||||||||||||
|
International -
|
927 | 973 | 71 | (25 | ) | 948 | 1,041 | 121 | (28 | ) | 3,407 | 3,274 | 8 | (141 | ) | |||||||||||||||||||||||||||||||||
|
United States -
|
605 | 662 | 56 | — | 641 | 737 | 104 | (8 | ) | 664 | 654 | — | (11 | ) | ||||||||||||||||||||||||||||||||||
|
Equity listed
|
11 | 13 | 1 | — | 16 | 8 | — | (8 | ) | 38 | 28 | — | (11 | ) | ||||||||||||||||||||||||||||||||||
|
Equity Unlisted
|
594 | 649 | 55 | — | 625 | 729 | 104 | (0 | ) | 626 | 626 | — | (0 | ) | ||||||||||||||||||||||||||||||||||
|
Other countries -
|
322 | 311 | 15 | (25 | ) | 307 | 304 | 17 | (20 | ) | 2,743 | 2,620 | 8 | (130 | ) | |||||||||||||||||||||||||||||||||
|
Equity listed
|
258 | 240 | 7 | (25 | ) | 250 | 242 | 12 | (20 | ) | 2,545 | 2,416 | 1 | (130 | ) | |||||||||||||||||||||||||||||||||
|
Equity Unlisted
|
64 | 71 | 8 | (0 | ) | 57 | 62 | 5 | (0 | ) | 198 | 205 | 7 | (0 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL AVAILABLE FOR SALE PORTFOLIO
|
4,330 | 5,581 | 1,283 | (32 | ) | 4,630 | 6,450 | 1,860 | (40 | ) | 6,988 | 7,949 | 1,197 | (237 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL EQUITY SECURITIES
|
4,330 | 5,581 | 1,283 | (32 | ) | 4,630 | 6,450 | 1,860 | (40 | ) | 6,988 | 7,949 | 1,197 | (237 | ) | |||||||||||||||||||||||||||||||||
|
TOTAL INVESTMENT SECURITIES
|
66,313 | 65,645 | 2,489 | (3,156 | ) | 66,512 | 69,014 | 3,514 | (1,012 | ) | 52,122 | 53,001 | 2,044 | (1,166 | ) | |||||||||||||||||||||||||||||||||
F-195
Table of Contents
The total amount of losses amounted to €3,776 million,
€1,461 million and €1,368 million as of
December 31, 2010, 2009 and 2008, respectively.
| As of December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Millions of euros | ||||||||||||
|
Equity securities
|
(429 | ) | (226 | ) | (26 | ) | ||||||
|
Debt securities
|
(190 | ) | (223 | ) | (176 | ) | ||||||
|
(1) Total impairments
other-than-temporary
(charged to income under both GAAP)
|
(619 | ) | (449 | ) | (202 | ) | ||||||
|
Equity securities
|
(32 | ) | (40 | ) | (237 | ) | ||||||
|
Debt securities
|
(3,125 | ) | (972 | ) | (929 | ) | ||||||
|
(2) Total temporary unrealized losses
|
(3,157 | ) | (1,012 | ) | (1,166 | ) | ||||||
|
(1)+(2) Total unrecognized losses
|
(3,776 | ) | (1,461 | ) | (1,368 | ) | ||||||
As of December 31, 2010, the fair value of the debt
securities is below its amortized cost.
As of December 31, 2010 most of our unrealized losses
correspond to Spanish Government debt securities (both
Available-for-sale
and
Held-to-maturity
securities).
As of December 31, 2010 the total unrealized losses
generated 12 months prior to such date were 10.2% of total
unrealized losses of debt securities (both
Available-for-sale
and
Held-to-maturity
securities). However, we can concluded that they are temporary
and no impairment has been estimated following an analysis of
these unrealized losses, because: the payment deadlines for
interests have been met for all debt securities, there is no
evidence that the issuer will not continue meeting the payment
terms, the future payments of principal and interest are
sufficient to recover the cost of the debt securities and, for
Held-to-maturity
securities, we have the intent to hold the security until
maturity or at least until the fair value of the security
recovers to a level that exceeds the security’s amortized
cost.
As of December 31, 2010, the unrealized losses that
correspond to equity securities have been considered temporary
and we have not recognized any
other-than-temporary
impairment for those investments because the unrealized losses
related to them have mainly arisen due to the negative evolution
of the markets affected by the economic situation.
F-196
Table of Contents
An analysis of the carrying amount of investments, exclusive of
valuation reserves, by contractual maturity and fair value of
the debt securities portfolio is shown below:
| December 31, 2010 | ||||||||||||||||||||
| Carrying Amount | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
AVAILABLE-FOR-SALE
PORTFOLIO(*)
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
982 | 8,650 | 3,197 | 2,507 | 15,337 | |||||||||||||||
|
Other debt securities
|
1,303 | 2,613 | 438 | 876 | 5,229 | |||||||||||||||
|
Total Domestic
|
2,285 | 11,263 | 3,635 | 3,383 | 20,566 | |||||||||||||||
|
International
|
||||||||||||||||||||
|
United States
|
525 | 2,971 | 2,340 | 995 | 6,832 | |||||||||||||||
|
U.S. Treasury and other U.S. government agencies
|
108 | 195 | 65 | 210 | 578 | |||||||||||||||
|
States and political subdivisions
|
29 | 93 | 59 | 12 | 193 | |||||||||||||||
|
Other U.S. securities
|
389 | 2,683 | 2,216 | 773 | 6,061 | |||||||||||||||
|
Other countries
|
3,075 | 11,436 | 3,571 | 5,395 | 23,477 | |||||||||||||||
|
Securities of other foreign governments
|
690 | 9,156 | 2,547 | 3,565 | 15,958 | |||||||||||||||
|
Other debt securities of other countries
|
2,385 | 2,280 | 1,024 | 1,830 | 7,519 | |||||||||||||||
|
Total International
|
3,601 | 14,407 | 5,911 | 6,390 | 30,309 | |||||||||||||||
|
TOTAL
AVAILABLE-FOR-SALE
|
5,886 | 25,670 | 9,546 | 9,773 | 50,875 | |||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
75 | 98 | 3,107 | 3,330 | 6,610 | |||||||||||||||
|
Other debt securities
|
38 | 645 | 210 | — | 893 | |||||||||||||||
|
Total Domestic
|
113 | 743 | 3,317 | 3,330 | 7,503 | |||||||||||||||
|
Total International
|
616 | 1,392 | 209 | 226 | 2,443 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
729 | 2,135 | 3,526 | 3,556 | 9,946 | |||||||||||||||
|
TOTAL DEBT SECURITIES
|
6,615 | 27,805 | 13,072 | 13,329 | 60,821 | |||||||||||||||
| December 31, 2010 | ||||||||||||||||||||
| Market Value | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
76 | 98 | 2.859 | 2.909 | 5.942 | |||||||||||||||
|
Other debt securities
|
37 | 612 | 180 | — | 829 | |||||||||||||||
|
Total Domestic
|
113 | 710 | 3.039 | 2.909 | 6.771 | |||||||||||||||
|
Total International
|
617 | 1.372 | 202 | 227 | 2.418 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
730 | 2.082 | 3.241 | 3.136 | 9.189 | |||||||||||||||
F-197
Table of Contents
| As of December 31, 2009 | ||||||||||||||||||||
| Carrying Amount | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
AVAILABLE-FOR-SALE
PORTFOLIO(*)
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
127 | 10,536 | 5,116 | 2,772 | 18,551 | |||||||||||||||
|
Other debt securities
|
576 | 4,422 | 283 | 1,037 | 6,318 | |||||||||||||||
|
Total Domestic
|
703 | 14,958 | 5,399 | 3,809 | 24,869 | |||||||||||||||
|
International
|
||||||||||||||||||||
|
United States
|
838 | 2,586 | 1,597 | 1,784 | 6,805 | |||||||||||||||
|
U.S. Treasury and other U.S. government agencies
|
223 | 53 | — | 140 | 416 | |||||||||||||||
|
States and political subdivisions
|
36 | 84 | 79 | 22 | 221 | |||||||||||||||
|
Other U.S. securities
|
579 | 2,449 | 1,518 | 1,622 | 6,168 | |||||||||||||||
|
Other countries
|
2,254 | 9,318 | 3,614 | 10,211 | 25,397 | |||||||||||||||
|
Securities of other foreign governments
|
934 | 5,929 | 2,454 | 8,046 | 17,363 | |||||||||||||||
|
Other debt securities of other countries
|
1,320 | 3,389 | 1,160 | 2,165 | 8,034 | |||||||||||||||
|
Total International
|
3,092 | 11,904 | 5,211 | 11,995 | 32,202 | |||||||||||||||
|
TOTAL
AVAILABLE-FOR-SALE
|
3,795 | 26,862 | 10,610 | 15,804 | 57,071 | |||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
5 | 181 | 1,425 | 63 | 1,674 | |||||||||||||||
|
Other debt securities
|
50 | 486 | 294 | 122 | 952 | |||||||||||||||
|
Total Domestic
|
55 | 667 | 1,719 | 185 | 2,626 | |||||||||||||||
|
Total International
|
215 | 790 | 1,590 | 216 | 2,811 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
270 | 1,457 | 3,309 | 401 | 5,437 | |||||||||||||||
|
TOTAL DEBT SECURITIES
|
4,065 | 28,319 | 13,919 | 16,205 | 62,508 | |||||||||||||||
| As of December 31, 2009 | ||||||||||||||||||||
| Market Value | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
5 | 181 | 1,433 | 63 | 1,682 | |||||||||||||||
|
Other debt securities
|
50 | 482 | 287 | 123 | 942 | |||||||||||||||
|
Total Domestic
|
55 | 663 | 1,720 | 186 | 2,624 | |||||||||||||||
|
Total International
|
217 | 808 | 1,623 | 221 | 2,869 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
272 | 1,471 | 3,343 | 407 | 5,493 | |||||||||||||||
F-198
Table of Contents
| December 31, 2008 | ||||||||||||||||||||
| Carrying Amount | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
AVAILABLE-FOR-SALE
PORTFOLIO(*)
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
119 | 6,694 | 4,003 | 3,829 | 14,645 | |||||||||||||||
|
Other debt securities
|
1,067 | 3,732 | 278 | 835 | 5,912 | |||||||||||||||
|
Total Domestic
|
1,186 | 10,426 | 4,281 | 4,664 | 20,557 | |||||||||||||||
|
International
|
||||||||||||||||||||
|
United States
|
985 | 3,083 | 1,784 | 1,410 | 7,262 | |||||||||||||||
|
U.S. Treasury and other U.S. government agencies
|
160 | 18 | — | 245 | 423 | |||||||||||||||
|
States and political subdivisions
|
70 | 145 | 159 | 52 | 426 | |||||||||||||||
|
Other U.S. securities
|
755 | 2,920 | 1,625 | 1,113 | 6,413 | |||||||||||||||
|
Other countries
|
2,603 | 9,799 | 5,438 | 3,960 | 21,800 | |||||||||||||||
|
Securities of other foreign governments
|
666 | 7,483 | 4,018 | 2,088 | 14,255 | |||||||||||||||
|
Other debt securities of other countries
|
1,937 | 2,316 | 1,420 | 1,872 | 7,545 | |||||||||||||||
|
Total International
|
3,588 | 12,882 | 7,222 | 5,370 | 29,062 | |||||||||||||||
|
TOTAL
AVAILABLE-FOR-SALE
|
4,774 | 23,308 | 11,503 | 10,034 | 49,619 | |||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
110 | 118 | 1,053 | 54 | 1,335 | |||||||||||||||
|
Other debt securities
|
54 | 212 | 550 | 128 | 944 | |||||||||||||||
|
Total Domestic
|
164 | 330 | 1,603 | 182 | 2,279 | |||||||||||||||
|
Total International
|
85 | 918 | 1,594 | 223 | 2,820 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
249 | 1,248 | 3,197 | 405 | 5,099 | |||||||||||||||
|
TOTAL DEBT SECURITIES
|
5,023 | 24,556 | 14,700 | 10,439 | 54,718 | |||||||||||||||
| December 31, 2008 | ||||||||||||||||||||
| Market Value | ||||||||||||||||||||
|
Due After
|
Due After
|
|||||||||||||||||||
|
Due in One
|
One Year to
|
Five Years to
|
Due After
|
|||||||||||||||||
| Year or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
| Millions of euros | ||||||||||||||||||||
|
HELD-TO-MATURITY
PORTFOLIO
|
||||||||||||||||||||
|
Domestic
|
||||||||||||||||||||
|
Spanish government
|
110 | 119 | 1,055 | 54 | 1,338 | |||||||||||||||
|
Other debt securities
|
52 | 203 | 525 | 122 | 902 | |||||||||||||||
|
Total Domestic
|
162 | 322 | 1,580 | 176 | 2,240 | |||||||||||||||
|
Total International
|
83 | 924 | 1,607 | 226 | 2,840 | |||||||||||||||
|
TOTAL
HELD-TO-MATURITY
|
245 | 1,246 | 3,187 | 402 | 5,080 | |||||||||||||||
F-199
Table of Contents
| (*) | As we describe in Note 2.2.1 carrying amount and market value are the same for “Trading portfolio” and “Available for sale portfolio” |
Under both EU-IFRS and U.S. GAAP, the methodology used to
estimate the fair value of non-traded or unlisted securities is
as follows (see Note 2.2.1.b):
| • | Debt securities: fair value is considered to be the present value of the cash flows, using market interest rates (discounted cash flows). | |
| • | Equity securities: in the cases of equity instruments whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost. In some cases in which trigger events indicate that a specific investment could be impaired, a specific valuation of fair value is used and all available factors are considered by management to determine the fair value under both GAAP. |
These methodologies include an evaluation of credit risk, market
conditions (volatility, interest rate evolution, macroeconomic
variables, etc...) or future expectations.
As of December 31, 2010, 2009 and 2008 the net gains from
sales of
available-for-sale
securities amounted to €653 million
€504 million and €1,723 million,
respectively (see Note 44 and 52). As of December 31,
2010, 2009 and 2008 the gross realized gains on those sales
amounted to €814 million, €672 million and
€1,150 million, respectively. As of December 31,
2010, 2009 and 2008 the gross realized losses on those sales
amounted to €161 million (of which
€122 million corresponds to debt securities and
€39 million corresponds to other equity instruments),
€167 million (of which €70 million
corresponds to debt securities and €97 million
corresponds to other equity instruments) and
€154 million (of which €58 million
corresponds to debt securities and €96 million
corresponds to other equity instruments), respectively.
| 2. | LOANS AND ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN — |
The balance of the recorded investment in impaired loans
(substandard loans) and of the related valuation allowance as of
December 31, 2010 is as follows:
|
As of December 31,
|
||||
| 2010 | ||||
| Millions of euros | ||||
|
Impaired loans requiring no reserve
|
281 | |||
|
Impaired loans requiring valuation allowance
|
15,080 | |||
|
Total impaired loans
|
15,361 | |||
|
Valuation allowance on impaired loans
|
5,482 | |||
The roll-forward allowance is shown in Note 7.1 of the
Consolidated Financial Statements.
The related amount of interest income recognized during the time
within that period that the loans were impaired was:
|
As December 31,
|
||||
| 2010 | ||||
| Millions of euros | ||||
|
Interest revenue that would have been recorded if accruing
|
1,717 | |||
|
Net interest revenue recorded
|
203 | |||
| 3. | INVESTMENTS IN AND INDEBTEDNESS OF AND TO AFFILIATES — |
For aggregated summarized financial information with respect to
significant affiliated companies for the year ended
December 31, 2010 see Note 17 and Appendix IV for
detailed information of investments in associates.
F-200
Table of Contents
| 4. | DEPOSITS — |
The breakdowns of deposits from credit entities and customers by
domicile and type are included in Note 23 of the
accompanying consolidated financial statements.
As of December 31, 2010, 2009 and 2008, the time deposits,
both domestic and international, (other than interbank deposits)
in denominations of €75,364 (approximately US$100,000) or
more were €83,516 million, €96,164 million
and €97,923 million, respectively.
| 5. | SHORT-TERM BORROWINGS — |
The information about “Short-Term borrowings” required
under S-X Regulations is as follows:
| As of December 31, | ||||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Average
|
Average
|
Average
|
||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||
| (In millions of euro, except percentages) | ||||||||||||||||||||||||
|
Securities sold under agreements to repurchase (principally
Spanish Treasury bills):
|
||||||||||||||||||||||||
|
As of December 31,
|
39,587 | 2.03 | % | 26,171 | 2.43 | % | 28,206 | 4.66 | % | |||||||||||||||
|
Average during year
|
31,056 | 2.17 | % | 30,811 | 2.71 | % | 34,729 | 5.62 | % | |||||||||||||||
|
Maximum quarter-end balance
|
39,587 | — | 28,849 | — | 34,202 | — | ||||||||||||||||||
|
Bank promissory notes:
|
||||||||||||||||||||||||
|
As of December 31,
|
13,215 | 0.91 | % | 29,578 | 0.50 | % | 20,061 | 3.70 | % | |||||||||||||||
|
Average during year
|
24,405 | 0.55 | % | 27,434 | 1.28 | % | 15,661 | 4.57 | % | |||||||||||||||
|
Maximum quarter-end balance
|
28,937 | — | 30,919 | — | 20,061 | — | ||||||||||||||||||
|
Bonds and Subordinated debt :
|
||||||||||||||||||||||||
|
As of December 31 ,
|
11,041 | 2.57 | % | 13,236 | 2.54 | % | 13,565 | 4.66 | % | |||||||||||||||
|
Average during year
|
10,825 | 3.20 | % | 14,820 | 3.20 | % | 12,447 | 5.18 | % | |||||||||||||||
|
Maximum quarter-end balance
|
13,184 | — | 15,609 | — | 15,822 | — | ||||||||||||||||||
|
Total short-term borrowings at December 31
|
63,844 | 1.89 | % | 68,985 | 1.62 | % | 61,832 | 4.35 | % | |||||||||||||||
As of December 31, 2010, 2009 and 2008, short-term
borrowings include €16,396 million.
€17,419 million, and €13,018 million,
respectively, of securities sold under agreements to repurchase
from Bank of Spain and other Spanish and foreign financial
institutions.
| 6. |
|
See Note 23 of the Consolidated Financial Statements.
| 7. | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES — |
The breakdown of the Derivative Financial Instruments is shown
in Notes 10 and 15 of the Consolidated Financial Statements.
| 7.1. | Objectives for the holding of positions in derivatives and strategies for the achievement of these objectives |
See Note 15 of the Consolidated Financial Statements.
| 7.1.1. | Risk Management Policies |
See Note 7 of the Consolidated Financial Statements.
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| 7.1.2. | Transactions whose risks are hedged for U.S. GAAP purposes |
U.S. GAAP ASC 815 is more restrictive than IAS 39,
Financial Instruments: recognition and measurement, on the types
of risks that may be hedged and therefore certain hedging
relationships have been discontinued under U.S. GAAP.
Paragraph 21.f. of ASC 815 defines the risks that may
be hedged as only one of (or a combination of) the following:
(a) the risk of changes in the overall fair value of the
entire hedged item,
(b) the risk of changes in its fair value attributed to
changes in the designated benchmark interest rate (referred to
as interest rate risk),
(c) the risk of changes in its fair value attributed to
changes in the related foreign currency exchange rates (referred
to as foreign exchange risk) and
(d) the risk of changes in its fair value attributed to
both changes in the obligor’s creditworthiness and changes
in the spread over the benchmark interest rate with respect to
the hedged item’s credit sector at inception of the hedge
(referred to as credit risk).
The same paragraph states that an entity may not simply
designate prepayment risk as the risk being hedged for a
financial asset unless it is represented by an embedded option
in the hedged instrument.
Transactions whose risks are hedged for U.S. GAAP purposes
are:
1. Available for sale fixed rate debt securities: this risk
is hedged using interest-rate derivatives (interest-rate swaps
through which the fixed-coupon of the bond is exchanged for a
variable return).
2. Long term fixed rate debt issued: this risk is hedged
using interest-rate derivatives (interest-rate swaps which
replicate, on the collection leg, the payment resulting from the
issue and transform it into a variable cost for the Bank).
3. Foreign currency of a net investment in a foreign
subsidiary: the risk of a net investment in a foreign operation
is exchanged for the currency in which the investment is
denominated.
4. Available for sale equity securities: this risk is
hedged using equity swaps through which the risk of variation in
the price per books of the portfolio is transferred to the
counterparty.
5. Fixed rate loans: this risk is hedged using
interest-rate derivatives (interest-rate swaps through which the
fixed-coupon of the loans is exchanged for a variable return).
6. Floating interest rate loans in foreign currencies: this
risk is hedged using currency swaps.
| 7.2. | Accounting for Derivative Instruments and Hedging Activities |
Under ASC 815 the accounting for changes in fair value of a
derivative instrument depends on its intended use and the
resulting designation.
If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and the hedged item
attributed to the hedged risk are recognized in earnings.
If the derivative is designated as a cash flow hedge, the
effective portions of changes in the fair value of the
derivative are recorded in Other Comprehensive Income and are
recognized in the income statement when the hedged item affects
earnings. Ineffective portions of changes in the fair value of
cash flow hedges are recognized in earnings.
The gain or loss on a hedging derivative instrument that is
designated as, and is effective as, an economic hedge of the net
investment in a foreign operation is reported in the same way as
a translation adjustment to the extent it is effective as a
hedge. The ineffective portion of net investment hedges is
reported in earnings.
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Hedging transactions must be formally documented, designated and
the company must describe the way the effectiveness is going to
be assessed.
On the other hand when the derivative is designated as a trading
transaction the changes in the fair value must be recognized in
earnings.
| 7.3. | Additional disclosures required by U.S. GAAP: Fair Value Methods |
The methods used by the Group in estimating the fair value of
its derivative instruments are as follows:
Forward
purchases/sales of foreign currency
Estimated fair value of these financial instruments is based on
active market prices.
Forward
purchases/sales of government debt securities
Estimated fair value of these financial instruments is based on
active market prices, since they are mostly traded in organised
markets.
Options
and financial futures
Derivatives traded in organised markets are valued based on
quoted market prices.
For options and futures traded in OTC markets, the fair value is
estimated based on theoretical year-end closing prices. These
year-end closing prices are calculated according to generally
accepted models estimating the amounts the Group would receive
or pay based upon the yield curve/ volatilities prevailing at
year-end or prices.
Forward
rate agreements and interest rate swaps
Fair values of these contracts are estimated based on the
discounted future cash flows related to the interest rates to be
collected or paid, using for this purpose the yield curve
prevailing at year-end.
| 8. | PENSION LIABILITIES — |
See Notes 2.2.12 and 26 of the Consolidated Financial
Statements for a detail of the pension commitments under the
EU-IFRS required to be applied under the Bank of Spain’s
Circular 4/2004.
| 9. | EMPLOYERS’ DISCLOSURES ABOUT POSTRETIREMENT BENEFIT PLAN ASSETS (ASC 715-20) |
Employee benefits corporate policies are defined by BBVA Group
as part of the coordination framework established between the
headquarters and each of the countries in which it operates.
In order to manage the assets related to defined benefit plans,
BBVA Group has set the corresponding corporate investment
policy. The investment policy currently in force is designed
according to the criteria of prudence and aimed to minimize the
financial risks in plan assets.
The main principles of this policy are summarized below:
| • | Fixed income as the only category of allowed assets. Preference for government bonds. | |
| • | No currency risk allowed in asset allocation | |
| • | Requirement of specific levels of liquidity in order to meet the expected cash flow liabilities. | |
| • | Systematized controls in duration, limiting the asset-liabilities duration gaps. | |
| • | Standardized limitation in inflation risk. |
Local adaptation of the corporate investment policy is taking
place gradually along the countries in which the Group operates,
taking into account the particularities of each market. This
implies the need for unifying the
F-203
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diversity of the local investment policies previously in force,
considering the specific local legislations and regulations
-especially with regards to investment decision making
processes — .
On average, as of December 31, 2010 the degree of local
implementation of the current investment policy for plan assets
is, in its most significant aspects, well advanced with nearly
91% of assets invested in fixed income (mostly government bonds)
and around 7% in equity and 2% in other assets.
Measurement of plan assets is set using market quoted prices as
the underlying assets are market quoted and priced instruments.
In addition, no significant concentrations of risks within plan
assets have been identified as of December 31, 2010 and
investments of the plans are deemed to be sufficiently
diversified.
| 10. | DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (ASC 825-10) — |
See Note 8 of the Consolidated Financial Statements for
disclosures about Fair Value of Financial Instruments, as
required by
ASC 825-10.
| 11. | SEGMENT INFORMATION — |
See Note 6 of the Consolidated Financial Statements, for a
detail of the segment information under the EU-IFRS required to
be applied under the Bank of Spain’s Circular 4/2004.
| 12. | BUSINESS COMBINATION IN 2010 — |
See Note 3 of the Consolidated Financial Statements for
information of Business combinations.
| 13. | “UNRECOGNIZED TAX BENEFITS” (ASC 605-15) — |
As of December 31, 2010 and December 31, 2009, the
Group’s unrecognized tax benefits, including related
interest expense and penalties was €1,091 million and
€1,052 million, respectively, of which
€701 million, if recognized, would reduce the annual
effective tax rate. As the Group is presently under audit by
number of tax authorities, it is reasonably possible that
unrecognized tax benefits could change significantly over the
next 12 months. The Group does not expect that any such
changes would have a material impact on its annual effective tax
rate.
Due to the inherent complexities arising from the nature of the
Group’s businesses, and from conducting business are being
taxed in a substantial number of jurisdictions, significant
judgements and estimates are required to be made. Agreement of
tax liabilities between BBVA and the many tax jurisdictions in
which Group files tax returns may not be finalized for several
years. Thus, the Group’s final tax-related assets and
liabilities may ultimately be different than those currently
reported.
The following is a roll-forward of the Bank’s
ASC 605-15
unrecognized tax benefits from December 31, 2008 to
December 31, 2010.
| Millions of euros | ||||
|
Total unrecognized tax benefits as of December 31,
2008
|
1,136 | |||
|
Net amount of increases for current year’s tax positions
|
3 | |||
|
Gross amount of increases for prior years’ tax positions
|
113 | |||
|
Gross amount of decreases for prior years’ tax positions
|
(9 | ) | ||
|
Foreign exchange, acquisitions and others
|
(191 | ) | ||
|
Total unrecognized tax benefits as of December 31,
2009
|
1,052 | |||
|
Net amount of increases for current year’s tax positions
|
7 | |||
|
Gross amount of increases for prior years’ tax positions
|
77 | |||
|
Gross amount of decreases for prior years’ tax positions
|
(7 | ) | ||
|
Foreign exchange, acquisitions and others
|
(38 | ) | ||
|
Total unrecognized tax benefits as of December 31,
2010
|
1,091 | |||
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The Group classifies interest as interest expense but penalties
are classified as tax expense. During the year 2010, the Group
recognized approximately €34 million in interest and
penalties. The Group had approximately €333 million
for the payment of interest and penalties accrued as of
December 31, 2010.
The following are the major tax jurisdictions in which the
Company and its affiliates operate and the earliest tax year
subject to examination:
|
Jurisdiction
|
Tax Year | |||
|
Spain
|
2004 - 2010 | |||
|
United States
|
2005 - 2010 | |||
|
Puerto Rico
|
2006 - 2010 | |||
|
Peru
|
2006 - 2010 | |||
|
Colombia
|
2005 - 2010 | |||
|
Argentina
|
2005 - 2010 | |||
|
Venezuela
|
2004 - 2010 | |||
|
Mexico
|
2005 - 2010 | |||
| 14. | DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (ASC 815-10-50 — DERIVATIVES AND HEDGING) — |
In March 2008 the FASB issued FASB Statement No. 161
(
ASC
815-10-50)
,
Disclosures about Derivative Instruments and Hedging
Activities.
The new standard is intended to improve
financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors
to better understand their effects on an entity’s financial
position, financial performance, and cash flows. This Statement
is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008.
See Note 10, 15, 39 and 44 of the Consolidated Financial
Statements for disclosures about derivative instruments and
hedging activities, as required by
ASC
815-10-5.
| 15. | DISCLOSURES ABOUT THE CREDIT QUALITY OF FINANCING RECEIVABLES AND THE ALLOWANCE FOR CREDIT LOSSES (ASC 310) — |
In 2010 the FASB issued ASU 2010-20, which amends ASC 310
to enhance disclosures about the credit quality of financing
receivables and the allowance for credit losses.
See Note 7 and 13 of the Consolidated Financial Statements
for the significant disclosures about credit quality of
financing receivables and the allowance for credit losses.
| 16. | FINANCIAL STATEMENTS OF GUARANTORS AND ISSUERS OF GUARANTEED SECURITIES REGISTERED — |
In accordance with Reg. S-X
Rule 3-10,
Financial Statements of Guarantors and Issuers of Guaranteed
Securities Registered or Being Registered, BBVA International
Preferred, S.A. (Unipersonal) — issuer of registered
preferred securities guaranteed by Banco Bilbao Vizcaya
Argentaria, S.A. — do not file the financial
statements required for a registrant by
Regulation S-X
as BBVA International Preferred, S.A. (Unipersonal) is 100%
owned finance subsidiary of Banco Bilbao Vizcaya Argentaria,
S.A. who fully and unconditionally guarantees the preferred
securities (Serie “C” is listed in the United States).
No other subsidiary of the Bank guarantees such securities. We
are not aware of any legal or economic restrictions on the
ability of this subsidiary to transfer funds to our parent
company in the form of cash dividends, loans or advances,
capital repatriation or otherwise. There is no assurance that in
the future such restrictions will not be adopted.
F-205
Table of Contents
APPENDICES
Table of Contents
APPENDIX I.
FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
BALANCE
SHEETS AS OF DECEMBER 31, 2010 AND 2009
| 2010 | 2009 | |||||||
| Millions of euros | ||||||||
|
ASSETS
|
||||||||
|
CASH AND BALANCES WITH CENTRAL BANKS
|
4,165 | 3,286 | ||||||
|
FINANCIAL ASSETS HELD FOR TRADING
|
51,348 | 57,532 | ||||||
|
Loans and advances to credit institutions
|
— | — | ||||||
|
Loans and advances to customers
|
— | — | ||||||
|
Debt securities
|
13,016 | 22,833 | ||||||
|
Equity instruments
|
4,608 | 4,996 | ||||||
|
Trading derivatives
|
33,724 | 29,703 | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
8,669 | 12,665 | ||||||
|
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH
PROFIT OR LOSS
|
— | — | ||||||
|
Loans and advances to credit institutions
|
— | — | ||||||
|
Loans and advances to customers
|
— | — | ||||||
|
Debt securities
|
— | — | ||||||
|
Equity instruments
|
— | — | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
— | — | ||||||
|
AVAILABLE-FOR-SALE
FINANCIAL ASSETS
|
26,712 | 35,964 | ||||||
|
Debt securities
|
22,131 | 30,610 | ||||||
|
Equity instruments
|
4,581 | 5,354 | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
5,901 | 23,777 | ||||||
|
LOANS AND RECEIVABLES
|
264,278 | 256,355 | ||||||
|
Loans and advances to credit institutions
|
28,882 | 27,863 | ||||||
|
Loans and advances to customers
|
234,031 | 228,491 | ||||||
|
Debt securities
|
1,365 | 1 | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
42,333 | 40,040 | ||||||
|
HELD-TO-MATURITY
INVESTMENTS
|
9,946 | 5,437 | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
— | 1,178 | ||||||
|
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO
HEDGES OF INTEREST RATE RISK
|
40 | — | ||||||
|
HEDGING DERIVATIVES
|
2,988 | 3,082 | ||||||
|
NON-CURRENT ASSETS HELD FOR SALE
|
958 | 570 | ||||||
|
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY
METHOD
|
24,368 | 22,120 | ||||||
|
Associates
|
3,612 | 2,296 | ||||||
|
Jointly controlled entities
|
14 | 17 | ||||||
|
Subsidiaries
|
20,742 | 19,807 | ||||||
|
INSURANCE CONTRACTS LINKED TO PENSIONS
|
1,847 | 1,883 | ||||||
|
TANGIBLE ASSETS
|
1,459 | 1,464 | ||||||
|
Property, plants and equipment
|
1,458 | 1,461 | ||||||
|
For own use
|
1,458 | 1,461 | ||||||
|
Other assets leased out under an operating lease
|
— | — | ||||||
|
Investment properties
|
1 | 3 | ||||||
|
Memorandum item: Loaned or advanced as collateral
|
— | — | ||||||
|
INTANGIBLE ASSETS
|
410 | 246 | ||||||
|
Goodwill
|
— | — | ||||||
|
Other intangible assets
|
410 | 246 | ||||||
|
TAX ASSETS
|
3,161 | 3,188 | ||||||
|
Current
|
324 | 448 | ||||||
|
Deferred
|
2,837 | 2,740 | ||||||
|
OTHER ASSETS
|
431 | 718 | ||||||
|
TOTAL ASSETS
|
392,111 | 391,845 | ||||||
I-1
Table of Contents
APPENDIX I
(Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
BALANCE
SHEETS AS OF DECEMBER 31, 2010 AND 2009
| 2010 | 2009 | |||||||
| Millions of euros | ||||||||
|
LIABILITIES AND EQUITY
|
||||||||
|
FINANCIAL LIABILITIES HELD FOR TRADING
|
35,680 | 31,943 | ||||||
|
Deposits from central banks
|
— | — | ||||||
|
Deposits from credit institutions
|
— | — | ||||||
|
Customer deposits
|
— | — | ||||||
|
Debt certificates
|
— | — | ||||||
|
Trading derivatives
|
32,294 | 28,577 | ||||||
|
Short positions
|
3,386 | 3,366 | ||||||
|
Other financial liabilities
|
— | — | ||||||
|
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH
PROFIT OR LOSS
|
— | — | ||||||
|
Deposits from central banks
|
— | — | ||||||
|
Deposits from credit institutions
|
— | — | ||||||
|
Customer deposits
|
— | — | ||||||
|
Debt certificates
|
— | — | ||||||
|
Subordinated liabilities
|
— | — | ||||||
|
Other financial liabilities
|
— | — | ||||||
|
FINANCIAL LIABILITIES AT AMORTIZED COST
|
320,592 | 328,389 | ||||||
|
Deposits from central banks
|
10,867 | 20,376 | ||||||
|
Deposits from credit institutions
|
42,015 | 40,201 | ||||||
|
Customer deposits
|
194,079 | 180,407 | ||||||
|
Debt certificates
|
56,007 | 69,453 | ||||||
|
Subordinated liabilities
|
13,099 | 14,481 | ||||||
|
Other financial liabilities
|
4,525 | 3,471 | ||||||
|
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO
HEDGES OF INTEREST RATE RISK
|
(2 | ) | — | |||||
|
HEDGING DERIVATIVES
|
1,391 | 1,014 | ||||||
|
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR
SALE
|
— | — | ||||||
|
PROVISIONS
|
6,613 | 6,790 | ||||||
|
Provisions for pensions and similar obligations
|
5,177 | 5,426 | ||||||
|
Provisions for taxes and other legal contingencies
|
— | — | ||||||
|
Provisions for contingent exposures and commitments
|
177 | 201 | ||||||
|
Other provisions
|
1,259 | 1,163 | ||||||
|
TAX LIABILITIES
|
488 | 715 | ||||||
|
Current
|
— | — | ||||||
|
Deferred
|
488 | 715 | ||||||
|
OTHER LIABILITIES
|
1,192 | 1,317 | ||||||
|
TOTAL LIABILITIES
|
365,954 | 370,168 | ||||||
|
STOCKHOLDERS’ FUNDS
|
26,183 | 20,034 | ||||||
|
Common Stock
|
2,201 | 1,837 | ||||||
|
Issued
|
2,201 | 1,837 | ||||||
|
Unpaid and uncalled(-)
|
— | — | ||||||
|
Share premium
|
17,104 | 12,453 | ||||||
|
Reserves
|
5,114 | 3,893 | ||||||
|
Other equity instruments
|
23 | 10 | ||||||
|
Equity component of compound financial instruments
|
— | — | ||||||
|
Other equity instruments
|
23 | 10 | ||||||
|
Less: Treasury stock
|
(84 | ) | (128 | ) | ||||
|
Income attributed
|
2,904 | 2,981 | ||||||
|
Less: Dividends and remuneration
|
(1,079 | ) | (1,012 | ) | ||||
|
VALUATION ADJUSTMENTS
|
(26 | ) | 1,643 | |||||
|
Available-for-sale
financial assets
|
39 | 1,567 | ||||||
|
Cash flow hedging
|
(62 | ) | 80 | |||||
|
Hedging of net investment in foreign transactions
|
— | — | ||||||
|
Exchange differences
|
(3 | ) | (4 | ) | ||||
|
Non-current assets
held-for-sale
|
— | — | ||||||
|
Other valuation adjustments
|
— | — | ||||||
|
TOTAL EQUITY
|
26,157 | 21,677 | ||||||
|
TOTAL LIABILITIES AND EQUITY
|
392,111 | 391,845 | ||||||
| Memorandum Item | 2010 | 2009 | ||||||
| Millions of euros | ||||||||
|
CONTINGENT EXPOSURES
|
57,764 | 58,174 | ||||||
|
CONTINGENT COMMITMENTS
|
58,885 | 64,428 | ||||||
I-2
Table of Contents
APPENDIX I
(Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
INCOME
STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009
| 2010 | 2009 | |||||||
| Millions of euros | ||||||||
|
INTEREST AND SIMILAR INCOME
|
8,759 | 11,420 | ||||||
|
INTEREST AND SIMILAR EXPENSES
|
(3,718 | ) | (5,330 | ) | ||||
|
NET INTEREST INCOME
|
5,041 | 6,090 | ||||||
|
DIVIDEND INCOME
|
2,129 | 1,773 | ||||||
|
FEE AND COMMISSION INCOME
|
1,806 | 1,948 | ||||||
|
FEE AND COMMISSION EXPENSES
|
(270 | ) | (303 | ) | ||||
|
NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES
|
738 | 96 | ||||||
|
Financial instruments held for trading
|
256 | (133 | ) | |||||
|
Other financial instruments at fair value through profit or loss
|
— | — | ||||||
|
Other financial instruments not at fair value through profit or
loss
|
482 | 229 | ||||||
|
Rest
|
— | — | ||||||
|
EXCHANGE DIFFERENCES (NET)
|
112 | 259 | ||||||
|
OTHER OPERATING INCOME
|
102 | 81 | ||||||
|
OTHER OPERATING EXPENSES
|
(106 | ) | (98 | ) | ||||
|
GROSS INCOME
|
9,552 | 9,846 | ||||||
|
ADMINISTRATION COSTS
|
(3,409 | ) | (3,337 | ) | ||||
|
Personnel expenses
|
(2,202 | ) | (2,251 | ) | ||||
|
General and administrative expenses
|
(1,207 | ) | (1,086 | ) | ||||
|
DEPRECIATION AND AMORTIZATION
|
(276 | ) | (243 | ) | ||||
|
PROVISIONS (NET)
|
(405 | ) | (269 | ) | ||||
|
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)
|
(1,925 | ) | (1,698 | ) | ||||
|
Loans and receivables
|
(1,794 | ) | (1,518 | ) | ||||
|
Other financial instruments not at fair value through profit or
loss
|
(131 | ) | (180 | ) | ||||
|
NET OPERATING INCOME
|
3,537 | 4,299 | ||||||
|
IMPAIRMENT LOSSES ON OTHER ASSETS (NET)
|
(258 | ) | (1,746 | ) | ||||
|
Goodwill and other intangible assets
|
— | — | ||||||
|
Other assets
|
(258 | ) | (1,746 | ) | ||||
|
GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS
NON-CURRENT ASSETS HELD FOR SALE
|
5 | 3 | ||||||
|
NEGATIVE GOODWILL
|
— | — | ||||||
|
GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT
CLASSIFIED AS DISCONTINUED OPERATIONS
|
129 | 892 | ||||||
|
INCOME BEFORE TAX
|
3,413 | 3,448 | ||||||
|
INCOME TAX
|
(509 | ) | (467 | ) | ||||
|
INCOME FROM CONTINUING TRANSACTIONS
|
2,904 | 2,981 | ||||||
|
INCOME FROM DISCONTINUED TRANSACTIONS (NET)
|
— | — | ||||||
|
NET INCOME
|
2,904 | 2,981 | ||||||
I-3
Table of Contents
APPENDIX
I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
STATEMENTS
OF RECOGNIZED INCOME AND EXPENSES FOR THE YEARS ENDED DECEMBER
31, 2010 AND 2009
| 2010 | 2009 | |||||||
| Millions of euros | ||||||||
|
NET INCOME RECOGNIZED IN INCOME STATEMENT
|
2,904 | 2,981 | ||||||
|
OTHER RECOGNIZED INCOME (EXPENSES)
|
(1,669 | ) | 492 | |||||
|
Available-for-sale
financial assets
|
(2,038 | ) | 1,028 | |||||
|
Valuation gains/(losses)
|
(1,756 | ) | 1,045 | |||||
|
Amounts removed to income statement
|
(282 | ) | (17 | ) | ||||
|
Reclassifications
|
— | — | ||||||
|
Cash flow hedging
|
(190 | ) | (85 | ) | ||||
|
Valuation gains/(losses)
|
(159 | ) | (80 | ) | ||||
|
Amounts removed to income statement
|
(31 | ) | (5 | ) | ||||
|
Amounts removed to the initial carrying amount of the hedged
items
|
— | — | ||||||
|
Reclassifications
|
— | — | ||||||
|
Hedging of net investment in foreign transactions
|
— | — | ||||||
|
Valuation gains/(losses)
|
— | — | ||||||
|
Amounts removed to income statement
|
— | — | ||||||
|
Reclassifications
|
— | — | ||||||
|
Exchange differences
|
— | (79 | ) | |||||
|
Valuation gains/(losses)
|
(4 | ) | (6 | ) | ||||
|
Amounts removed to income statement
|
4 | (73 | ) | |||||
|
Reclassifications
|
— | — | ||||||
|
Non-current assets held for sale
|
— | — | ||||||
|
Valuation gains/(losses)
|
— | — | ||||||
|
Amounts removed to income statement
|
— | — | ||||||
|
Reclassifications
|
— | — | ||||||
|
Actuarial gains and losses in post-employment plans
|
— | — | ||||||
|
Rest of recognized income and expenses
|
— | — | ||||||
|
Income tax
|
559 | (372 | ) | |||||
|
TOTAL RECOGNIZED INCOME/EXPENSES
|
1,235 | 3,473 | ||||||
I-4
Table of Contents
APPENDIX
I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
STATEMENTS
OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009
| Total Equity Attributed to the Parent Company | ||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Funds | ||||||||||||||||||||||||||||||||||||||||
|
Less:
|
||||||||||||||||||||||||||||||||||||||||
|
Reserves
|
Other
|
Less:
|
Dividends
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Common
|
Share
|
(Accumulated
|
Equity
|
Treasury
|
Profit for
|
and
|
Stockholders’
|
Valuation
|
Total
|
|||||||||||||||||||||||||||||||
| Stock | Premium | Losses) | Instruments | Stock | the Year | Remunerations | Funds | Adjustments | Equity | |||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||
|
Balances as of January 1, 2010
|
1,837 | 12,453 | 3,893 | 10 | (128 | ) | 2,981 | (1,012 | ) | 20,034 | 1,643 | 21,677 | ||||||||||||||||||||||||||||
|
Effect of changes in accounting policies
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Effect of correction of errors
|
||||||||||||||||||||||||||||||||||||||||
|
Adjusted initial balance
|
1,837 | 12,453 | 3,893 | 10 | (128 | ) | 2,981 | (1,012 | ) | 20,034 | 1,643 | 21,677 | ||||||||||||||||||||||||||||
|
Total income/expense recognized
|
— | — | — | — | — | 2,904 | — | 2,904 | (1,669 | ) | 1,235 | |||||||||||||||||||||||||||||
|
Other changes in equity
|
364 | 4,651 | 1,221 | 13 | 44 | (2,981 | ) | (67 | ) | 3,245 | — | 3,245 | ||||||||||||||||||||||||||||
|
Common stock increase
|
364 | 4,651 | — | — | — | — | — | 5,015 | — | 5,015 | ||||||||||||||||||||||||||||||
|
Common stock reduction
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Conversion of financial liabilities into capital
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Increase of other equity instruments
|
— | — | — | 13 | — | — | — | 13 | — | 13 | ||||||||||||||||||||||||||||||
|
Reclassification of financial liabilities to other equity
instruments
|
— | — | — | — | — | — | — | ——— | — | — | ||||||||||||||||||||||||||||||
|
Reclassification of other equity instruments to financial
liabilities
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Dividend distribution
|
— | — | — | — | — | (562 | ) | (1,079 | ) | (1,641 | ) | — | (1,641 | ) | ||||||||||||||||||||||||||
|
Transactions including treasury stock and other equity
instruments (net)
|
— | — | (88 | ) | — | 44 | — | — | (44 | ) | — | (44 | ) | |||||||||||||||||||||||||||
|
Transfers between total equity entries
|
— | — | 1,407 | — | — | (2,419 | ) | 1,012 | — | — | — | |||||||||||||||||||||||||||||
|
Increase/Reduction due to business combinations
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Payments with equity instruments
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Rest of increases/reductions in total equity
|
— | — | (98 | ) | — | — | — | — | (98 | ) | — | (98 | ) | |||||||||||||||||||||||||||
|
Balances as of December 31, 2010
|
2,201 | 17,104 | 5,114 | 23 | (84 | ) | 2,904 | (1,079 | ) | 26,183 | (26 | ) | 26,157 | |||||||||||||||||||||||||||
I-5
Table of Contents
APPENDIX
I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
ARGENTARIA, S.A.
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
| Total Equity Attributed to the Parent Company | ||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Funds | ||||||||||||||||||||||||||||||||||||||||
|
Reserves
|
Other
|
Less:
|
Less:
|
|||||||||||||||||||||||||||||||||||||
|
Common
|
Share
|
(Accumulated
|
Equity
|
Treasury
|
Profit for
|
Dividends
|
Total
|
Valuation
|
Total
|
|||||||||||||||||||||||||||||||
| Stock | Premium | Losses) | Instruments | Stock | the Year | and Remunerations | Stockholders’ Funds | Adjustments | Equity | |||||||||||||||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||||||||||||||||||
|
Balances as of January 1, 2009
|
1,837 | 12,770 | 3,070 | 71 | (143 | ) | 2,835 | (1,878 | ) | 18,562 | 1,151 | 19,713 | ||||||||||||||||||||||||||||
|
Effect of changes in accounting policies
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Effect of correction of errors
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Adjusted initial balance
|
1,837 | 12,770 | 3,070 | 71 | (143 | ) | 2,835 | (1,878 | ) | 18,562 | 1,151 | 19,713 | ||||||||||||||||||||||||||||
|
Total income/expense recognized
|
— | — | — | — | — | 2,981 | — | 2,981 | 492 | 3,473 | ||||||||||||||||||||||||||||||
|
Other changes in equity
|
— | (317 | ) | 823 | (61 | ) | 15 | (2,835 | ) | 866 | (1,509 | ) | — | (1,509 | ) | |||||||||||||||||||||||||
|
Common stock increase
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Common stock reduction
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Conversion of financial liabilities into capital
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Increase of other equity instruments
|
— | — | — | 5 | — | — | — | 5 | — | 5 | ||||||||||||||||||||||||||||||
|
Reclassification of financial liabilities to other equity
instruments
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Reclassification of other equity instruments to financial
liabilities
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Dividend distribution
|
— | — | — | — | — | — | (1,012 | ) | (1,012 | ) | — | (1,012 | ) | |||||||||||||||||||||||||||
|
Transactions including treasury stock and other equity
instruments (net)
|
— | — | (99 | ) | — | 15 | — | — | (84 | ) | — | (84 | ) | |||||||||||||||||||||||||||
|
Transfers between total equity entries
|
— | — | 957 | — | — | (2,835 | ) | 1,878 | — | — | — | |||||||||||||||||||||||||||||
|
Increase/Reduction due to business combinations
|
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
Payments with equity instruments
|
— | (317 | ) | — | (66 | ) | — | — | — | (383 | ) | — | (383 | ) | ||||||||||||||||||||||||||
|
Rest of increases/reductions in total equity
|
— | — | (35 | ) | — | — | — | — | (35 | ) | — | (35 | ) | |||||||||||||||||||||||||||
|
Balances as of December 31, 2009
|
1,837 | 12,453 | 3,893 | 10 | (128 | ) | 2,981 | (1,012 | ) | 20,034 | 1,643 | 21,677 | ||||||||||||||||||||||||||||
I-6
Table of Contents
APPENDIX
I. (Continued). FINANCIAL STATEMENTS OF BANCO BILBAO VIZCAYA
ARGENTARIA, S.A.
CASH FLOW
STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009
| 2010 | 2009 | |||||||
| Millions of euros | ||||||||
|
CASH FLOW FROM OPERATING ACTIVITIES(1)
|
5,867 | 2,372 | ||||||
|
Net income for the year
|
2,904 | 2,981 | ||||||
|
Adjustments to obtain the cash flow from operating
activities:
|
(1,141 | ) | 934 | |||||
|
Depreciation and amortization
|
276 | 243 | ||||||
|
Other adjustments
|
(1,417 | ) | 691 | |||||
|
Net increase/decrease in operating assets
|
(7,251 | ) | (2,022 | ) | ||||
|
Financial assets held for trading
|
(6,184 | ) | (2,455 | ) | ||||
|
Other financial assets designated at fair value through profit
or loss
|
— | — | ||||||
|
Available-for-sale
financial assets
|
(9,252 | ) | 17,238 | |||||
|
Loans and receivables
|
7,963 | (15,759 | ) | |||||
|
Other operating assets
|
222 | (1,046 | ) | |||||
|
Net increase/decrease in operating liabilities
|
(3,656 | ) | (4,032 | ) | ||||
|
Financial liabilities held for trading
|
3,737 | (8,594 | ) | |||||
|
Other financial liabilities designated at fair value through
profit or loss
|
— | — | ||||||
|
Financial liabilities at amortized cost
|
(6,821 | ) | 5,668 | |||||
|
Other operating liabilities
|
(572 | ) | (1,106 | ) | ||||
|
Collection/Payments for income tax
|
509 | 467 | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES(2)
|
(7,108 | ) | (656 | ) | ||||
|
Investment
|
8,329 | 2,306 | ||||||
|
Tangible assets
|
222 | 268 | ||||||
|
Intangible assets
|
260 | 138 | ||||||
|
Investments
|
1,864 | 1,039 | ||||||
|
Other business units
|
— | — | ||||||
|
Non-current assets held for sale and associated liabilities
|
1,014 | 436 | ||||||
|
Held-to-maturity
investments
|
4,969 | 425 | ||||||
|
Other settlements related to investing activities
|
— | — | ||||||
|
Divestments
|
1,221 | 1,650 | ||||||
|
Tangible assets
|
— | 6 | ||||||
|
Intangible assets
|
— | — | ||||||
|
Investments
|
12 | 21 | ||||||
|
Subsidiaries and other business units
|
— | — | ||||||
|
Non-current assets held for sale and associated liabilities
|
749 | 1,350 | ||||||
|
Held-to-maturity
investments
|
232 | 257 | ||||||
|
Other collections related to investing activities
|
228 | 16 | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES(3)
|
2,121 | (1,118 | ) | |||||
|
Investment
|
7,622 | 7,785 | ||||||
|
Dividends
|
1,237 | 1,638 | ||||||
|
Subordinated liabilities
|
1,524 | 1,682 | ||||||
|
Common stock amortization
|
— | — | ||||||
|
Treasury stock acquisition
|
4,828 | 4,232 | ||||||
|
Other items relating to financing activities
|
33 | 233 | ||||||
|
Divestments
|
9,743 | 6,667 | ||||||
|
Subordinated liabilities
|
— | 2,927 | ||||||
|
Common stock increase
|
4,914 | — | ||||||
|
Treasury stock disposal
|
4,829 | 3,740 | ||||||
|
Other items relating to financing activities
|
— | — | ||||||
|
EFFECT OF EXCHANGE RATE CHANGES(4)
|
(1 | ) | 1 | |||||
|
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS
(1+2+3+4)
|
879 | 599 | ||||||
|
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR
|
3,286 | 2,687 | ||||||
|
CASH OR CASH EQUIVALENTS AT END OF THE YEAR
|
4,165 | 3,286 | ||||||
| Millions of euros | ||||||||
|
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR
|
2010 | 2009 | ||||||
|
Cash
|
616 | 650 | ||||||
|
Balance of cash equivalent in central banks
|
3,549 | 2,636 | ||||||
|
Other financial assets
|
— | — | ||||||
|
Less: Bank overdraft refundable on demand
|
— | — | ||||||
|
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR
|
4,165 | 3,286 | ||||||
I-7
Table of Contents
APPENDIX II.
Additional Information On Consolidated Subsidiaries Composing
The BBVA Group
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros(*) | ||||||||||||||||||||||||||||||||||||
|
ADMINISTRADORA DE FONDOS DE PENSIONES (AFP) PROVIDA, S.A.
|
CHILE | PENSION FUNDS MANAGEMENT | 12.7 | 51.6 | 64.3 | 299,781 | 604,814 | 133,974 | 336,179 | 134,661 | ||||||||||||||||||||||||||
|
ADMINISTRADORA DE FONDOS PARA EL RETIRO-BANCOMER, S.A DE
C.V.
|
MEXICO | PENSION FUNDS MANAGEMENT | 17.5 | 82.5 | 100.0 | 378,280 | 253,580 | 57,106 | 121,296 | 75,178 | ||||||||||||||||||||||||||
|
AFP GENESIS ADMINISTRADORA DE FONDOS Y FIDEICOMISOS, S.A.
|
ECUADOR | PENSION FUNDS MANAGEMENT | — | 100.0 | 100.0 | 5,705 | 9,911 | 4,191 | 1,251 | 4,469 | ||||||||||||||||||||||||||
|
AFP HORIZONTE, S.A.
|
PERU | PENSION FUNDS MANAGEMENT | 24.9 | 75.2 | 100.0 | 57,956 | 93,038 | 23,097 | 53,875 | 16,066 | ||||||||||||||||||||||||||
|
AFP PREVISION BBV-ADM.DE FONDOS DE PENSIONES S.A.
|
BOLIVIA | PENSION FUNDS MANAGEMENT | 75.0 | 5.0 | 80.0 | 2,063 | 9,634 | 4,263 | 3,942 | 1,429 | ||||||||||||||||||||||||||
|
AMERICAN FINANCE GROUP, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 15,599 | 16,529 | 930 | 14,370 | 1,229 | ||||||||||||||||||||||||||
|
ANIDA DESARROLLOS INMOBILIARIOS, S.L.
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | 264,143 | 570,278 | 350,002 | 244,826 | (24,550 | ) | |||||||||||||||||||||||||
|
ANIDA DESARROLLOS SINGULARES, S.L.
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | (485,076 | ) | 1,613,790 | 2,134,176 | (293,829 | ) | (226,557 | ) | |||||||||||||||||||||||
|
ANIDA GERMANIA IMMOBILIEN ONE, GMBH
|
GERMANY | REAL ESTATE | — | 100.0 | 100.0 | 4,358 | 20,130 | 15,566 | 4,289 | 275 | ||||||||||||||||||||||||||
|
ANIDA GRUPO INMOBILIARIO, S.L
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | — | 186,112 | 596,399 | (42,568 | ) | (367,719 | ) | ||||||||||||||||||||||||
|
ANIDA INMOBILIARIA, S.A. DE C.V.
|
MEXICO | INVESTMENT COMPANY | — | 100.0 | 100.0 | 106,704 | 98,004 | 9 | 97,847 | 148 | ||||||||||||||||||||||||||
|
ANIDA INMUEBLES ESPAÑA Y PORTUGAL, S.L.
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | (11,543 | ) | 333,936 | 385,249 | (7,631 | ) | (43,682 | ) | |||||||||||||||||||||||
|
ANIDA OPERACIONES SINGULARES, S.L
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | (436,849 | ) | 2,152,664 | 2,644,200 | (293,202 | ) | (198,334 | ) | |||||||||||||||||||||||
|
ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V.
|
MEXICO | REAL ESTATE | — | 100.0 | 100.0 | 97,027 | 143,976 | 46,949 | 97,016 | 11 | ||||||||||||||||||||||||||
|
ANIDA SERVICIOS INMOBILIARIOS, S.A. DE C.V.
|
MEXICO | REAL ESTATE | — | 100.0 | 100.0 | 499 | 919 | 420 | 349 | 150 | ||||||||||||||||||||||||||
|
ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA
|
PORTUGAL | REAL ESTATE | — | 100.0 | 100.0 | — | 21,948 | 24,040 | (1,207 | ) | (885 | ) | ||||||||||||||||||||||||
|
APLICA SOLUCIONES ARGENTINAS, S.A.
|
ARGENTINA | SERVICES | — | 100.0 | 100.0 | 1,399 | 1,604 | 122 | 1,546 | (64 | ) | |||||||||||||||||||||||||
|
APLICA SOLUCIONES TECNOLOGICAS CHILE LIMITADA
|
CHILE | SERVICES | — | 100.0 | 100.0 | (76 | ) | 431 | 506 | 3 | (78 | ) | ||||||||||||||||||||||||
|
APLICA TECNOLOGIA AVANZADA OPERADORA, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 3 | 3 | — | 3 | — | ||||||||||||||||||||||||||
|
APLICA TECNOLOGIA AVANZADA SERVICIOS, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 3 | 3 | — | 3 | — | ||||||||||||||||||||||||||
|
APLICA TECNOLOGIA AVANZADA, S.A. DE C.V.- ATA
|
MEXICO | SERVICES | 100.0 | — | 100.0 | 4 | 60,114 | 46,651 | 7,129 | 6,334 | ||||||||||||||||||||||||||
|
APOYO MERCANTIL S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 2,115 | 268,134 | 267,388 | 1,122 | (376 | ) | |||||||||||||||||||||||||
|
ARIZONA FINANCIAL PRODUCTS, INC
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 718,853 | 721,440 | 2,586 | 705,529 | 13,325 | ||||||||||||||||||||||||||
|
AUTOMERCANTIL-COMERCIO E ALUGER DE VEICULOS AUTOM.,LDA
|
PORTUGAL | FINANCIAL SERVICES | — | 100.0 | 100.0 | 4,720 | 45,950 | 37,434 | 8,795 | (279 | ) | |||||||||||||||||||||||||
|
BAHIA SUR RESORT, S.C
|
SPAIN | INACTIVE | 100.0 | — | 100.0 | 1,436 | 1,438 | 15 | 1,423 | — | ||||||||||||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.
|
PANAMA | BANKING | 54.1 | 44.8 | 98.9 | 19,464 | 1,585,516 | 1,379,245 | 174,908 | 31,363 | ||||||||||||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A.
|
PORTUGAL | BANKING | 9.5 | 90.5 | 100.0 | 338,916 | 8,094,054 | 7,801,158 | 301,751 | (8,855 | ) | |||||||||||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.
|
CHILE | BANKING | — | 68.2 | 68.2 | 543,201 | 11,637,734 | 10,840,980 | 725,374 | 71,380 | ||||||||||||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, S.A.
|
PUERTO RICO | BANKING | — | 100.0 | 100.0 | 178,673 | 3,614,532 | 3,205,830 | 403,714 | 4,988 | ||||||||||||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY, S.A.
|
URUGUAY | BANKING | 100.0 | — | 100.0 | 17,049 | 754,090 | 697,780 | 58,543 | (2,233 | ) | |||||||||||||||||||||||||
|
BANCO CONTINENTAL, S.A.(1)
|
PERU | BANKING | — | 92.2 | 92.2 | 835,381 | 10,077,559 | 9,175,857 | 632,731 | 268,971 | ||||||||||||||||||||||||||
|
BANCO DE PROMOCION DE NEGOCIOS, S.A.
|
SPAIN | BANKING | — | 99.8 | 99.8 | 15,165 | 32,901 | 172 | 32,561 | 168 | ||||||||||||||||||||||||||
|
BANCO DEPOSITARIO BBVA, S.A.
|
SPAIN | BANKING | — | 100.0 | 100.0 | 1,595 | 986,755 | 906,042 | 56,174 | 24,539 | ||||||||||||||||||||||||||
|
BANCO INDUSTRIAL DE BILBAO, S.A.
|
SPAIN | BANKING | — | 99.9 | 99.9 | 97,220 | 212,691 | 1,120 | 191,414 | 20,157 | ||||||||||||||||||||||||||
|
BANCO OCCIDENTAL, S.A.
|
SPAIN | BANKING | 49.4 | 50.6 | 100.0 | 16,464 | 18,014 | 272 | 17,576 | 166 | ||||||||||||||||||||||||||
|
BANCO PROVINCIAL OVERSEAS N.V.(2)
|
NETHERLANDS ANTILLES | BANKING | — | 100.0 | 100.0 | 35,236 | 424,812 | 388,592 | 25,019 | 11,201 | ||||||||||||||||||||||||||
|
BANCO PROVINCIAL S.A. — BANCO UNIVERSAL
|
VENEZUELA | BANKING | 1.9 | 53.8 | 55.6 | 159,952 | 8,492,775 | 7,587,925 | 792,625 | 112,225 | ||||||||||||||||||||||||||
|
BANCOMER FINANCIAL SERVICES INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,930 | 778 | (1,152 | ) | 1,922 | 8 | |||||||||||||||||||||||||
|
BANCOMER FOREIGN EXCHANGE INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 7,412 | 8,593 | 1,181 | 5,945 | 1,467 | ||||||||||||||||||||||||||
|
BANCOMER PAYMENT SERVICES INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 34 | 22 | (11 | ) | 37 | (4 | ) | ||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 | |
| (1) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. | |
| (2) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 48.0%. |
II-1
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros(*) | ||||||||||||||||||||||||||||||||||||
|
BANCOMER TRANSFER SERVICES, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 27,707 | 71,644 | 43,936 | 18,342 | 9,366 | ||||||||||||||||||||||||||
|
BBV AMERICA, S.L.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 479,328 | 880,779 | 21 | 880,228 | 530 | ||||||||||||||||||||||||||
|
BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A.
|
SPAIN | SECURITIES DEALER | 70.0 | — | 70.0 | 1,331 | 9,880 | 2,239 | 6,463 | 1,178 | ||||||||||||||||||||||||||
|
BBVA ASESORIAS FINANCIERAS, S.A.
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | 3,990 | 5,374 | 1,385 | 1,174 | 2,815 | ||||||||||||||||||||||||||
|
BBVA ASSET MANAGEMENT (IRELAND) LIMITED
|
IRELAND | FINANCIAL SERVICES | — | 100.0 | 100.0 | 245 | 270 | 34 | 311 | (75 | ) | |||||||||||||||||||||||||
|
BBVA ASSET MANAGEMENT ADMINISTRADORA GENERAL DE FONDOS S.A.
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | 15,821 | 18,002 | 2,181 | 9,875 | 5,946 | ||||||||||||||||||||||||||
|
BBVA ASSET MANAGEMENT, S.A., SGIIC
|
SPAIN | FINANCIAL SERVICES | 17.0 | 83.0 | 100.0 | 11,436 | 152,334 | 69,240 | 57,373 | 25,721 | ||||||||||||||||||||||||||
|
BBVA AUTORENTING SPA
|
ITALY | SERVICES | — | 100.0 | 100.0 | 66,793 | 314,830 | 281,221 | 30,091 | 3,518 | ||||||||||||||||||||||||||
|
BBVA BANCO DE FINANCIACION S.A.
|
SPAIN | BANKING | — | 100.0 | 100.0 | 64,200 | 703,047 | 630,388 | 72,438 | 221 | ||||||||||||||||||||||||||
|
BBVA BANCO FRANCES, S.A.
|
ARGENTINA | BANKING | 45.7 | 30.4 | 76.0 | 64,589 | 5,249,989 | 4,563,209 | 459,362 | 227,418 | ||||||||||||||||||||||||||
|
BBVA BANCOMER FINANCIAL HOLDINGS, INC.
|
UNITED STATES | INVESTMENT COMPANY | — | 100.0 | 100.0 | 48,091 | 42,900 | (5,324 | ) | 37,394 | 10,830 | |||||||||||||||||||||||||
|
BBVA BANCOMER GESTION, S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 30,613 | 54,585 | 23,972 | 12,548 | 18,065 | ||||||||||||||||||||||||||
|
BBVA BANCOMER OPERADORA, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 41,407 | 304,008 | 262,600 | 30,568 | 10,840 | ||||||||||||||||||||||||||
|
BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 534 | 24,503 | 23,969 | 394 | 140 | ||||||||||||||||||||||||||
|
BBVA BANCOMER, S.A. DE C.V.
|
MEXICO | BANKING | — | 100.0 | 100.0 | 6,561,797 | 69,666,830 | 63,107,804 | 5,212,420 | 1,346,606 | ||||||||||||||||||||||||||
|
BBVA BRASIL BANCO DE INVESTIMENTO, S.A.
|
BRASIL | BANKING | 100.0 | — | 100.0 | 16,166 | 47,756 | 6,722 | 39,060 | 1,974 | ||||||||||||||||||||||||||
|
BBVA BROKER, CORREDURIA DE SEGUROS Y REASEGUROS, S.A. (Ex-BBVA
CORREDURIA TECNICA ASEGURADORA, S.A.)
|
SPAIN | FINANCIAL SERVICES | 99.9 | 0.1 | 100.0 | 297 | 35,016 | 3,907 | 25,730 | 5,379 | ||||||||||||||||||||||||||
|
BBVA CAPITAL FINANCE, S.A.
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 60 | 2,983,028 | 2,982,710 | 267 | 51 | ||||||||||||||||||||||||||
|
BBVA CARTERA DE INVERSIONES,SICAV,S.A.
|
SPAIN | VARIABLE CAPITAL | 100.0 | — | 100.0 | 118,444 | 120,093 | 121 | 118,880 | 1,092 | ||||||||||||||||||||||||||
|
BBVA COLOMBIA, S.A.
|
COLOMBIA | BANKING | 76.2 | 19.2 | 95.4 | 265,416 | 8,634,332 | 7,753,127 | 714,310 | 166,895 | ||||||||||||||||||||||||||
|
BBVA COMERCIALIZADORA LTDA.
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | (1,154 | ) | 3,050 | 4,205 | (710 | ) | (445 | ) | |||||||||||||||||||||||
|
BBVA COMPASS CONSULTING & BENEFITS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 13,449 | 13,723 | 275 | 13,143 | 305 | ||||||||||||||||||||||||||
|
BBVA COMPASS INSURANCE AGENCY, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 146,614 | 155,943 | 9,328 | 140,493 | 6,122 | ||||||||||||||||||||||||||
|
BBVA COMPASS INVESTMENT SOLUTIONS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 51,158 | 56,021 | 4,862 | 40,773 | 10,386 | ||||||||||||||||||||||||||
|
BBVA CONSOLIDAR SEGUROS, S.A.
|
ARGENTINA | INSURANCES SERVICES | 87.8 | 12.2 | 100.0 | 6,496 | 48,124 | 29,304 | 17,334 | 1,486 | ||||||||||||||||||||||||||
|
BBVA CONSULTING ( BEIJING) LIMITED
|
CHINA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 477 | 683 | 182 | 440 | 61 | ||||||||||||||||||||||||||
|
BBVA CONSULTORIA, S.A.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 2,227 | 4,257 | 707 | 2,933 | 617 | ||||||||||||||||||||||||||
|
BBVA CORREDORA TECNICA DE SEGUROS LIMITADA
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | 13,377 | 15,902 | 2,501 | 7,075 | 6,326 | ||||||||||||||||||||||||||
|
BBVA CORREDORES DE BOLSA LIMITADA
|
CHILE | SECURITIES DEALER | — | 100.0 | 100.0 | 48,415 | 573,180 | 524,768 | 41,467 | 6,945 | ||||||||||||||||||||||||||
|
BBVA DINERO EXPRESS, S.A.U
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 2,186 | 14,524 | 9,298 | 4,820 | 406 | ||||||||||||||||||||||||||
|
BBVA FACTORING LIMITADA (CHILE)
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | 6,765 | 31,974 | 25,207 | 5,443 | 1,324 | ||||||||||||||||||||||||||
|
BBVA FIDUCIARI1A, S.A.
|
COLOMBIA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 23,453 | 26,094 | 2,614 | 17,487 | 5,993 | ||||||||||||||||||||||||||
|
BBVA FINANCE (UK), LTD.
|
UNITED KINGDOM | FINANCIAL SERVICES | — | 100.0 | 100.0 | 3,324 | 24,867 | 13,603 | 11,198 | 66 | ||||||||||||||||||||||||||
|
BBVA FINANCE SPA.
|
ITALY | FINANCIAL SERVICES | 100.0 | — | 100.0 | 4,648 | 6,860 | 1,332 | 5,398 | 130 | ||||||||||||||||||||||||||
|
BBVA FINANCIAMIENTO AUTOMOTRIZ, S.A.
|
CHILE | INVESTMENT COMPANY | — | 100.0 | 100.0 | 145,494 | 145,529 | 35 | 120,467 | 25,027 | ||||||||||||||||||||||||||
|
BBVA FINANZIA, S.p.A
|
ITALY | FINANCIAL SERVICES | 50.0 | 50.0 | 100.0 | 29,200 | 600,187 | 573,633 | 38,061 | (11,507 | ) | |||||||||||||||||||||||||
|
BBVA FUNDOS, S.Gestora Fundos Pensoes, S.A.
|
PORTUGAL | FINANCIAL SERVICES | — | 100.0 | 100.0 | 998 | 8,679 | 445 | 6,448 | 1,786 | ||||||||||||||||||||||||||
|
BBVA GEST, S.G.DE FUNDOS DE INVESTIMENTO MOBILIARIO, S.A.
|
PORTUGAL | FINANCIAL SERVICES | — | 100.0 | 100.0 | 998 | 7,206 | 120 | 6,834 | 252 | ||||||||||||||||||||||||||
|
BBVA GLOBAL FINANCE LTD.
|
CAYMAN ISLANDS | FINANCIAL SERVICES | 100.0 | — | 100.0 | — | 688,846 | 685,142 | 3,776 | (72 | ) | |||||||||||||||||||||||||
|
BBVA GLOBAL MARKETS B.V.
|
NETHERLANDS | FINANCIAL SERVICES | 100.0 | — | 100.0 | 18 | 256,964 | 256,960 | 17 | (13 | ) | |||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 |
II-2
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros (*) | ||||||||||||||||||||||||||||||||||||
|
BBVA HORIZONTE PENSIONES Y CESANTIAS, S.A.
|
COLOMBIA | PENSION FUNDS MANAGEMENT | 78.5 | 21.4 | 100.0 | 62,061 | 162,934 | 35,812 | 102,872 | 24,250 | ||||||||||||||||||||||||||
|
BBVA INMOBILIARIA E INVERSIONES, S.A.
|
CHILE | REAL ESTATE | — | 68.1 | 68.1 | 5,652 | 44,049 | 35,750 | 8,641 | (342 | ) | |||||||||||||||||||||||||
|
BBVA INSTITUIÇAO FINANCEIRA DE CREDITO, S.A.
|
PORTUGAL | FINANCIAL SERVICES | — | 100.0 | 100.0 | 33,148 | 443,576 | 402,234 | 39,123 | 2,219 | ||||||||||||||||||||||||||
|
BBVA INTERNATIONAL LIMITED
|
CAYMAN ISLANDS | FINANCIAL SERVICES | 100.0 | — | 100.0 | 1 | 503,692 | 501,107 | 2,751 | (166 | ) | |||||||||||||||||||||||||
|
BBVA INTERNATIONAL PREFERRED, S.A.U
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 60 | 1,697,891 | 1,697,121 | 378 | 392 | ||||||||||||||||||||||||||
|
BBVA INVERSIONES CHILE, S.A.
|
CHILE | FINANCIAL SERVICES | 61.2 | 38.8 | 100.0 | 580,584 | 1,254,723 | 2,328 | 1,088,536 | 163,859 | ||||||||||||||||||||||||||
|
BBVA IRELAND PLC
|
IRELAND | FINANCIAL SERVICES | 100.0 | — | 100.0 | 180,381 | 881,138 | 514,594 | 344,782 | 21,762 | ||||||||||||||||||||||||||
|
BBVA LEASIMO — SOCIEDADE DE LOCAÇAO FINANCEIRA,
S.A.
|
PORTUGAL | FINANCIAL SERVICES | — | 100.0 | 100.0 | 11,576 | 28,620 | 18,456 | 10,422 | (258 | ) | |||||||||||||||||||||||||
|
BBVA LUXINVEST, S.A.
|
LUXEMBOURG | INVESTMENT COMPANY | 36.0 | 64.0 | 100.0 | 255,843 | 1,477,238 | 65,971 | 1,406,909 | 4,358 | ||||||||||||||||||||||||||
|
BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A.
|
SPAIN | FINANCIAL SERVICES | — | 100.0 | 100.0 | 60 | 85,311 | 73,962 | 5,784 | 5,565 | ||||||||||||||||||||||||||
|
BBVA NOMINEES LIMITED
|
UNITED KINGDOM | SERVICES | 100.0 | — | 100.0 | — | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
BBVA PARAGUAY, S.A.
|
PARAGUAY | BANKING | 100.0 | — | 100.0 | 22,598 | 1,121,259 | 1,010,091 | 71,269 | 39,899 | ||||||||||||||||||||||||||
|
BBVA PATRIMONIOS GESTORA SGIIC, S.A.
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 3,907 | 28,634 | 3,404 | 20,143 | 5,087 | ||||||||||||||||||||||||||
|
BBVA PENSIONES, SA, ENTIDAD GESTORA DE FONDOS DE PENSIONES
|
SPAIN | PENSION FUNDS MANAGEMENT | 100.0 | — | 100.0 | 12,922 | 72,968 | 34,106 | 25,939 | 12,923 | ||||||||||||||||||||||||||
|
BBVA PLANIFICACION PATRIMONIAL, S.L.
|
SPAIN | FINANCIAL SERVICES | 80.0 | 20.0 | 100.0 | 1 | 502 | 3 | 493 | 6 | ||||||||||||||||||||||||||
|
BBVA PROPIEDAD F.I.I
|
SPAIN | REAL ESTATE INVESTMENT COMPANY | — | 100.0 | 100.0 | 1,384,561 | 1,469,283 | 74,743 | 1,474,196 | (79,656 | ) | |||||||||||||||||||||||||
|
BBVA PUERTO RICO HOLDING CORPORATION
|
PUERTO RICO | INVESTMENT COMPANY | 100.0 | — | 100.0 | 322,837 | 179,048 | 6 | 179,107 | (65 | ) | |||||||||||||||||||||||||
|
BBVA RE LIMITED
|
IRELAND | INSURANCES SERVICES | — | 100.0 | 100.0 | 656 | 67,631 | 39,901 | 22,296 | 5,434 | ||||||||||||||||||||||||||
|
BBVA RENTING, S.A.
|
SPAIN | FINANCIAL SERVICES | — | 100.0 | 100.0 | 20,976 | 840,056 | 747,739 | 85,809 | 6,508 | ||||||||||||||||||||||||||
|
BBVA RENTING, SPA
|
ITALY | SERVICES | — | 100.0 | 100.0 | 8,453 | 56,154 | 50,629 | 7,891 | (2,366 | ) | |||||||||||||||||||||||||
|
BBVA SECURITIES INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 41,796 | 45,580 | 12,452 | 27,484 | 5,644 | ||||||||||||||||||||||||||
|
BBVA SECURITIES OF PUERTO RICO, INC.
|
PUERTO RICO | FINANCIAL SERVICES | 100.0 | — | 100.0 | 4,726 | 6,963 | 755 | 6,082 | 126 | ||||||||||||||||||||||||||
|
BBVA SEGUROS COLOMBIA, S.A.
|
COLOMBIA | INSURANCES SERVICES | 94.0 | 6.0 | 100.0 | 9,490 | 42,797 | 27,578 | 14,065 | 1,154 | ||||||||||||||||||||||||||
|
BBVA SEGUROS DE VIDA COLOMBIA, S.A.
|
COLOMBIA | INSURANCES SERVICES | 94.0 | 6.0 | 100.0 | 13,242 | 329,602 | 278,040 | 41,754 | 9,808 | ||||||||||||||||||||||||||
|
BBVA SEGUROS DE VIDA, S.A.
|
CHILE | INSURANCES SERVICES | — | 100.0 | 100.0 | 56,178 | 397,262 | 341,085 | 45,780 | 10,397 | ||||||||||||||||||||||||||
|
BBVA SEGUROS INC.
|
PUERTO RICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 187 | 5,459 | 629 | 3,895 | 935 | ||||||||||||||||||||||||||
|
BBVA SEGUROS, S.A., DE SEGUROS Y REASEGUROS
|
SPAIN | INSURANCES SERVICES | 94.3 | 5.7 | 100.0 | 414,659 | 10,913,118 | 10,164,287 | 508,373 | 240,458 | ||||||||||||||||||||||||||
|
BBVA SENIOR FINANCE, S.A.U
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 60 | 15,154,181 | 15,153,452 | 346 | 383 | ||||||||||||||||||||||||||
|
BBVA SERVICIOS CORPORATIVOS LIMITADA
|
CHILE | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,297 | 10,949 | 9,648 | (1,968 | ) | 3,269 | |||||||||||||||||||||||||
|
BBVA SERVICIOS, S.A.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 354 | 10,791 | 1,189 | 7,031 | 2,571 | ||||||||||||||||||||||||||
|
BBVA SOCIEDAD DE LEASING INMOBILIARIO, S.A.
|
CHILE | FINANCIAL SERVICES | — | 97.5 | 97.5 | 15,901 | 64,945 | 48,633 | 14,795 | 1,517 | ||||||||||||||||||||||||||
|
BBVA SUBORDINATED CAPITAL S.A.U
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 130 | 3,434,727 | 3,434,217 | 403 | 107 | ||||||||||||||||||||||||||
|
BBVA SUIZA, S.A. (BBVA SWITZERLAND)
|
SWITZERLAND | BANKING | 39.7 | 60.3 | 100.0 | 58,107 | 1,406,692 | 1,008,595 | 377,797 | 20,300 | ||||||||||||||||||||||||||
|
BBVA TRADE, S.A.
|
SPAIN | INVESTMENT COMPANY | — | 100.0 | 100.0 | 6,379 | 21,274 | 11,035 | 8,171 | 2,068 | ||||||||||||||||||||||||||
|
BBVA U.S. SENIOR S.A.U.
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 169 | 898,687 | 898,650 | 138 | (101 | ) | |||||||||||||||||||||||||
|
BBVA USA BANCSHARES, INC.
|
UNITED STATES | INVESTMENT COMPANY | 100.0 | — | 100.0 | 9,268,740 | 9,106,626 | 7,897 | 9,355,563 | (256,834 | ) | |||||||||||||||||||||||||
|
BBVA VALORES COLOMBIA, S.A. COMISIONISTA DE BOLSA
|
COLOMBIA | SECURITIES DEALER | — | 100.0 | 100.0 | 4,747 | 9,330 | 4,583 | 3,581 | 1,166 | ||||||||||||||||||||||||||
|
BBVA WEALTH SOLUTIONS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 25,398 | 25,990 | 591 | 25,269 | 130 | ||||||||||||||||||||||||||
|
BCL INTERNATIONAL FINANCE. LTD.
|
CAYMAN ISLANDS | FINANCIAL SERVICES | 100.0 | — | 100.0 | — | 4 | 4 | (5 | ) | 5 | |||||||||||||||||||||||||
|
BILBAO VIZCAYA AMERICA B.V.
|
NETHERLANDS | INIVESTMENT COMPANY | — | 100.0 | 100.0 | 746,000 | 629,416 | 22 | 608,766 | 20,628 | ||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 |
II-3
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros (*) | ||||||||||||||||||||||||||||||||||||
|
BILBAO VIZCAYA HOLDING, S.A.
|
SPAIN | INVESTMENT COMPANY | 89.0 | 11.0 | 100.0 | 34,771 | 251,089 | 21,027 | 223,504 | 6,558 | ||||||||||||||||||||||||||
|
BLUE INDICO INVESTMENTS, S.L.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 49,106 | 55,957 | 207 | 60,897 | (5,147 | ) | |||||||||||||||||||||||||
|
C B TRANSPORT ,INC.
|
UNITED STATES | SERVICES | — | 100.0 | 100.0 | 12,427 | 13,622 | 1,195 | 12,803 | (376 | ) | |||||||||||||||||||||||||
|
CAPITAL INVESTMENT COUNSEL, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 22,807 | 24,088 | 1,280 | 21,037 | 1,771 | ||||||||||||||||||||||||||
|
CARTERA E INVERSIONES S.A., CIA DE
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 92,016 | 253,247 | 48,030 | 201,140 | 4,077 | ||||||||||||||||||||||||||
|
CASA DE BOLSA BBVA BANCOMER , S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 77,423 | 99,183 | 21,758 | 47,743 | 29,682 | ||||||||||||||||||||||||||
|
CASA DE CAMBIO MULTIDIVISAS, SA DE CV
|
MEXICO | IN LIQUIDATION | — | 100.0 | 100.0 | 171 | 170 | — | 169 | 1 | ||||||||||||||||||||||||||
|
CIA. GLOBAL DE MANDATOS Y REPRESENTACIONES, S.A.
|
URUGUAY | IN LIQUIDATION | — | 100.0 | 100.0 | 108 | 187 | 2 | 185 | — | ||||||||||||||||||||||||||
|
CIDESSA DOS, S.L.
|
SPAIN | INVESTMENT COMPANY | — | 100.0 | 100.0 | 12,062 | 12,183 | 117 | 12,047 | 19 | ||||||||||||||||||||||||||
|
CIDESSA UNO, S.L.
|
SPAIN | INVESTMENT COMPANY | — | 100.0 | 100.0 | 4,754 | 898,460 | 22,374 | 994,155 | (118,069 | ) | |||||||||||||||||||||||||
|
CIERVANA, S.L.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 53,164 | 70,156 | 3,232 | 66,879 | 45 | ||||||||||||||||||||||||||
|
COMERCIALIZADORA CORPORATIVA SAC(1)
|
PERU | FINANCIAL SERVICES | — | 100.0 | 100.0 | 449 | 1,050 | 601 | 142 | 307 | ||||||||||||||||||||||||||
|
COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A.
|
COLOMBIA | SERVICES | — | 100.0 | 100.0 | 587 | 1,738 | 752 | 680 | 306 | ||||||||||||||||||||||||||
|
COMPASS ASSET ACCEPTANCE COMPANY, LLC
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 363,575 | 363,575 | — | 362,726 | 849 | ||||||||||||||||||||||||||
|
COMPASS AUTO RECEIVABLES CORPORATION
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 3,125 | 3,125 | — | 3,127 | (2 | ) | |||||||||||||||||||||||||
|
COMPASS BANCSHARES, INC.
|
UNITED STATES | INVESTMENT COMPANY | — | 100.0 | 100.0 | 9,083,594 | 9,178,765 | 95,174 | 9,339,985 | (256,394 | ) | |||||||||||||||||||||||||
|
COMPASS BANK
|
UNITED STATES | BANKING | — | 100.0 | 100.0 | 9,049,899 | 51,111,008 | 42,061,111 | 9,289,908 | (240,011 | ) | |||||||||||||||||||||||||
|
COMPASS CAPITAL MARKETS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 5,626,344 | 5,626,344 | — | 5,509,976 | 116,368 | ||||||||||||||||||||||||||
|
COMPASS CUSTODIAL SERVICES, INC.
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
COMPASS FINANCIAL CORPORATION
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 6,886 | 53,984 | 47,099 | 6,824 | 61 | ||||||||||||||||||||||||||
|
COMPASS GP, INC.
|
UNITED STATES | INVESTMENT COMPANY | — | 100.0 | 100.0 | 34,802 | 43,807 | 9,005 | 34,272 | 530 | ||||||||||||||||||||||||||
|
COMPASS INVESTMENTS, INC.
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
COMPASS LIMITED PARTNER, INC.
|
UNITED STATES | INVESTMENT COMPANY | — | 100.0 | 100.0 | 4,872,688 | 4,873,129 | 440 | 4,770,173 | 102,516 | ||||||||||||||||||||||||||
|
COMPASS LOAN HOLDINGS TRS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 58,163 | 60,101 | 1,938 | 58,118 | 45 | ||||||||||||||||||||||||||
|
COMPASS MORTGAGE CORPORATION
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,938,209 | 1,938,459 | 249 | 1,924,839 | 13,371 | ||||||||||||||||||||||||||
|
COMPASS MORTGAGE FINANCING, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 26 | 26 | — | 26 | — | ||||||||||||||||||||||||||
|
COMPASS MULTISTATE SERVICES CORPORATION
|
UNITED STATES | SERVICES | — | 100.0 | 100.0 | 2,807 | 2,862 | 55 | 2,807 | — | ||||||||||||||||||||||||||
|
COMPASS SOUTHWEST, LP
|
UNITED STATES | BANKING | — | 100.0 | 100.0 | 4,008,054 | 4,008,406 | 351 | 3,916,928 | 91,127 | ||||||||||||||||||||||||||
|
COMPASS TEXAS ACQUISITION CORPORATION
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1,694 | 1,711 | 17 | 1,693 | 1 | ||||||||||||||||||||||||||
|
COMPASS TEXAS MORTGAGE FINANCING, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 26 | 26 | — | 26 | — | ||||||||||||||||||||||||||
|
COMPASS TRUST II
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | — | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
COMPASS WEALTH MANAGERS COMPANY
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
COMPAÑIA CHILENA DE INVERSIONES, S.L.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 580,313 | 590,050 | 3,534 | 585,508 | 1,008 | ||||||||||||||||||||||||||
|
COMUNIDAD FINANCIERA ÍNDICO, S.L.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 69 | 62 | — | 160 | (98 | ) | |||||||||||||||||||||||||
|
CONSOLIDAR A.F.J.P., S.A.
|
ARGENTINA | PENSION FUNDS MANAGEMENT | 46.1 | 53.9 | 100.0 | 4,025 | 19,566 | 12,099 | 10,727 | (3,260 | ) | |||||||||||||||||||||||||
|
CONSOLIDAR ASEGURADORA DE RIESGOS DEL TRABAJO, S.A.
|
ARGENTINA | INSURANCES SERVICES | 87.5 | 12.5 | 100.0 | 29,434 | 237,856 | 199,586 | 33,211 | 5,059 | ||||||||||||||||||||||||||
|
CONSOLIDAR CIA. DE SEGUROS DE RETIRO, S.A.
|
ARGENTINA | INSURANCES SERVICES | 33.8 | 66.2 | 100.0 | 32,612 | 608,698 | 559,442 | 36,596 | 12,660 | ||||||||||||||||||||||||||
|
CONSOLIDAR COMERCIALIZADORA, S.A.
|
ARGENTINA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,440 | 12,577 | 11,139 | 8,864 | (7,426 | ) | |||||||||||||||||||||||||
|
CONTENTS AREA, S.L.
|
SPAIN | INVESTMENT COMPANY | — | 100.0 | 100.0 | 1,251 | 1,456 | 44 | 3,789 | (2,377 | ) | |||||||||||||||||||||||||
|
CONTINENTAL BOLSA, SDAD. AGENTE DE BOLSA, S.A.(2)
|
PERU | SECURITIES DEALER | — | 100.0 | 100.0 | 6,243 | 12,399 | 6,156 | 5,283 | 960 | ||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 | |
| (1) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 50.0%. | |
| (2) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-4
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros(*) | ||||||||||||||||||||||||||||||||||||
|
CONTINENTAL DPR FINANCE COMPANY(1)
|
CAYMAN ISLANDS | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 350,885 | 350,885 | — | — | ||||||||||||||||||||||||||
|
CONTINENTAL S.A. SOCIEDAD ADMINISTRADORA DE FONDOS(1)
|
PERU | FINANCIAL SERVICES | — | 100.0 | 100.0 | 9,013 | 10,700 | 1,686 | 6,587 | 2,427 | ||||||||||||||||||||||||||
|
CONTINENTAL SOCIEDAD TITULIZADORA, S.A.(1)
|
PERU | FINANCIAL SERVICES | — | 100.0 | 100.0 | 440 | 467 | 27 | 437 | 3 | ||||||||||||||||||||||||||
|
CONTRATACION DE PERSONAL, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 2,633 | 11,486 | 8,853 | 2,221 | 412 | ||||||||||||||||||||||||||
|
CORPORACION DE ALIMENTACION Y BEBIDAS, S.A.
|
SPAIN | INVESTMENT COMPANY | — | 100.0 | 100.0 | 138,508 | 164,685 | 1,282 | 162,956 | 447 | ||||||||||||||||||||||||||
|
CORPORACION GENERAL FINANCIERA, S.A.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 509,716 | 1,704,190 | 44,359 | 1,604,045 | 55,786 | ||||||||||||||||||||||||||
|
DESARROLLADORA Y VENDEDORA DE CASAS, S.A
|
MEXICO | REAL ESTATE | — | 100.0 | 100.0 | 13 | 15 | 2 | 16 | (3 | ) | |||||||||||||||||||||||||
|
DESARROLLO URBANISTICO DE CHAMARTIN, S.A.
|
SPAIN | REAL ESTATE | — | 72.5 | 72.5 | 52,210 | 91,653 | 19,698 | 72,086 | (131 | ) | |||||||||||||||||||||||||
|
DESITEL TECNOLOGIA Y SISTEMAS, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 1,616 | 1,616 | — | 1,569 | 47 | ||||||||||||||||||||||||||
|
DINERO EXPRESS SERVICIOS GLOBALES, S.A.
|
SPAIN | FINANCIAL SERVICES | 100.0 | — | 100.0 | 2,042 | 1,771 | 229 | 2,005 | (463 | ) | |||||||||||||||||||||||||
|
ECONTA GESTION INTEGRAL, S.L.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 372 | 1,829 | 1,639 | 1,305 | (1,115 | ) | |||||||||||||||||||||||||
|
EL ENCINAR METROPOLITANO, S.A.
|
SPAIN | REAL ESTATE | — | 99.0 | 99.0 | 6,253 | 7,240 | 1,056 | 5,378 | 806 | ||||||||||||||||||||||||||
|
EL OASIS DE LAS RAMBLAS, S.L.
|
SPAIN | REAL ESTATE | — | 70.0 | 70.0 | 167 | 473 | 191 | 257 | 25 | ||||||||||||||||||||||||||
|
ENTRE2 SERVICIOS FINANCIEROS, E.F.C., S.A.
|
SPAIN | FINANCIAL SERVICES | — | 100.0 | 100.0 | 9,139 | 9,515 | 12 | 9,570 | (67 | ) | |||||||||||||||||||||||||
|
ESPANHOLA COMERCIAL E SERVIÇOS, LTDA
|
BRASIL | FINANCIAL SERVICES | 100.0 | — | 100.0 | — | 985 | 313 | 6,945 | (6,273 | ) | |||||||||||||||||||||||||
|
ESTACION DE AUTOBUSES CHAMARTIN, S.A.
|
SPAIN | SERVICES | — | 51.0 | 51.0 | 31 | 30 | — | 30 | — | ||||||||||||||||||||||||||
|
EUROPEA DE TITULIZACION, S.A., S.G.F.T.
|
SPAIN | FINANCIAL SERVICES | 87.5 | — | 87.5 | 1,974 | 23,916 | 1,328 | 16,407 | 6,181 | ||||||||||||||||||||||||||
|
FIDEICOMISO
28991-8
TRADING EN LOS MCADOS FINANCIEROS
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 2,259 | 2,259 | — | 2,150 | 109 | ||||||||||||||||||||||||||
|
FIDEICOMISO BBVA BANCOMER SERVICIOS
N
o
F/47433-8, S.A.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 41,490 | 48,139 | 6,648 | 39,573 | 1,918 | ||||||||||||||||||||||||||
|
FIDEICOMISO F/29763-0 SOCIO LIQUIDADOR DE OPERACIONES
FINANCIERAS DERIVADAS CUENTA PROPIA
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 24,506 | 24,947 | 440 | 23,083 | 1,424 | ||||||||||||||||||||||||||
|
FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES
FINANCIERAS DERIVADAS CUENTA TERCEROS
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 39,772 | 40,540 | 767 | 36,556 | 3,217 | ||||||||||||||||||||||||||
|
FIDEICOMISO HARES BBVA BANCOMER F/
47997-2
|
MEXICO | REAL ESTATE | — | 80.3 | 80.3 | 28,371 | 35,433 | 2,275 | 28,979 | 4,179 | ||||||||||||||||||||||||||
|
FIDEICOMISO N.847 EN BANCO INVEX, S.A.,INSTITUCION DE BANCA
MULTIPLE, INVEX GRUPO FINANCIERO, FIDUCIARIO (FIDEIC. 4 EMISION)
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 29 | 270,963 | 273,221 | (355 | ) | (1,903 | ) | ||||||||||||||||||||||||
|
FIDEICOMISO
N
o
.402900-5
ADMINISTRACION DE INMUEBLES
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 2,522 | 2,734 | 201 | 2,533 | — | ||||||||||||||||||||||||||
|
FIDEICOMISO
N
o
.711,
EN BANCO INVEX, S.A. INSTITUCION DE BANCA MÚLTIPLE, INVEX
GRUPO FINANCIERO, FIDUCIARIO (FIDEICOMISO INVEX
1
a
EMISION)
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 111,196 | 107,748 | 5,365 | (1,917 | ) | |||||||||||||||||||||||||
|
FIDEICOMISO
N
o
.752 EN
BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO
FINANCIERO, FIDUCIARIO(FIDEIC.INVEX
2
a
EMISION)
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 51,183 | 49,731 | 2,185 | (733 | ) | |||||||||||||||||||||||||
|
FIDEICOMISO
N
o
.781EN
BANCO INVEX, S.A.,INSTITUCION DE BANCA MULTIPLE, INVEX GRUPO
FINANCIERO, FIDUCIARIO (FIDEIC. 3ra EMISION)
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 295,754 | 275,519 | 5,549 | 14,686 | ||||||||||||||||||||||||||
|
FINANCEIRA DO COMERCIO EXTERIOR S.A.R.
|
PORTUGAL | INACTIVE | 100.0 | — | 100.0 | 51 | 35 | — | 36 | (1 | ) | |||||||||||||||||||||||||
|
FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 3,405 | 7,428 | 4,023 | 4,811 | (1,406 | ) | |||||||||||||||||||||||||
|
FINANZIA AUTORENTING, S.A.
|
SPAIN | SERVICES | 27.1 | 72.9 | 100.0 | 49,879 | 540,085 | 528,174 | 13,250 | (1,339 | ) | |||||||||||||||||||||||||
|
FINANZIA, BANCO DE CREDITO, S.A.
|
SPAIN | BANKING | — | 100.0 | 100.0 | 174,207 | 7,778,930 | 7,689,540 | 197,799 | (108,409 | ) | |||||||||||||||||||||||||
|
FRANCES ADMINISTRADORA DE INVERSIONES, S.A.
|
ARGENTINA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 7,118 | 10,436 | 3,318 | 6,091 | 1,027 | ||||||||||||||||||||||||||
|
FRANCES VALORES SOCIEDAD DE BOLSA, S.A.
|
ARGENTINA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 2,255 | 3,686 | 1,431 | 1,482 | 773 | ||||||||||||||||||||||||||
|
FUTURO FAMILIAR, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 439 | 1,176 | 736 | 340 | 100 | ||||||||||||||||||||||||||
|
GESTION DE PREVISION Y PENSIONES, S.A.
|
SPAIN | PENSION FUNDS MANAGEMENT | 60.0 | — | 60.0 | 8,830 | 27,725 | 2,587 | 20,873 | 4,265 | ||||||||||||||||||||||||||
|
GESTION Y ADMINISTRACION DE RECIBOS, S.A.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 150 | 2,780 | 405 | 1,887 | 488 | ||||||||||||||||||||||||||
|
GOBERNALIA GLOBAL NET, S.A.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 947 | 2,977 | 1,408 | 1,553 | 16 | ||||||||||||||||||||||||||
|
GRAN JORGE JUAN, S.A.
|
SPAIN | REAL ESTATE | 100.0 | — | 100.0 | 110,115 | 515,862 | 457,176 | 60,453 | (1,767 | ) | |||||||||||||||||||||||||
|
GRANFIDUCIARIA
|
COLOMBIA | IN LIQUIDATION | — | 90.0 | 90.0 | — | 218 | 128 | 136 | (46 | ) | |||||||||||||||||||||||||
|
GRUPO FINANCIERO BBVA BANCOMER, S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | 100.0 | — | 100.0 | 6,677,124 | 7,562,447 | 1,002 | 5,984,850 | 1,576,595 | ||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 | |
| (1) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-5
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||||||
| Thousands of euros (*) | ||||||||||||||||||||||||||||||||||||||||
|
GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V.
|
MEXICO | SERVICES | — | 58.4 | 58.4 | 4,049 | 23,913 | 16,981 | 7,368 | (436 | ) | |||||||||||||||||||||||||||||
|
GUARANTY BUSINESS CREDIT CORPORATION
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 27,132 | 28,524 | 1,391 | 25,838 | 1,295 | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS HOLDING COMPANY
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | (23,927 | ) | 45,646 | 69,571 | (22,290 | ) | (1,635 | ) | |||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-2
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 35,040 | 35,193 | 153 | 34,866 | 174 | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-3
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-4
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-5
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-6
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-7
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-8
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES LLC-9
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||||||
|
GUARANTY PLUS PROPERTIES, INC-1
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 9,349 | 9,351 | 2 | 9,730 | (381 | ) | |||||||||||||||||||||||||||||
|
HIPOTECARIA NACIONAL MEXICANA INCORPORATED
|
UNITED STATES | REAL ESTATE | — | 100.0 | 100.0 | 312 | 408 | 95 | 183 | 130 | ||||||||||||||||||||||||||||||
|
HIPOTECARIA NACIONAL, S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 58,701 | 91,122 | 11,779 | 80,170 | (827 | ) | |||||||||||||||||||||||||||||
|
HOLDING CONTINENTAL, S.A.
|
PERU | INVESTMENT COMPANY | 50.0 | — | 50.0 | 123,678 | 884,998 | 5 | 628,029 | 256,964 | ||||||||||||||||||||||||||||||
|
HOMEOWNERS LOAN CORPORATION
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 7,786 | 8,062 | 275 | 7,970 | (183 | ) | |||||||||||||||||||||||||||||
|
HUMAN RESOURCES PROVIDER
|
UNITED STATES | SERVICES | — | 100.0 | 100.0 | 698,212 | 698,237 | 24 | 703,161 | (4,948 | ) | |||||||||||||||||||||||||||||
|
HUMAN RESOURCES SUPPORT, INC.
|
UNITED STATES | SERVICES | — | 100.0 | 100.0 | 696,453 | 696,511 | 59 | 701,608 | (5,156 | ) | |||||||||||||||||||||||||||||
|
IBERNEGOCIO DE TRADE, S.L.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 3,687 | 3,688 | — | 1,688 | 2,000 | ||||||||||||||||||||||||||||||
|
INGENIERIA EMPRESARIAL MULTIBA, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
INMOBILIARIA BILBAO, S.A.
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | 3,842 | 3,847 | 1 | 3,837 | 9 | ||||||||||||||||||||||||||||||
|
INMUEBLES Y RECUPERACIONES CONTINENTAL S.A(1)
|
PERU | REAL ESTATE | — | 100.0 | 100.0 | 5,392 | 6,583 | 1,192 | 1,873 | 3,518 | ||||||||||||||||||||||||||||||
|
INVERAHORRO, S.L.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | — | 77,630 | 79,210 | (918 | ) | (662 | ) | ||||||||||||||||||||||||||||
|
INVERSIONES ALDAMA, C.A
|
VENEZUELA | IN LIQUIDATION | — | 100.0 | 100.0 | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
INVERSIONES BANPRO INTERNATIONAL INC. N.V.
|
NETHERLANDS ANTILLES | IN LIQUIDATION | 48.0 | — | 48.0 | 11,390 | 37,837 | 1,173 | 25,460 | 11,204 | ||||||||||||||||||||||||||||||
|
INVERSIONES BAPROBA, C.A
|
VENEZUELA | FINANCIAL SERVICES | 100.0 | — | 100.0 | 1,307 | 1,258 | 132 | 801 | 325 | ||||||||||||||||||||||||||||||
|
INVERSIONES P.H.R.4, C.A.
|
VENEZUELA | IN LIQUIDATION | — | 60.5 | 60.5 | — | 26 | — | 26 | — | ||||||||||||||||||||||||||||||
|
INVERSORA OTAR, S.A.
|
ARGENTINA | INVESTMENT COMPANY | — | 100.0 | 100.0 | 3,276 | 65,392 | 8 | 42,299 | 23,085 | ||||||||||||||||||||||||||||||
|
INVESCO MANAGEMENT
N
o
1,
S.A.
|
LUXEMBOURG | FINANCIAL SERVICES | — | 100.0 | 100.0 | 9,753 | 10,344 | 623 | 9,825 | (104 | ) | |||||||||||||||||||||||||||||
|
INVESCO MANAGEMENT
N
o
2,
S.A.
|
LUXEMBOURG | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 7,769 | 17,071 | (8,564 | ) | (738 | ) | ||||||||||||||||||||||||||||
|
JARDINES DE SARRIENA, S.L.
|
SPAIN | INVESTMENT COMPANY | — | 85.0 | 85.0 | 255 | 457 | 159 | 172 | 126 | ||||||||||||||||||||||||||||||
|
LIQUIDITY ADVISORS, L.P
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 900,046 | 902,819 | 2,774 | 890,086 | 9,959 | ||||||||||||||||||||||||||||||
|
MEDITERRANIA DE PROMOCIONS I GESTIONS INMOBILIARIES, S.A.
|
SPAIN | INACTIVE | — | 100.0 | 100.0 | 1,189 | 1,251 | 60 | 1,187 | 4 | ||||||||||||||||||||||||||||||
|
MISAPRE, S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 17,342 | 23,937 | 8,087 | 16,910 | (1,060 | ) | |||||||||||||||||||||||||||||
|
MULTIASISTENCIA OPERADORA S.A. DE C.V.
|
MEXICO | INSURANCES SERVICES | — | 100.0 | 100.0 | 121 | 877 | 757 | 76 | 44 | ||||||||||||||||||||||||||||||
|
MULTIASISTENCIA SERVICIOS S.A. DE C.V.
|
MEXICO | INSURANCES SERVICES | — | 100.0 | 100.0 | 381 | 1,971 | 1,589 | 208 | 174 | ||||||||||||||||||||||||||||||
|
MULTIASISTENCIA, S.A. DE C.V.
|
MEXICO | INSURANCES SERVICES | — | 100.0 | 100.0 | 16,913 | 25,983 | 7,868 | 14,470 | 3,645 | ||||||||||||||||||||||||||||||
|
OPCION VOLCAN, S.A.
|
MEXICO | REAL ESTATE | — | 100.0 | 100.0 | 65,964 | 69,684 | 3,719 | 61,801 | 4,164 | ||||||||||||||||||||||||||||||
|
OPPLUS OPERACIONES Y SERVICIOS, S.A. (Antes STURGES)
|
SPAIN | SERVICES | 100.0 | — | 100.0 | 1,067 | 19,109 | 11,467 | 4,602 | 3,040 | ||||||||||||||||||||||||||||||
|
OPPLUS S.A.C
|
PERU | SERVICES | — | 100.0 | 100.0 | 600 | 1,710 | 938 | 754 | 18 | ||||||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 | |
| (1) | The percentage of voting rights is the result of the agreements entered into with shareholders that enable the control of the entity. The ownership percentage is 46.1%. |
II-6
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros(*) | ||||||||||||||||||||||||||||||||||||
|
PARTICIPACIONES ARENAL, S.L.
|
SPAIN | INACTIVE | — | 100.0 | 100.0 | 7,574 | 7,582 | 4 | 7,553 | 25 | ||||||||||||||||||||||||||
|
PECRI INVERSION S.A
|
SPAIN | OTHER INVESTMENT COMPANIES | 100.0 | — | 100.0 | 78,500 | 95,512 | 17,013 | 97,355 | (18,856 | ) | |||||||||||||||||||||||||
|
PENSIONES BANCOMER, S.A. DE C.V.
|
MEXICO | INSURANCES SERVICES | — | 100.0 | 100.0 | 156,591 | 2,529,143 | 2,372,547 | 89,097 | 67,499 | ||||||||||||||||||||||||||
|
PHOENIX LOAN HOLDINGS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 319,718 | 338,561 | 18,844 | 331,675 | (11,958 | ) | |||||||||||||||||||||||||
|
PI HOLDINGS NO. 1, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 57,372 | 57,768 | 397 | 58,917 | (1,546 | ) | |||||||||||||||||||||||||
|
PI HOLDINGS NO. 3, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 21,423 | 21,650 | 228 | 21,055 | 367 | ||||||||||||||||||||||||||
|
PI HOLDINGS NO. 4, INC.
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
PORT ARTHUR ABSTRACT & TITLE COMPANY
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,839 | 2,176 | 336 | 1,878 | (38 | ) | |||||||||||||||||||||||||
|
PREMEXSA, S.A. DE C.V.
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 375 | 1,282 | 571 | 463 | 248 | ||||||||||||||||||||||||||
|
PREVENTIS, S.A.
|
MEXICO | INSURANCES SERVICES | — | 90.3 | 90.3 | 11,130 | 28,533 | 16,379 | 8,316 | 3,838 | ||||||||||||||||||||||||||
|
PRO-SALUD, C.A
|
VENEZUELA | SERVICES | — | 58.9 | 58.9 | — | — | — | — | — | ||||||||||||||||||||||||||
|
PROMOCION EMPRESARIAL XX, S.A.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 1,039 | 12,641 | 11,112 | 1,120 | 409 | ||||||||||||||||||||||||||
|
PROMOTORA DE RECURSOS AGRARIOS, S.A.
|
SPAIN | SERVICES | 100.0 | — | 100.0 | 139 | 122 | — | 125 | (3 | ) | |||||||||||||||||||||||||
|
PROMOTORA RESIDENCIAL GRAN EUROPA, S.L.
|
SPAIN | REAL ESTATE | — | 58.5 | 58.5 | 184 | 339 | 26 | 384 | (71 | ) | |||||||||||||||||||||||||
|
PROVIDA INTERNACIONAL, S.A.
|
CHILE | PENSION FUNDS MANAGEMENT | — | 100.0 | 100.0 | 44,125 | 48,133 | 4,010 | 32,246 | 11,877 | ||||||||||||||||||||||||||
|
PROVINCIAL DE VALORES CASA DE BOLSA, C.A
|
VENEZUELA | FINANCIAL SERVICES | — | 90.0 | 90.0 | 2,344 | 11,277 | 7,966 | 1,362 | 1,949 | ||||||||||||||||||||||||||
|
PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA, C.A
|
VENEZUELA | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,489 | 1,488 | 143 | 1,105 | 240 | ||||||||||||||||||||||||||
|
PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A.
|
BOLIVIA | PENSION FUNDS MANAGEMENT | — | 100.0 | 100.0 | 776 | 2,913 | 2,066 | 707 | 140 | ||||||||||||||||||||||||||
|
PROXIMA ALFA INVESTMENTS (UK) LLP
|
UNITED KINGDOM | IN LIQUIDATION | — | 51.0 | 51.0 | — | 85 | 2,298 | (617 | ) | (1,596 | ) | ||||||||||||||||||||||||
|
PROXIMA ALFA INVESTMENTS (USA) LLC
|
UNITED STATES | IN LIQUIDATION | — | 100.0 | 100.0 | 7,212 | 1,293 | 201 | 1,163 | (71 | ) | |||||||||||||||||||||||||
|
PROXIMA ALFA INVESTMENTS HOLDINGS (USA) II INC.
|
UNITED STATES | IN LIQUIDATION | — | 100.0 | 100.0 | 72 | 68 | 42 | 25 | 1 | ||||||||||||||||||||||||||
|
PROXIMA ALFA INVESTMENTS HOLDINGS (USA) INC.
|
UNITED STATES | IN LIQUIDATION | 100.0 | — | 100.0 | 72 | 7,216 | 3,349 | 3,718 | 149 | ||||||||||||||||||||||||||
|
PROXIMA ALFA SERVICES LTD.
|
UNITED KINGDOM | FINANCIAL SERVICES | 100.0 | — | 100.0 | 105 | 2,342 | 1 | 2,364 | (23 | ) | |||||||||||||||||||||||||
|
RESIDENCIAL CUMBRES DE SANTA FE, S.A. DE C.V.
|
MEXICO | REAL ESTATE | — | 100.0 | 100.0 | 8,938 | 9,456 | 1,145 | 8,433 | (122 | ) | |||||||||||||||||||||||||
|
RIVER OAKS BANK BUILDING, INC.
|
UNITED STATES | REAL ESTATE | — | 100.0 | 100.0 | 24,530 | 29,231 | 4,701 | 16,014 | 8,516 | ||||||||||||||||||||||||||
|
RIVER OAKS TRUST CORPORATION
|
UNITED STATES | INACTIVE | — | 100.0 | 100.0 | 1 | 1 | — | 1 | — | ||||||||||||||||||||||||||
|
RIVERWAY HOLDINGS CAPITAL TRUST I
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 233 | 7,765 | 7,531 | 210 | 24 | ||||||||||||||||||||||||||
|
RWHC, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 542,101 | 542,734 | 634 | 539,968 | 2,132 | ||||||||||||||||||||||||||
|
S.GESTORA FONDO PUBL.REGUL.MERCADO HIPOT
|
SPAIN | INACTIVE | 77.2 | — | 77.2 | 138 | 213 | 67 | 146 | — | ||||||||||||||||||||||||||
|
SCALDIS FINANCE, S.A.
|
BELGIUM | INVESTMENT COMPANY | — | 100.0 | 100.0 | 3,416 | 3,652 | 145 | 3,514 | (7 | ) | |||||||||||||||||||||||||
|
SEGUROS BANCOMER, S.A. DE C.V.
|
MEXICO | INSURANCES SERVICES | 25.0 | 75.0 | 100.0 | 412,330 | 2,432,075 | 2,083,508 | 191,517 | 157,050 | ||||||||||||||||||||||||||
|
SEGUROS PROVINCIAL, C.A.
|
VENEZUELA | INSURANCES SERVICES | — | 100.0 | 100.0 | 31,340 | 53,778 | 22,546 | 16,946 | 14,286 | ||||||||||||||||||||||||||
|
SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 317 | 2,501 | 2,182 | 401 | (82 | ) | |||||||||||||||||||||||||
|
SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 1,099 | 6,000 | 4,899 | 858 | 243 | ||||||||||||||||||||||||||
|
SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 3,603 | 5,266 | 1,663 | 3,304 | 299 | ||||||||||||||||||||||||||
|
SERVICIOS TECNOLOGICOS SINGULARES, S.A.
|
SPAIN | SERVICES | — | 100.0 | 100.0 | — | 20,216 | 24,042 | (297 | ) | (3,529 | ) | ||||||||||||||||||||||||
|
SMARTSPREAD LIMITED (UK)
|
UNITED KINGDOM | SERVICES | 100.0 | — | 100.0 | 1 | 137 | — | (188 | ) | 325 | |||||||||||||||||||||||||
|
SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO.,S.A.
|
SPAIN | COMERCIAL | 100.0 | — | 100.0 | 114,518 | 193,810 | 116 | 194,130 | (436 | ) | |||||||||||||||||||||||||
|
SOCIETE INMOBILIERE BBV D’ILBARRIZ
|
FRANCE | REAL ESTATE | — | 100.0 | 100.0 | 1,637 | 1,537 | 30 | 1,682 | (175 | ) | |||||||||||||||||||||||||
|
SOUTHEAST TEXAS TITLE COMPANY
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 529 | 727 | 198 | 529 | — | ||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 |
II-7
Table of Contents
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
|
Controlled by the
|
||||||||||||||||||||||||||||||||||||
| Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
Profit
|
|||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
(Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location
|
Activity
|
Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros(*) | ||||||||||||||||||||||||||||||||||||
|
SPORT CLUB 18, S.A.
|
SPAIN | INVESTMENT COMPANY | 100.0 | — | 100.0 | 23,412 | 53,093 | 29,785 | 25,183 | (1,875 | ) | |||||||||||||||||||||||||
|
STATE NATIONAL CAPITAL TRUST I
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 352 | 11,580 | 11,228 | 339 | 13 | ||||||||||||||||||||||||||
|
STATE NATIONAL STATUTORY TRUST II
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 233 | 7,725 | 7,493 | 225 | 7 | ||||||||||||||||||||||||||
|
TEXAS LOAN SERVICES, LP.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 894,559 | 895,031 | 472 | 882,589 | 11,970 | ||||||||||||||||||||||||||
|
TEXAS REGIONAL STATUTORY TRUST I
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,159 | 38,627 | 37,468 | 1,123 | 36 | ||||||||||||||||||||||||||
|
TEXASBANC CAPITAL TRUST I
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 582 | 19,396 | 18,813 | 565 | 18 | ||||||||||||||||||||||||||
|
TMF HOLDING INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 7,601 | 10,388 | 2,787 | 7,354 | 247 | ||||||||||||||||||||||||||
|
TRAINER PRO GESTION DE ACTIVIDADES, S.A.
|
SPAIN | REAL ESTATE | — | 100.0 | 100.0 | 2,886 | 2,931 | — | 3,261 | (330 | ) | |||||||||||||||||||||||||
|
TRANSITORY CO
|
PANAMA | REAL ESTATE | — | 100.0 | 100.0 | 124 | 1,435 | 1,407 | 154 | (126 | ) | |||||||||||||||||||||||||
|
TUCSON LOAN HOLDINGS, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | 345,706 | 345,789 | 83 | 341,069 | 4,637 | ||||||||||||||||||||||||||
|
TWOENC, INC.
|
UNITED STATES | FINANCIAL SERVICES | — | 100.0 | 100.0 | (1,164 | ) | 1,117 | 2,282 | (1,165 | ) | — | ||||||||||||||||||||||||
|
UNICOM TELECOMUNICACIONES S.DE R.L. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 1 | 3 | 2 | — | 1 | ||||||||||||||||||||||||||
|
UNIDAD DE AVALUOS MEXICO, S.A. DE CV
|
MEXICO | FINANCIAL SERVICES | — | 100.0 | 100.0 | 1,918 | 3,533 | 1,970 | 1,235 | 328 | ||||||||||||||||||||||||||
|
UNITARIA GESTION DE PATRIMONIOS INMOBILIARIOS
|
SPAIN | SERVICES | — | 100.0 | 100.0 | 2,410 | 2,633 | 1 | 2,624 | 8 | ||||||||||||||||||||||||||
|
UNIVERSALIDAD “E5”
|
COLOMBIA | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 3,250 | 1,085 | 1,888 | 277 | ||||||||||||||||||||||||||
|
UNIVERSALIDAD TIPS PESOS
E-9
|
COLOMBIA | FINANCIAL SERVICES | — | 100.0 | 100.0 | — | 94,309 | 81,086 | 3,882 | 9,341 | ||||||||||||||||||||||||||
|
UNO-E BANK, S.A.
|
SPAIN | BANKING | 67.4 | 32.7 | 100.0 | 174,751 | 1,361,488 | 1,255,492 | 107,729 | (1,733 | ) | |||||||||||||||||||||||||
|
URBANIZADORA SANT LLORENC, S.A.
|
SPAIN | INACTIVE | 60.6 | — | 60.6 | — | 108 | — | 108 | — | ||||||||||||||||||||||||||
|
VALANZA CAPITAL RIESGO S.G.E.C.R. S.A. UNIPERSONAL
|
SPAIN | VENTURE CAPITAL | 100.0 | — | 100.0 | 1,200 | 16,026 | 491 | 14,743 | 792 | ||||||||||||||||||||||||||
|
VIRTUAL DOC, S.L.
|
SPAIN | IN LIQUIDATION | — | 70.0 | 70.0 | — | 467 | 620 | 318 | (471 | ) | |||||||||||||||||||||||||
|
VISACOM, S.A. DE C.V.
|
MEXICO | SERVICES | — | 100.0 | 100.0 | 1,134 | 1,135 | — | 1,052 | 83 | ||||||||||||||||||||||||||
| (*) | Information on foreign companies at exchange rate on December 31, 2010 |
II-8
Table of Contents
APPENDIX III.
Additional information on the jointly controlled companies
accounted for using the proportionate consolidating method in
BBVA Group
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||
|
Net
|
Assets
|
Liabilities
|
||||||||||||||||||||||||||||||||||
|
Carrying
|
as of
|
as of
|
Equity
|
Profit (Loss)
|
||||||||||||||||||||||||||||||||
|
Company
|
Location | Activity | Direct | Indirect | Total | Amount | 12.31.10 | 12.31.10 | 12.31.10 | 12.31.10 | ||||||||||||||||||||||||||
| Thousands of euros (*) | ||||||||||||||||||||||||||||||||||||
|
ALTURA MARKETS, SOCIEDAD DE VALORES, S.A.
|
SPAIN | SECURITIES DEALER | 50.0 | — | 50.0 | 12,600 | 1,038,431 | 998,424 | 30,381 | 9,626 | ||||||||||||||||||||||||||
|
ECASA, S.A.
|
CHILE | FINANCIAL SERVICES | — | 51.0 | 51.0 | 5,515 | 7,102 | 7,018 | (4,943 | ) | 5,027 | |||||||||||||||||||||||||
|
FORUM DISTRIBUIDORA, S,A,
|
CHILE | FINANCIAL SERVICES | — | 51.0 | 51.0 | 7,480 | 107,008 | 97,848 | 6,995 | 2,165 | ||||||||||||||||||||||||||
|
FORUM SERVICIOS FINANCIEROS, S.A.
|
CHILE | FINANCIAL SERVICES | — | 51.0 | 51.0 | 56,493 | 719,366 | 643,861 | 29,489 | 46,016 | ||||||||||||||||||||||||||
|
INVERSIONES PLATCO, C.A
|
VENEZUELA | FINANCIAL SERVICES | — | 50.0 | 50.0 | 11,832 | 26,803 | 3,137 | 24,972 | (1,306 | ) | |||||||||||||||||||||||||
|
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA, S.A.
|
ARGENTINA | FINANCIAL SERVICES | — | 50.0 | 50.0 | 12,451 | 137,358 | 112,456 | 18,707 | 6,195 | ||||||||||||||||||||||||||
|
RENTRUCKS, ALQUILER Y SERVICIOS DE TRANSPORTE, S.A.
|
SPAIN | FINANCIAL SERVICES | — | 50.0 | 50.0 | 3,959 | 42,281 | 34,364 | 11,358 | (3,441 | ) | |||||||||||||||||||||||||
| Information on foreign companies at exchange rate on December 31, 2010 | ||
| (*) | Jointly controlled companies accounted for using the equity method |
III-1
Table of Contents
APPENDIX IV.
Additional information on investments and jointly controlled
companies consolidated using the equity method in BBVA
Group
(Including
the most significant entities, jointly representing 98% of all
investment in this collective)
|
% of Voting Rights
|
||||||||||||||||||||||||||||||||||||||||
| Controlled by the Bank | Affiliate Entity Data | |||||||||||||||||||||||||||||||||||||||
|
Net
|
Liabilities
|
|||||||||||||||||||||||||||||||||||||||
|
Carrying
|
Assets of
|
as of
|
Equity
|
Profit (Loss)
|
||||||||||||||||||||||||||||||||||||
|
Company
|
Location | Activity | Direct | Indirect | Total | Amount | 12/31/10 | 12/31/10 | 12/31/10 | 12/31/10 | ||||||||||||||||||||||||||||||
| Thousands of euros (*) | ||||||||||||||||||||||||||||||||||||||||
|
ADQUIRA ESPAÑA, S.A.
|
SPAIN | SERVICES | — | 40.0 | 40.0 | 2,037 | 17,162 | 9,357 | 6,872 | 934(2 | ) | |||||||||||||||||||||||||||||
|
ALMAGRARIO, S.A.
|
COLOMBIA | SERVICES | — | 35.4 | 35.4 | 3,956 | 31,858 | 15,261 | 20,406 | (3,809 | )(2) | |||||||||||||||||||||||||||||
|
ALTITUDE SOFTWARE SGPS, S.A.(*)
|
PORTUGAL | SERVICES | — | 30.5 | 30.5 | 9,842 | 18,619 | 9,994 | 6,144 | 2,481(2 | ) | |||||||||||||||||||||||||||||
|
AUREA, S.A. (CUBA)
|
CUBA | REAL ESTATE | — | 49.0 | 49.0 | 3,922 | 8,421 | 811 | 7,485 | 125(2 | ) | |||||||||||||||||||||||||||||
|
BBVA ELCANO EMPRESARIAL II, S.C.R., S.A.
|
SPAIN | VENTURE CAPITAL | 45.0 | — | 45.0 | 37,491 | 104,885 | 15,355 | 89,454 | 77(2 | ) | |||||||||||||||||||||||||||||
|
BBVA ELCANO EMPRESARIAL, S.C.R., S.A.
|
SPAIN | VENTURE CAPITAL | 45.0 | — | 45.0 | 37,487 | 104,958 | 15,355 | 89,457 | 146(2 | ) | |||||||||||||||||||||||||||||
|
CAMARATE GOLF, S.A.(*)
|
SPAIN | REAL ESTATE | — | 26.0 | 26.0 | 4,091 | 39,396 | 18,764 | 17,798 | 2,835(3 | ) | |||||||||||||||||||||||||||||
|
CHINA CITIC BANK LIMITED CNCB
|
CHINA | BANKING | 15.0 | — | 15.0 | 3,557,759 | 180,608,192 | 169,601,243 | 9,478,880 | 1,528,069(2 | ) | |||||||||||||||||||||||||||||
|
CITIC INTERNATIONAL FINANCIAL HOLDINGS LIMITED CIFH
|
HONG-KONG | FINANCIAL SERVICES | 29.7 | — | 29.7 | 464,339 | 11,063,029 | 9,619,672 | 1,357,742 | 85,616(1 | )(2) | |||||||||||||||||||||||||||||
|
COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO
S.A.
|
SPAIN | FINANCIAL SERVICES | 21.8 | — | 21.8 | 14,413 | 61,967 | 7,126 | 53,086 | 1,755(2 | ) | |||||||||||||||||||||||||||||
|
COMPAÑIA MEXICANA DE PROCESAMIENTO, S.A. DE C.V.
|
MEXICO | SERVICES | — | 50.0 | 50.0 | 4,706 | 8,854 | 1,558 | 6,564 | 732(2 | ) | |||||||||||||||||||||||||||||
|
CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A.(*)
|
SPAIN | INVESTMENT COMPANY | — | 50.0 | 50.0 | 71,027 | 808,482 | 371,929 | 402,838 | 33,715(1 | )(2) | |||||||||||||||||||||||||||||
|
FERROMOVIL 3000, S.L.(*)
|
SPAIN | SERVICES | — | 20.0 | 20.0 | 6,275 | 649,334 | 619,575 | 27,470 | 2,289(2 | ) | |||||||||||||||||||||||||||||
|
FERROMOVIL 9000, S.L.(*)
|
SPAIN | SERVICES | — | 20.0 | 20.0 | 4,614 | 413,798 | 391,994 | 19,410 | 2,394(2 | ) | |||||||||||||||||||||||||||||
|
FIDEICOMISO F/70191-2 PUEBLA(*)
|
MEXICO | REAL ESTATE | — | 25.0 | 25.0 | 5,017 | 44,360 | 11,668 | 28,189 | 4,503(3 | ) | |||||||||||||||||||||||||||||
|
I+D MEXICO, S.A. DE C.V.(*)
|
MEXICO | SERVICES | — | 50.0 | 50.0 | 22,127 | 70,158 | 34,068 | 29,080 | 7,010(1 | )(2) | |||||||||||||||||||||||||||||
|
IMOBILIARIA DUQUE D’AVILA, S.A.(*)
|
PORTUGAL | REAL ESTATE | — | 50.0 | 50.0 | 5,346 | 24,149 | 13,713 | 10,058 | 377(2 | ) | |||||||||||||||||||||||||||||
|
LAS PEDRAZAS GOLF, S.L.(*)
|
SPAIN | REAL ESTATE | — | 50.0 | 50.0 | 9,647 | 66,286 | 49,189 | 27,279 | (10,183 | )(2) | |||||||||||||||||||||||||||||
|
OCCIDENTAL HOTELES MANAGEMENT, S.L.(*)
|
SPAIN | SERVICES | — | 41.7 | 41.7 | 87,579 | 756,194 | 493,789 | 336,310 | (73,906 | )(1)(2) | |||||||||||||||||||||||||||||
|
PARQUE REFORMA SANTA FE, S.A. DE C.V.
|
MEXICO | REAL ESTATE | — | 30.0 | 30.0 | 3,544 | 66,363 | 55,103 | 9,923 | 1,337(3 | ) | |||||||||||||||||||||||||||||
|
PROMOTORA METROVACESA, S.L(*)
|
SPAIN | REAL ESTATE | — | 50.0 | 50.0 | 4,412 | 76,919 | 64,518 | 14,491 | (2,089 | )(3) | |||||||||||||||||||||||||||||
|
ROMBO COMPAÑIA FINANCIERA, S.A.
|
ARGENTINA | FINANCIAL SERVICES | — | 40.0 | 40.0 | 9,849 | 86,232 | 65,463 | 13,868 | 6,901(2 | ) | |||||||||||||||||||||||||||||
|
SERVICIOS DE ADMINISTRACION PREVISIONAL, S.A.
|
CHILE | PENSION FUNDS MANAGEMENT | — | 37.9 | 37.9 | 5,460 | 15,263 | 4,506 | 6,387 | 4,370(2 | ) | |||||||||||||||||||||||||||||
|
SERVICIOS ELECTRONICOS GLOBALES, S.A. DE C.V.
|
MEXICO | SERVICES | — | 46.1 | 46.1 | 4,992 | 14,226 | 5,297 | 8,811 | 118(2 | ) | |||||||||||||||||||||||||||||
|
SERVICIOS ON LINE PARA USUARIOS MULTIPLES, S.A. (SOLIUM)(*)
|
SPAIN | SERVICES | — | 66.7 | 66.7 | 4,056 | 7,710 | 4,488 | 2,902 | 320(2 | ) | |||||||||||||||||||||||||||||
|
SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO, S.A.
|
SPAIN | FINANCIAL SERVICES | 20.4 | 0.9 | 21.4 | 15,489 | 206,836 | 78,920 | 119,659 | 8,257(1 | )(2) | |||||||||||||||||||||||||||||
|
TELEFONICA FACTORING, S.A.
|
SPAIN | FINANCIAL SERVICES | 30.0 | — | 30.0 | 3,694 | 101,408 | 90,408 | 6,849 | 4,151(2 | ) | |||||||||||||||||||||||||||||
|
TUBOS REUNIDOS, S.A.
|
SPAIN | INDUSTRIAL | — | 23.0 | 23.0 | 50,726 | 664,368 | 436,637 | 226,672 | 1,059(1 | )(2) | |||||||||||||||||||||||||||||
|
VITAMEDICA S.A DE C.V.(*)
|
MEXICO | INSURANCES SERVICES | — | 51.0 | 51.0 | 2,586 | 9,833 | 4,407 | 4,964 | 462(2 | ) | |||||||||||||||||||||||||||||
|
OTHER COMPANIES
|
90,554 | |||||||||||||||||||||||||||||||||||||||
| TOTAL | 4,547,037 | 196,149,259 | 182,110,166 | 12,429,047 | 1,610,047 | |||||||||||||||||||||||||||||||||||
| (*) | Jointly controlled companies accounted for using the equity method | |
| (**) | Data relating to the latest financial statements approved at the date of preparation of these notes to the consolidated statements | |
| Information on foreign companies at exchange rate on reference date | ||
| (1) | Consolidated Data | |
| (2) | Financial statetement as of December 31, 2009 | |
| (3) | Financial statetement as of December 31, 2008 |
IV-1
Table of Contents
Appendix V.
Changes and notification of investments in the BBVA Group in
2010
BUSINESS
COMBINATIONS AND OTHER ACQUISITIONS OR INCREASE OF INTEREST
OWNERSHIP IN CONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED
COMPANIES ACCOUNTED FOR USING THE PROPORCIONATE METHOD
| Thousands of Euros | % of Voting Rights | |||||||||||||||||||||||
|
Price Paid in the
|
Fair Value of
|
Total Voting
|
||||||||||||||||||||||
|
Transactions +
|
Equity
|
% Participation
|
Rights
|
Effective Date for
|
||||||||||||||||||||
|
Expenses directly
|
Instruments
|
(net)
|
Controlled after
|
the Trasaction
|
||||||||||||||||||||
|
attributable to the
|
Issued for the
|
Acquired
|
the
|
(or Notification
|
||||||||||||||||||||
|
Company
|
Type of Transaction | Activity | Transactions | Transactions | in the Period | Transactions | Date) | |||||||||||||||||
|
APLICA SOLUCIONES TECNOLOGICAS CHILE LIMITADA
|
FOUNDING | SERVICES | 7 | — | 99.99 | % | 99.99 | % | 4-1-2010 | |||||||||||||||
|
MONTEALMENARA GOLF, S.L.*
|
ACQUISITION | REAL ESTATE | 6,515 | — | 50.00 | % | 100.00 | % | 26-2-2010 | |||||||||||||||
|
GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V.
|
ACQUISITION | SERVICES | 904 | — | 14.02 | % | 58.40 | % | 26-2-2010 | |||||||||||||||
|
BANCO CONTINENTAL, S.A.
|
ACQUISITION | BANKING | 998 | — | 0.07 | % | 92.15 | % | 31-3-2010 | |||||||||||||||
|
ECONTA GESTION INTEGRAL, S.L.*
|
ACQUISITION | SERVICES | 591 | — | 29.92 | % | 100.00 | % | 22-4-2010 | |||||||||||||||
| REAL ESTATE | ||||||||||||||||||||||||
|
BBVA PROPIEDAD F.I.I.
|
ACQUISITION | INVESTMENT COMPANY | 55,774 | — | 3.89 | % | 99.57 | % | 30-4-2010 | |||||||||||||||
|
BANCO CONTINENTAL, S.A.
|
ACQUISITION | BANKING | 1,490 | — | 0.07 | % | 92.22 | % | 31-5-2010 | |||||||||||||||
| REAL ESTATE | ||||||||||||||||||||||||
|
BBVA PROPIEDAD F.I.I.
|
ACQUISITION | INVESTMENT COMPANY | — | — | 0.15 | % | 99.75 | % | 31-5-2010 | |||||||||||||||
|
RENTRUCKS, ALQUILER Y
S
o
S DE
TRANSPORTE, S.A.*
|
ACQUISITION | FINANCIAL SERVICES | 8 | — | 7.08 | % | 50.00 | % | 30-6-2010 | |||||||||||||||
|
BBVA SEGUROS DE VIDA, S.A.
|
ACQUISITION | INSURANCES SERVICES | — | — | 0.00 | % | 100.00 | % | 31-7-2010 | |||||||||||||||
|
OCCIVAL, S.A.
|
ACQUISITION | INVESTMENT COMPANY | — | — | 0.00 | % | 100.00 | % | 31-7-2010 | |||||||||||||||
|
IBERDROLA SERVICIOS FINANCIEROS, E.F.C., S.A.*
|
ACQUISITION | FINANCIAL SERVICES | 1,849 | — | 16.00 | % | 100.00 | % | 31-7-2010 | |||||||||||||||
| REAL ESTATE | ||||||||||||||||||||||||
|
BBVA PROPIEDAD F.I.I.
|
ACQUISITION | INVESTMENT COMPANY | — | — | 0.25 | % | 100.00 | % | 31-8-2010 | |||||||||||||||
|
APLICA TECNOLOGIA AVANZADA OPERADORA, S.A. DE C.V.
|
FOUNDING | SERVICES | 3 | — | 100.00 | % | 100.00 | % | 24-9-2010 | |||||||||||||||
|
APLICA TECNOLOGIA AVANZADA SERVICIOS, S.A. DE C.V.
|
FOUNDING | SERVICES | 3 | — | 100.00 | % | 100.00 | % | 24-9-2010 | |||||||||||||||
|
BANCO PROMOCIÓN
|
ACQUISITION | BANKING | 13 | — | 0.00 | % | 99.84 | % | 30-11-2010 | |||||||||||||||
|
BANCO CONTINENTAL, S.A.
|
ACQUISITION | BANKING | — | — | 0.02 | % | 92.24 | % | 31-12-2010 | |||||||||||||||
|
FIDEICOMISO HARES BBVA BANCOMER F/
47997-2
|
ACQUISITION | REAL ESTATE | 8,833 | — | 30.31 | % | 80.31 | % | 31-12-2010 | |||||||||||||||
| (*) | Notification realized |
V-1
Table of Contents
DISPOSALS
OR REDUCTION OF INTEREST OWNERSHIP IN CONSOLIDATED SUBSIDIARIES
AND JOINTLY CONTROLLED COMPANIES ACCOUNTED FOR USING THE
PROPORTIONATE METHOD
| % of Voting Rights | ||||||||||||||||||||
|
Effective Date for
|
||||||||||||||||||||
|
% Participation
|
Total Voting Rights
|
the Transaction
|
||||||||||||||||||
|
Type of
|
Profit (Loss)
|
Sold
|
Controlled after the
|
(or Notification
|
||||||||||||||||
|
Company
|
Transaction | Activity | in the Transaction | in the Period | Disposal | Date) | ||||||||||||||
| Thousands of euros | ||||||||||||||||||||
|
BBVA LEASING S.A.COMPAÑIA DE FINANCIAMIENTO COMERCIAL
|
MERGER | FINANCIAL SERVICES | — | 100.00 | % | — | 04-01-10 | |||||||||||||
|
GFIS HOLDINGS INC.
|
MERGER | FINANCIAL SERVICES | — | 100.00 | % | — | 01-02-10 | |||||||||||||
|
GUARANTY FINANCIAL INSURANCE SOLUTIONS, INC.
|
MERGER | FINANCIAL SERVICES | — | 100.00 | % | — | 01-02-10 | |||||||||||||
|
BBVA
E-COMMERCE,
S.A.
|
MERGER | SERVICES | — | 100.00 | % | — | 15-03-10 | |||||||||||||
|
UNIVERSALIDAD- BANDO GRANAHORRAR
|
LIQUIDATION | FINANCIAL SERVICES | 557 | 100.00 | % | — | 30-04-10 | |||||||||||||
|
PROXIMA ALFA MANAGING MEMBER LLC
|
LIQUIDATION | FINANCIAL SERVICES | (1 | ) | 100.00 | % | — | 30-04-10 | ||||||||||||
|
BIBJ MANAGEMENT, LTD.
|
LIQUIDATION | SERVICES | — | 100.00 | % | — | 31-05-10 | |||||||||||||
|
BIBJ NOMINEES, LTD.
|
LIQUIDATION | SERVICES | — | 100.00 | % | — | 31-05-10 | |||||||||||||
|
CANAL COMPANY, LTD.
|
LIQUIDATION | FINANCIAL SERVICES | (191 | ) | 100.00 | % | — | 31-05-10 | ||||||||||||
|
COMPASS TRUST IV
|
LIQUIDATION | FINANCIAL SERVICES | (1 | ) | 100.00 | % | — | 31-05-10 | ||||||||||||
|
APLICA SOLUCIONES GLOBALES, S.L.
|
LIQUIDATION | SERVICES | (14 | ) | 100.00 | % | — | 31-07-10 | ||||||||||||
|
BBVA PRIVANZA (JERSEY), LTD.
|
LIQUIDATION | FINANCIAL SERVICES | (1,272 | ) | 100.00 | % | — | 31-08-10 | ||||||||||||
|
BBVA CAPITAL FUNDING, LTD.
|
LIQUIDATION | FINANCIAL SERVICES | 1,723 | 100.00 | % | — | 31-08-10 | |||||||||||||
|
ADPROTEL STRAND, S.L.
|
DISPOSAL | REAL ESTATE | 27,139 | 100.00 | % | — | 29-09-10 | |||||||||||||
|
PRESTACIONES ADMINISTRATIVAS LIMITADA-PROEX LIMITADA
|
MERGER | FINANCIAL SERVICES | — | 100.00 | % | — | 01-09-10 | |||||||||||||
|
ALTITUDE INVESTMENTS LIMITED
|
LIQUIDATION | FINANCIAL SERVICES | (86 | ) | 51.00 | % | — | 05-10-10 | ||||||||||||
|
ATUEL FIDEICOMISOS, S.A.
|
MERGER | SERVICES | — | 100.00 | % | — | 26-10-10 | |||||||||||||
|
EMPRESA INSTANT CREDIT, C.A.
|
LIQUIDATION | REAL ESTATE | — | 100.00 | % | — | 18-11-10 | |||||||||||||
|
INVERSIONES T, C.A.
|
LIQUIDATION | REAL ESTATE | — | 100.00 | % | — | 18-11-10 | |||||||||||||
|
PROXIMA ALFA INVESTMENTS, SGIIC, S.A.
|
LIQUIDATION | FINANCIAL SERVICES | — | 100.00 | % | — | 12-11-10 | |||||||||||||
|
ST. JOHNS INVESTMENTS MANAGMENT CO
|
MERGER | FINANCIAL SERVICES | — | 100.00 | % | — | 30-11-10 | |||||||||||||
|
DEUSTO, S.A. DE INVERSION MOBILIARIA
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 10-12-10 | |||||||||||||
|
ELANCHOVE, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 10-12-10 | |||||||||||||
|
FINANCIERA ESPAÑOLA, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 10-12-10 | |||||||||||||
|
OCCIVAL, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 10-12-10 | |||||||||||||
|
BBVA SECURITIES HOLDINGS, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
ALMACENES GENERALES DE DEPOSITO, S.A.E. DE
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
MULTIVAL, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
S.A. DE PROYECTOS INDUSTRIALES CONJUNTOS
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
HOLDING DE PARTICIPACIONES INDUSTRIALES 2000, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
MIRADOR DE LA CARRASCOSA, S.L.
|
MERGER | REAL ESTATE | — | 100.00 | % | — | 28-12-10 | |||||||||||||
|
MONTEALMENARA GOLF, S.L.
|
MERGER | REAL ESTATE | — | 100.00 | % | — | 28-12-10 | |||||||||||||
|
BBVA GLOBAL MARKETS RESEARCH, S.A.
|
LIQUIDATION | FINANCIAL SERVICES | 46 | 100.00 | % | — | 15-12-10 | |||||||||||||
|
ANIDA CARTERA SINGULAR, S.L,
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 28-12-10 | |||||||||||||
|
BBVA PARTICIPACIONES INTERNACIONAL, S.L.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 22-12-10 | |||||||||||||
|
BROOKLINE INVESTMENTS,S.L.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 22-12-10 | |||||||||||||
|
ARAGON CAPITAL, S.L.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 22-12-10 | |||||||||||||
|
GRELAR GALICIA, S.A.
|
MERGER | INVESTMENT COMPANY | — | 100.00 | % | — | 21-12-10 | |||||||||||||
|
MARQUES DE CUBAS 21, S.L,
|
MERGER | REAL ESTATE | — | 100.00 | % | — | 28-12-10 | |||||||||||||
V-2
Table of Contents
BUSINESS
COMBINATIONS AND OTHER ACQUISITIONS OR INCREASES OF INTEREST
OWNERSHIP IN CONSOLIDATED SUBSIDIARIES AND JOINTLY CONTROLLED
COMPANIES ACCOUNTED FOR USING THE PROPORTIONATE METHOD
| % of Voting Rights | ||||||||||||||||||||||||
|
Price Paid in the
|
Fair Value of
|
Total Voting
|
||||||||||||||||||||||
|
Transactions +
|
Equity
|
% Participation
|
Rights
|
Effective Date for
|
||||||||||||||||||||
|
Expenses Directly
|
Instruments
|
(Net)
|
Controlled After
|
the Transaction
|
||||||||||||||||||||
|
Type of
|
Attributable to the
|
Issued for the
|
Acquired
|
the
|
(or Notification
|
|||||||||||||||||||
|
Company
|
Transaction | Activity | Transactions | Transactions | in the Period | Transactions | Date) | |||||||||||||||||
| Thousands of Euros | ||||||||||||||||||||||||
|
TELEFONICA FACTORING COLOMBIA, S.A.
|
ACQUISITION | COMERCIAL | 350 | — | 24.30 | % | 24.30 | % | 31-1-2010 | |||||||||||||||
|
MICROMEDIOS DIGITALES, S.A.
|
ACQUISITION | SERVICES | — | — | — | 48.99 | % | 26-2-2010 | ||||||||||||||||
|
OPERADORA HITO URBANO, S.A. DE C.V.
|
FOUNDING | SERVICES | 1 | — | 35.00 | % | 35.00 | % | 26-2-2010 | |||||||||||||||
|
CHINA CITIC BANK LIMITED CNCB
|
ACQUISITION | BANKING | 1,197,475 | — | 4.93 | % | 15.00 | % | 30-4-2010 | |||||||||||||||
|
TELEFONICA FACTORING CHILE, S.A.
|
FOUNDING | COMERCIAL | 139 | — | 24.30 | % | 24.30 | % | 31-5-2010 | |||||||||||||||
|
DESARROLLO URBANÍSTICO CHAPULTEPEC, S.A.P.I. DE C.V.
|
FOUNDING | SERVICES | 280 | — | 50.00 | % | 50.00 | % | 24-6-2010 | |||||||||||||||
|
SOLIUM MEXICO, S.A. DE C.V.
|
FOUNDING | SERVICES | — | — | 100.00 | % | 100.00 | % | 4-11-2010 | |||||||||||||||
|
ALTITUDE SOFTWARE SGPS, S.A.
|
ACQUISITION | SERVICES | 9,842 | — | 30.47 | % | 30.47 | % | 29-12-2010 | |||||||||||||||
DISPOSAL
OR REDUCTION OF INTEREST OWNERSHIP IN CONSOLIDATED SUBSIDIARIES
AND JOINTLY CONTROLLED COMPANIES ACCOUNTED FOR USING THE
PROPORTIONATE METHOD
| % of Voting Rights |
Effective Date for
|
|||||||||||||||||||
|
% Participation
|
Total Voting Rights
|
the Transaction
|
||||||||||||||||||
|
Profit (Loss)
|
Sold
|
Controlled after the
|
(or Notification
|
|||||||||||||||||
|
Company
|
Type of Transaction | Activity | in the Transaction | in the Period | Disposal | Date) | ||||||||||||||
| Thousands of euros | ||||||||||||||||||||
|
SERVICIO MERCANTIL DE OCCIDENTE, S.A.
|
LIQUIDATION | SERVICES | — | 25.00 | % | — | 31-05-10 | |||||||||||||
|
INMUEBLES MADARIAGA PROMOCIONES, S.L.
|
LIQUIDATION | REAL ESTATE | (34 | ) | 50.0 | % | — | 31-05-10 | ||||||||||||
|
SDAD PARA LA PRESTACION
S
o
S
ADMINISTRATIVOS, S.L.
|
DISPOSAL | SERVICES | 485 | 30.0 | % | — | 30-06-10 | |||||||||||||
|
INMOBILIARIA RESIDENCIAL LOS ARROYOS, S.A.
|
CHARGE-OFF | REAL ESTATE | — | 33.3 | % | — | 30-06-10 | |||||||||||||
|
PRUBI, S.A.
|
CHARGE-OFF | REAL ESTATE | — | 24.0 | % | — | 30-06-10 | |||||||||||||
|
FIDEICOMISO F/401555-8 CUATRO BOSQUES
|
DISPOSAL | REAL ESTATE | 85 | 50.0 | % | — | 31-08-10 | |||||||||||||
|
MOBIPAY INTERNATIONAL, S.A.
|
LIQUIDATION | SERVICES | 1 | 50.0 | % | — | 06-08-10 | |||||||||||||
|
TUBOS REUNIDOS, S.A.
|
DISPOSAL | INDUSTRIAL | 141 | 0.1 | % | 23.25 | % | 30-09-10 | ||||||||||||
|
TUBOS REUNIDOS, S.A.
|
DISPOSAL | INDUSTRIAL | 278 | 0.2 | % | 23.03 | % | 31-10-10 | ||||||||||||
|
FIDEICOMISOS DE ADMINISTRACION (COLOMBIA)
|
DISPOSAL | SERVICES | 30 | 20.5 | % | — | 30-11-10 | |||||||||||||
|
TUBOS REUNIDOS, S.A.
|
DISPOSAL | INDUSTRIAL | 28 | 0.0 | % | 23.00 | % | 30-11-10 | ||||||||||||
|
MICROMEDIOS DIGITALES, S.A.
|
DISPOSAL | SERVICES | (129 | ) | 49.0 | % | — | 31-12-10 | ||||||||||||
|
TUBOS REUNIDOS, S.A.
|
DISPOSAL | INDUSTRIAL | 53 | 0.0 | % | 22.95 | % | 31-12-10 | ||||||||||||
V-3
Table of Contents
CHANGES
IN OTHER COMPANIES QUOTED RECOGNIZE AS
AVAILABLE-FOR-SALE
| % Voting rights |
Effective Date
|
|||||||||||||||
|
% Participation
|
for the Transaction
|
|||||||||||||||
|
Type of
|
Acquired (Sold)
|
Totally Controlled
|
(or Notification
|
|||||||||||||
|
Company
|
Transaction | Activity | in the Period | after Transaction | Date) | |||||||||||
|
INMOBILIARIA COLONIAL, S.A.(*)(1)
|
ACQUISITION | REAL ESTATE | 3.302 | % | 3.302 | % | 18-3-2010 | |||||||||
|
INMOBILIARIA COLONIAL, S.A.(*)(2)
|
DILUCION PARTIC. | REAL ESTATE | 2.519 | % | 0.783 | % | 24-3-2010 | |||||||||
|
ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*)
|
ACQUISITION | SERVICES | 0.888 | % | 3.560 | % | 13-5-2010 | |||||||||
|
TECNICAS REUNIDAS, S.A.(*)
|
DISPOSAL | SERVICES | 0.434 | % | 2.685 | % | 29-6-2010 | |||||||||
|
ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*)
|
DISPOSAL | SERVICES | 0.010 | % | 2.998 | % | 27-10-2010 | |||||||||
|
ACS, ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A.(*)
|
ACQUISITION | SERVICES | 0.150 | % | 3.022 | % | 10-11-2010 | |||||||||
|
REPSOL YPF, S.A.(*)
|
ACQUISITION | SERVICES | 0.803 | % | 3.284 | % | 28-12-2010 | |||||||||
| (*) | Notifications realized | |
| (1) | Operation of change of ownership in favor of BBVA by enforcement actions of 58,012,836 shares. | |
| (2) | Dilution of our percentage of investment for increase of the issuer resulting from the conversion into shares of convertifbles obligations. |
V-4
Table of Contents
APPENDIX VI.
Fully consolidated subsidiaries with more than 10% owned by
non-Group shareholders as of 31 December, 2010
|
% of Voting Rights
|
||||||||||||||
| Controlled by the Bank | ||||||||||||||
|
Company
|
Activity | Direct | Indirect | Total | ||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.
|
BANKING | — | 68.2 | 68.2 | ||||||||||
|
BANCO PROVINCIAL S.A. — BANCO UNIVERSAL
|
BANKING | 1.9 | 53.8 | 55.6 | ||||||||||
|
BBVA & PARTNERS ALTERNATIVE INVESTMENT A.V., S.A.
|
SECURITIES DEALER | 70.0 | — | 70.0 | ||||||||||
|
BBVA INMOBILIARIA E INVERSIONES, S.A.
|
REAL ESTATE | — | 68.1 | 68.1 | ||||||||||
|
DESARROLLO URBANISTICO DE CHAMARTÍN, S.A.
|
REAL ESTATE | — | 72.5 | 72.5 | ||||||||||
|
EL OASIS DE LAS RAMBLAS, S.L.
|
REAL ESTATE | — | 70.0 | 70.0 | ||||||||||
|
ESTACIÓN DE AUTOBUSES CHAMARTÍN, S.A.
|
SERVICES | — | 51.0 | 51.0 | ||||||||||
|
FIDEICOMISO HARES BBVA BANCOMER F/
47997-2
|
REAL ESTATE | — | 80.3 | 80.3 | ||||||||||
|
GESTIÓN DE PREVISIÓN Y PENSIONES, S.A.
|
PENSION FUND MANAGEMENT | 60.0 | — | 60.0 | ||||||||||
|
GRUPO PROFESIONAL PLANEACION Y PROYECTOS, S.A. DE C.V.
|
SERVICES | — | 58.4 | 58.4 | ||||||||||
|
HOLDING CONTINENTAL, S.A.
|
INVESTMENT COMPANY | 50.0 | — | 50.0 | ||||||||||
|
INVERSIONES BANPRO INTERNATIONAL INC. N.V.
|
IN LIQUIDATION | 48.0 | — | 48.0 | ||||||||||
|
INVERSIONES P.H.R.4, C.A.
|
IN LIQUIDATION | — | 60.5 | 60.5 | ||||||||||
|
JARDINES DE SARRIENA, S.L.
|
REAL ESTATE | — | 85.0 | 85.0 | ||||||||||
|
PROMOTORA RESIDENCIAL GRAN EUROPA, S.L.
|
REAL ESTATE | — | 58.5 | 58.5 | ||||||||||
|
PRO-SALUD, C.A.
|
SERVICES | — | 58.9 | 58.9 | ||||||||||
|
VIRTUAL DOC, S.L.
|
IN LIQUIDATION | — | 70.0 | 70.0 | ||||||||||
VI-1
Table of Contents
APPENDIX VII.
BBVA Group’s securitization fund
|
Total Securitized
|
Total Securitized
|
|||||||||||
|
Origination
|
Exposures at the
|
Exposures as of
|
||||||||||
|
Securitization Fund
|
Company | Date | Origination Date | December 31, 2010 | ||||||||
| Thousands of euros | ||||||||||||
|
BBVA AUTOS I FTA
|
BBVA, S.A. | 10/2004 | 1,000,000 | 92,588 | ||||||||
|
BBVA-3 FTPYME FTA
|
BBVA, S.A. | 11/2004 | 1,000,023 | 106,617 | ||||||||
|
BBVA AUTOS 2 FTA
|
BBVA, S.A. | 12/2005 | 1,000,000 | 294,326 | ||||||||
|
BBVA HIPOTECARIO 3 FTA
|
BBVA, S.A. | 06/2005 | 1,450,013 | 346,643 | ||||||||
|
BBVA-4 PYME FTA
|
BBVA, S.A. | 09/2005 | 1,250,025 | 141,447 | ||||||||
|
BBVA CONSUMO 1 FTA
|
BBVA, S.A. | 05/2006 | 1,499,999 | 415,721 | ||||||||
|
BBVA-5 FTPYME FTA
|
BBVA, S.A. | 10/2006 | 1,900,022 | 402,815 | ||||||||
|
BCL MUNICIPIOS I FTA
|
BBVA, S.A. | 06/2000 | 1,205,059 | 154,217 | ||||||||
|
2 PS RBS (ex ABN)
|
BBVA SDAD DE LEASING INMOBILIARIO, S.A. | 09/2001 | 8,982 | 6,393 | ||||||||
|
2 PS INTERAMERICANA
|
BBVA CHILE, S.A. | 09/2004 | 14,149 | 6,830 | ||||||||
|
2 PS INTERAMERICANA
|
BBVA SDAD DE LEASING INMOBILIARIO, S.A. | 09/2004 | 20,211 | 10,175 | ||||||||
|
BBVA-2 FTPYME ICO FTA
|
BBVA, S.A. | 12/2000 | 899,393 | 13,848 | ||||||||
|
BBVA CONSUMO 2 FTA
|
BBVA, S.A. | 11/2006 | 1,500,000 | 582,053 | ||||||||
|
BBVA CONSUMO 3 FTA
|
FINANZIA BANCO DE CRÉDITO, S.A. | 04/2008 | 651,788 | 354,982 | ||||||||
|
BBVA CONSUMO 3 FTA
|
BBVA, S.A. | 04/2008 | 323,212 | 153,544 | ||||||||
|
BBVA CONSUMO 4 FTA
|
FINANZIA BANCO DE CRÉDITO, S.A. | 12/2009 | 684,530 | 687,429 | ||||||||
|
BBVA CONSUMO 4 FTA
|
BBVA, S.A. | 12/2009 | 415,470 | 390,774 | ||||||||
|
BBVA CONSUMO 5 FTA
|
FINANZIA BANCO DE CRÉDITO, S.A. | 12/2010 | 827,819 | 821,700 | ||||||||
|
BBVA CONSUMO 5 FTA
|
BBVA, S.A. | 12/2010 | 72,180 | 72,185 | ||||||||
|
BBVA UNIVERSALIDAD E10
|
BBVA COLOMBIA, S.A. | 03/2009 | 29,033 | 15,838 | ||||||||
|
BBVA UNIVERSALIDAD E11
|
BBVA COLOMBIA, S.A. | 05/2009 | 19,166 | 11,175 | ||||||||
|
BBVA UNIVERSALIDAD E12
|
BBVA COLOMBIA, S.A. | 08/2009 | 30,789 | 17,566 | ||||||||
|
BBVA UNIVERSALIDAD E9
|
BBVA COLOMBIA, S.A. | 12/2008 | 55,052 | 28,747 | ||||||||
|
BBVA EMPRESAS 1 FTA
|
BBVA, S.A. | 11/2007 | 1,450,002 | 436,485 | ||||||||
|
BBVA EMPRESAS 2 FTA
|
BBVA, S.A. | 03/2009 | 2,850,062 | 1,654,301 | ||||||||
|
BBVA EMPRESAS 3 FTA
|
BBVA, S.A. | 12/2009 | 2,600,011 | 1,921,757 | ||||||||
|
BBVA EMPRESAS 4 FTA
|
BBVA, S.A. | 07/2010 | 1,700,025 | 1,513,222 | ||||||||
|
BACOMCB 07
|
BBVA BANCOMER, S.A. | 12/2007 | 159,755 | 107,803 | ||||||||
|
BACOMCB 08
|
BBVA BANCOMER, S.A. | 03/2008 | 69,783 | 50,165 | ||||||||
|
BACOMCB 08U
|
BBVA BANCOMER, S.A. | 08/2008 | 344,198 | 291,279 | ||||||||
|
BACOMCB
08-2
|
BBVA BANCOMER, S.A. | 12/2008 | 351,925 | 269,905 | ||||||||
|
BACOMCB 09
|
BBVA BANCOMER, S.A. | 08/2009 | 395,526 | 344,219 | ||||||||
|
FannieMae- Lender No. 227300000
|
COMPASS BANK | 12/2001 | 184,116 | 22,763 | ||||||||
|
FANNIE MAE — LENDER No. 227300027
|
COMPASS BANK | 12/2003 | 279,356 | 86,990 | ||||||||
|
BBVA-FINANZIA AUTOS 1 FTA
|
FINANZIA BANCO DE CRÉDITO, S.A. | 04/2007 | 800,000 | 309,971 | ||||||||
|
GAT FTGENCAT 2005 FTA
|
BBVA, S.A. | 12/2005 | 249,943 | 46,081 | ||||||||
|
GC GENCAT II FTA
|
BBVA, S.A. | 03/2003 | 224,967 | 10,517 | ||||||||
|
BBVA RMBS 1 FTA
|
BBVA, S.A. | 02/2007 | 2,500,000 | 1,787,623 | ||||||||
|
BBVA RMBS 2 FTA
|
BBVA, S.A. | 03/2007 | 5,000,000 | 3,536,270 | ||||||||
|
BBVA RMBS 3 FTA
|
BBVA, S.A. | 07/2007 | 3,000,000 | 2,366,245 | ||||||||
|
BBVA RMBS 4 FTA
|
BBVA, S.A. | 11/2007 | 4,900,001 | 3,508,024 | ||||||||
|
BBVA RMBS 5 FTA
|
BBVA, S.A. | 05/2008 | 5,000,001 | 4,053,846 | ||||||||
|
BBVA RMBS 6 FTA
|
BBVA, S.A. | 11/2008 | 4,995,005 | 4,113,627 | ||||||||
|
BBVA RMBS 7 FTA
|
BBVA, S.A. | 11/2008 | 8,500,005 | 6,530,597 | ||||||||
|
BBVA RMBS 9 FTA
|
BBVA, S.A. | 04/2010 | 1,295,101 | 1,258,406 | ||||||||
|
BBVA LEASING 1 FTA
|
BBVA, S.A. | 06/2007 | 2,500,000 | 921,962 | ||||||||
|
BBVA-6 FTPYME FTA
|
BBVA, S.A. | 06/2007 | 1,500,101 | 452,240 | ||||||||
|
BBVA-7 FTGENCAT FTA
|
BBVA, S.A. | 02/2008 | 250,010 | 98,519 | ||||||||
|
BBVA-8 FTPYME FTA
|
BBVA, S.A. | 07/2008 | 1,100,127 | 539,816 | ||||||||
|
BBVA RMBS 8 FTA
|
BBVA, S.A. | 07/2009 | 1,220,000 | 1,089,584 | ||||||||
VII-1
Table of Contents
APPENDIX VIII.
Details of the outstanding subordinated debt and preferred
securities issued by the Bank or entities in the Group
consolidated as of December 31, 2010.
Outsanding
as of December 31, 2010 of subordinated issues
|
Prevailing
|
||||||||||||||||||||||||
|
December
|
December
|
December
|
Interest Rate
|
Maturity
|
||||||||||||||||||||
|
Issuer Entity and Issued Date
|
Currency | 2010 | 2009 | 2008 | at 2010 | Date | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
Issues in Euros
|
||||||||||||||||||||||||
|
BBVA
|
||||||||||||||||||||||||
|
July-96
|
EUR | 27 | 27 | 27 | 9.37 | % | 22-12-16 | |||||||||||||||||
|
November-03
|
EUR | — | 750 | 750 | — | 12-11-15 | ||||||||||||||||||
|
October-04
|
EUR | 992 | 992 | 992 | 4.37 | % | 20-10-19 | |||||||||||||||||
|
February-07
|
EUR | 297 | 297 | 297 | 4.50 | % | 16-02-22 | |||||||||||||||||
|
March-08
|
EUR | 125 | 125 | 125 | 6.03 | % | 03-03-33 | |||||||||||||||||
|
July-08
|
EUR | 100 | 100 | 100 | 6.20 | % | 04-07-23 | |||||||||||||||||
|
September-09
|
EUR | 2,000 | 2,000 | — | 5.00 | % | 15-10-14 | |||||||||||||||||
|
Subtotal
|
EUR | 3,541 | 4,291 | 2,291 | ||||||||||||||||||||
|
BBVA GLOBAL FINANCE, LTD.(*)
|
||||||||||||||||||||||||
|
July-99
|
EUR | 73 | 73 | 73 | 6.35 | % | 16-10-15 | |||||||||||||||||
|
February-00
|
EUR | — | 442 | 442 | — | 25-02-10 | ||||||||||||||||||
|
October-01
|
EUR | 60 | 60 | 60 | 5.73 | % | 10-10-11 | |||||||||||||||||
|
October-01
|
EUR | 40 | 40 | 40 | 6.08 | % | 10-10-16 | |||||||||||||||||
|
October-01
|
EUR | 50 | 50 | 50 | 1.58 | % | 15-10-16 | |||||||||||||||||
|
November-01
|
EUR | 55 | 55 | 55 | 1.75 | % | 02-11-16 | |||||||||||||||||
|
December-01
|
EUR | 56 | 56 | 56 | 1.72 | % | 20-12-16 | |||||||||||||||||
|
Subtotal
|
EUR | 334 | 776 | 776 | ||||||||||||||||||||
|
BBVA SUBORDINATED CAPITAL, S.A.U.(*)
|
||||||||||||||||||||||||
|
May-05
|
EUR | 423 | 456 | 484 | 1.34 | % | 23-05-17 | |||||||||||||||||
|
October-05
|
EUR | 126 | 130 | 150 | 1.28 | % | 13-10-20 | |||||||||||||||||
|
October-05
|
EUR | 205 | 231 | 250 | 1.25 | % | 20-10-17 | |||||||||||||||||
|
October-06
|
EUR | 822 | 900 | 1,000 | 1.33 | % | 24-10-16 | |||||||||||||||||
|
April-07
|
EUR | 623 | 700 | 750 | 1.11 | % | 03-04-17 | |||||||||||||||||
|
April-07
|
EUR | 100 | 100 | 100 | 3.32 | % | 04-05-22 | |||||||||||||||||
|
May-08
|
EUR | 50 | 50 | 50 | 0.00 | % | 19-05-23 | |||||||||||||||||
|
July-08
|
EUR | 20 | 20 | 20 | 6.11 | % | 22-07-18 | |||||||||||||||||
|
Subtotal
|
EUR | 2,369 | 2,587 | 2,804 | ||||||||||||||||||||
|
BBVA BANCOMER, S.A. de C.V.
|
||||||||||||||||||||||||
|
May-07
|
EUR | 601 | 560 | 610 | 5.00 | % | 17-07-17 | |||||||||||||||||
|
Subtotal
|
EUR | 601 | 560 | 610 | ||||||||||||||||||||
|
ALTURA MARKETS A.V., S.A.
|
||||||||||||||||||||||||
|
November-07
|
EUR | 2 | 2 | 3 | 3.03 | % | 29-11-17 | |||||||||||||||||
|
Subtotal
|
EUR | 2 | 2 | 3 | ||||||||||||||||||||
|
Total issued in Euros
|
6,847 | 8,216 | 6,484 | |||||||||||||||||||||
| (*) | As of March 23, 2010 issues of BBVA Capital Funding, Ltd. have been assumed by BBVA Global Finance Ltd. | |
The issues of BBVA Subordinated Capital, S.A.U. and BBVA Global
Finance, LTD. are guaranteed (secondary liability) by the Bank.
VIII-1
Table of Contents
Outsanding
as of December 31, 2010 of subordinated issues
|
Prevailing
|
||||||||||||||||||||||||
|
December
|
December
|
December
|
Interest Rate
|
Maturity
|
||||||||||||||||||||
|
Issuer Entity and Issued Date
|
Currency | 2010 | 2009 | 2008 | at 2010 | Date | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
Issues in foreign currency
|
||||||||||||||||||||||||
|
BBVA PUERTO RICO, S.A.
|
||||||||||||||||||||||||
|
September-04
|
USD | 38 | 35 | 36 | 1.74 | % | 23-09-14 | |||||||||||||||||
|
September-06
|
USD | 28 | 26 | 27 | 5.76 | % | 29-09-16 | |||||||||||||||||
|
September-06
|
USD | 22 | 21 | 22 | 0.86 | % | 29-09-16 | |||||||||||||||||
|
Subtotal
|
USD | 88 | 82 | 85 | ||||||||||||||||||||
|
BBVA GLOBAL FINANCE, LTD.(*)
|
||||||||||||||||||||||||
|
December-95
|
USD | 96 | 139 | 144 | 7.00 | % | 01-12-25 | |||||||||||||||||
|
October-95
|
JPY | 92 | 75 | 79 | 6.00 | % | 26-10-15 | |||||||||||||||||
|
BANCO BILBAO VIZCAYA ARGENTARIA, CHILE
|
||||||||||||||||||||||||
|
Various issues
|
CLP | 624 | 336 | 287 | Various | Various | ||||||||||||||||||
|
Subtotal
|
CLP | 624 | 336 | 287 | ||||||||||||||||||||
|
BBVA BANCOMER, S.A. de C.V.
|
||||||||||||||||||||||||
|
July-05
|
USD | — | 241 | — | — | 22-07-15 | ||||||||||||||||||
|
May-07
|
USD | 373 | 345 | — | 6.00 | % | 17-05-22 | |||||||||||||||||
|
April-10
|
USD | 670 | — | — | 7.00 | % | 22-04-20 | |||||||||||||||||
|
Subtotal
|
USD | 1,043 | 586 | — | ||||||||||||||||||||
|
September-06
|
MXN | 151 | 132 | — | 5.00 | % | 18-09-14 | |||||||||||||||||
|
July-08
|
MXN | 73 | 63 | — | 5.00 | % | 16-07-18 | |||||||||||||||||
|
October-08
|
MXN | 181 | 156 | — | 6.00 | % | 24-09-18 | |||||||||||||||||
|
December-08
|
MXN | 166 | 146 | — | 6.00 | % | 26-11-20 | |||||||||||||||||
|
January-09
|
MXN | 2 | 2 | — | 6.00 | % | 26-11-20 | |||||||||||||||||
|
February-09
|
MXN | 2 | 2 | — | 6.00 | % | 26-11-20 | |||||||||||||||||
|
March-09
|
MXN | 1 | 1 | — | 6.00 | % | 26-11-20 | |||||||||||||||||
|
April-09
|
MXN | 1 | 1 | — | 6.00 | % | 26-11-20 | |||||||||||||||||
|
June-09
|
MXN | 158 | 138 | — | 6.00 | % | 07-06-19 | |||||||||||||||||
|
July-09
|
MXN | 5 | 5 | — | 6.00 | % | 07-06-19 | |||||||||||||||||
|
September-09
|
MXN | 1 | 1 | — | 6.00 | % | 07-06-19 | |||||||||||||||||
|
Subtotal
|
MXN | 741 | 647 | — | ||||||||||||||||||||
|
BBVA SUBORDINATED CAPITAL, S.A.U.
|
||||||||||||||||||||||||
|
October-05
|
JPY | 184 | 150 | 159 | 2.75 | % | 22-10-35 | |||||||||||||||||
|
Subtotal
|
JPY | 184 | 150 | 159 | ||||||||||||||||||||
|
October-05
|
GBP | — | 277 | 315 | — | 21-10-15 | ||||||||||||||||||
|
March-06
|
GBP | 326 | 325 | 315 | 5.00 | % | 31-03-16 | |||||||||||||||||
|
March-07
|
GBP | 284 | 282 | 262 | 5.75 | % | 11-03-18 | |||||||||||||||||
|
Subtotal
|
GBP | 610 | 884 | 892 | ||||||||||||||||||||
|
RIVERWAY HOLDING CAPITAL TRUST I
|
||||||||||||||||||||||||
|
March-01
|
USD | 7 | 7 | 7 | 10.18 | % | 08-06-31 | |||||||||||||||||
|
Subtotal
|
USD | 7 | 7 | 7 | ||||||||||||||||||||
|
TEXAS REGIONAL STATUTORY TRUST I
|
||||||||||||||||||||||||
|
February-04
|
USD | 37 | 35 | 36 | 3.15 | % | 17-03-34 | |||||||||||||||||
|
Subtotal
|
USD | 37 | 35 | 36 | ||||||||||||||||||||
| (*) | As of March 23, 2010 issues of BBVA Capital Funding, Ltd. have been assumed by BBVA Global Finance Ltd. |
The issues of BBVA Subordinated Capital, S.A.U. and BBVA Global
Finance, LTD. are guaranteed (secondary liability) by the Bank.
VIII-2
Table of Contents
Outsanding
as of December 31, 2010 of subordinated issues
|
Prevailing
|
||||||||||||||||||||||||
|
December
|
December
|
December
|
Interest Rate
|
Maturity
|
||||||||||||||||||||
|
Issuer Entity and Issued Date
|
Currency | 2010 | 2009 | 2008 | at 2010 | Date | ||||||||||||||||||
| Millions of euros | ||||||||||||||||||||||||
|
STATE NATIONAL CAPITAL TRUST I
|
||||||||||||||||||||||||
|
July-03
|
USD | 11 | 10 | 11 | 3.35 | % | 30-09-33 | |||||||||||||||||
|
Subtotal
|
USD | 11 | 10 | 11 | ||||||||||||||||||||
|
STATE NATIONAL STATUTORY TRUST II
|
||||||||||||||||||||||||
|
March-04
|
USD | 7 | 7 | 7 | 3.09 | % | 17-03-34 | |||||||||||||||||
|
Subtotal
|
USD | 7 | 7 | 7 | ||||||||||||||||||||
|
TEXASBANC CAPITAL TRUST I
|
||||||||||||||||||||||||
|
July-04
|
USD | 19 | 17 | 18 | 2.89 | % | 23-07-34 | |||||||||||||||||
|
Subtotal
|
USD | 19 | 17 | 18 | ||||||||||||||||||||
|
COMPASS BANK
|
||||||||||||||||||||||||
|
March-05
|
USD | 212 | 195 | 201 | 5.50 | % | 01-04-20 | |||||||||||||||||
|
March-06
|
USD | 195 | 180 | 186 | 5.90 | % | 01-04-26 | |||||||||||||||||
|
September-07
|
USD | 261 | 242 | 250 | 6.40 | % | 01-10-17 | |||||||||||||||||
|
Subtotal
|
USD | 668 | 617 | 637 | ||||||||||||||||||||
|
BBVA COLOMBIA, S.A.
|
||||||||||||||||||||||||
|
August-06
|
COP | 156 | 136 | 128 | 7.92 | % | 28-08-11 | |||||||||||||||||
|
Subtotal
|
COP | 156 | 136 | 128 | ||||||||||||||||||||
|
BBVA PARAGUAY, S.A.
|
||||||||||||||||||||||||
|
Various
|
PYG | 2 | 2 | 2 | Various | Various | ||||||||||||||||||
|
Various
|
USD | 6 | 6 | 6 | Various | Various | ||||||||||||||||||
|
BANCO CONTINENTAL, S.A.
|
||||||||||||||||||||||||
|
December-06
|
USD | 22 | 21 | 22 | 1.84 | % | 15-02-17 | |||||||||||||||||
|
May-07
|
USD | 15 | 14 | 9 | 6.00 | % | 14-05-27 | |||||||||||||||||
|
September-07
|
USD | 15 | 14 | 14 | 1.59 | % | 24-09-17 | |||||||||||||||||
|
February-08
|
USD | 15 | 14 | 14 | 6.47 | % | 28-02-28 | |||||||||||||||||
|
June-08
|
USD | 22 | 21 | 14 | 3.11 | % | 15-06-18 | |||||||||||||||||
|
November-08
|
USD | 15 | 14 | 14 | 2.89 | % | 15-02-19 | |||||||||||||||||
|
Subtotal
|
104 | 98 | 87 | |||||||||||||||||||||
|
May-07
|
PEN | 11 | 10 | 9 | 5.85 | % | 07-05-22 | |||||||||||||||||
|
June-07
|
PEN | 16 | 14 | 14 | 3.88 | % | 18-06-32 | |||||||||||||||||
|
November-07
|
PEN | 15 | 13 | 12 | 3.91 | % | 19-11-32 | |||||||||||||||||
|
July-08
|
PEN | 13 | 11 | 11 | 3.22 | % | 08-07-23 | |||||||||||||||||
|
September-08
|
PEN | 14 | 12 | 12 | 3.23 | % | 09-09-23 | |||||||||||||||||
|
December-08
|
PEN | 8 | 7 | 7 | 4.30 | % | 15-12-33 | |||||||||||||||||
|
October-10
|
PEN | 150 | — | — | 7.38 | % | 15-12-33 | |||||||||||||||||
|
Subtotal
|
PEN | 227 | 67 | 65 | ||||||||||||||||||||
|
Total issues in foreign currencies (Millions of Euros)
|
4,722 | 3,901 | 2,650 | |||||||||||||||||||||
VIII-3
Table of Contents
Outsanding
as of December 31, 2010 of Preferred Issues
| December 2010 | December 2009 | December 2008 | ||||||||||||||||||||||
|
Amount Issued
|
Amount Issued
|
Amount Issued
|
||||||||||||||||||||||
|
Issuer Entity and Issued Date
|
Currency | (Millions) | Currency | (Millions) | Currency | (Millions) | ||||||||||||||||||
|
BBVA International, Ltd.
|
— | — | — | — | — | — | ||||||||||||||||||
|
December-02
|
EUR | 500 | EUR | 500 | EUR | 500 | ||||||||||||||||||
|
BBVA Capital Finance, S.A.U.
|
— | — | — | — | — | — | ||||||||||||||||||
|
December-03
|
EUR | 350 | EUR | 350 | EUR | 350 | ||||||||||||||||||
|
July-04
|
EUR | 500 | EUR | 500 | EUR | 500 | ||||||||||||||||||
|
December-04
|
EUR | 1,125 | EUR | 1,125 | EUR | 1,125 | ||||||||||||||||||
|
December-08
|
EUR | 1,000 | EUR | 1,000 | EUR | 1,000 | ||||||||||||||||||
|
BBVA International Preferred, S.A.U
|
— | — | — | — | — | — | ||||||||||||||||||
|
September-05
|
EUR | 85 | EUR | 85 | EUR | 85 | ||||||||||||||||||
|
September-06
|
EUR | 164 | EUR | 164 | EUR | 164 | ||||||||||||||||||
|
April-07
|
USD | 600 | USD | 600 | USD | 600 | ||||||||||||||||||
|
July-07
|
GBP | 31 | GBP | 31 | GBP | 31 | ||||||||||||||||||
|
October-09
|
EUR | 645 | EUR | 645 | EUR | — | ||||||||||||||||||
|
October-09
|
GBP | 251 | GBP | 251 | GBP | — | ||||||||||||||||||
|
Banco Provincial, S.A. — Banco Universal
|
— | — | — | — | — | — | ||||||||||||||||||
|
October-07
|
VEF | 150 | VEF | 150 | VEF | 150 | ||||||||||||||||||
|
November-07
|
VEF | 58 | VEF | 58 | VEF | 58 | ||||||||||||||||||
|
Phoenix Loan Holdings Inc.
|
— | — | — | — | — | — | ||||||||||||||||||
|
November-00
|
USD | 25 | USD | 25 | USD | 25 | ||||||||||||||||||
VIII-4
Table of Contents
APPENDIX IX.
Consolidated balance sheets as of December 31, 2010, 2009
and 2008 held in foreign currency
|
Mexican
|
Other Foreign
|
Total Foreign
|
||||||||||||||
|
2010
|
USD | Pesos | Currencies | Currencies | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Assets -
|
||||||||||||||||
|
Cash and balances with Central Banks
|
4,358 | 6,002 | 5,333 | 15,693 | ||||||||||||
|
Financial assets held for trading
|
2,347 | 11,142 | 4,031 | 17,520 | ||||||||||||
|
Available-for-sale
financial assets
|
8,547 | 10,150 | 5,102 | 23,799 | ||||||||||||
|
Loans and receivables
|
61,994 | 35,465 | 31,288 | 128,747 | ||||||||||||
|
Investments in entities accounted for using the equity method
|
5 | 112 | 3,658 | 3,775 | ||||||||||||
|
Tangible assets
|
804 | 916 | 655 | 2,375 | ||||||||||||
|
Other assets
|
3,972 | 2,768 | 1,830 | 8,570 | ||||||||||||
|
Total
|
82,027 | 66,555 | 51,897 | 200,479 | ||||||||||||
|
Liabilities-
|
||||||||||||||||
|
Financial liabilities held for trading
|
1,420 | 3,349 | 1,073 | 5,842 | ||||||||||||
|
Financial liabilities at amortised cost
|
90,444 | 50,708 | 42,645 | 183,797 | ||||||||||||
|
Other liabilities
|
928 | 5,976 | 2,889 | 9,793 | ||||||||||||
|
Total
|
92,792 | 60,033 | 46,607 | 199,432 | ||||||||||||
|
Mexican
|
Other Foreign
|
Total Foreign
|
||||||||||||||
|
2009
|
USD | Pesos | Currencies | Currencies | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Assets -
|
||||||||||||||||
|
Cash and balances with Central Banks
|
3,198 | 5,469 | 4,278 | 12,945 | ||||||||||||
|
Financial assets held for trading
|
2,607 | 12,121 | 2,459 | 17,187 | ||||||||||||
|
Available-for-sale
financial assets
|
8,451 | 7,277 | 5,227 | 20,955 | ||||||||||||
|
Loans and receivables
|
59,400 | 27,618 | 27,953 | 114,971 | ||||||||||||
|
Investments in entities accounted for using the equity method
|
5 | 112 | 2,328 | 2,445 | ||||||||||||
|
Tangible assets
|
753 | 777 | 653 | 2,183 | ||||||||||||
|
Other assets
|
3,699 | 2,123 | 1,763 | 7,585 | ||||||||||||
|
Total
|
78,113 | 55,497 | 44,661 | 178,271 | ||||||||||||
|
Liabilities-
|
||||||||||||||||
|
Financial liabilities held for trading
|
893 | 2,507 | 968 | 4,368 | ||||||||||||
|
Financial liabilities at amortised cost
|
121,735 | 43,300 | 42,502 | 207,537 | ||||||||||||
|
Other liabilities
|
1,050 | 4,316 | 2,835 | 8,201 | ||||||||||||
|
Total
|
123,678 | 50,123 | 46,305 | 220,106 | ||||||||||||
IX-1
Table of Contents
|
Mexican
|
Other Foreign
|
Total Foreign
|
||||||||||||||
|
2008
|
USD | Pesos | Currencies | Currencies | ||||||||||||
| Millions of euros | ||||||||||||||||
|
Assets -
|
||||||||||||||||
|
Cash and balances with Central Banks
|
2,788 | 5,179 | 3,612 | 11,579 | ||||||||||||
|
Financial assets held for trading
|
4,137 | 13,184 | 3,003 | 20,324 | ||||||||||||
|
Available-for-sale
financial assets
|
10,321 | 5,613 | 4,846 | 20,780 | ||||||||||||
|
Loans and receivables
|
65,928 | 26,168 | 28,072 | 120,168 | ||||||||||||
|
Investments in entities accounted for using the equity method
|
5 | 103 | 481 | 589 | ||||||||||||
|
Tangible assets
|
802 | 729 | 485 | 2,016 | ||||||||||||
|
Other assets
|
2,093 | 1,843 | 1,716 | 5,652 | ||||||||||||
|
Total
|
86,074 | 52,819 | 42,215 | 181,108 | ||||||||||||
|
Liabilities-
|
||||||||||||||||
|
Financial liabilities held for trading
|
1,192 | 3,919 | 1,057 | 6,168 | ||||||||||||
|
Financial liabilities at amortised cost
|
116,910 | 42,288 | 42,097 | 201,295 | ||||||||||||
|
Other liabilities
|
1,005 | 3,896 | 2,565 | 7,466 | ||||||||||||
|
Total
|
119,107 | 50,103 | 45,719 | 214,929 | ||||||||||||
IX-2
Table of Contents
APPENDIX X.
Consolidated income statements for the first and second half of
2010 and 2009
|
Six Months
|
Six Months
|
Six Months
|
Six Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
June 30,
|
December 31,
|
June 30,
|
December 31,
|
|||||||||||||
| 2010 | 2010 | 2009 | 2009 | |||||||||||||
| Millions of euros | ||||||||||||||||
|
INTEREST AND SIMILAR INCOME
|
10,457 | 10,677 | 12,911 | 10,864 | ||||||||||||
|
INTEREST AND SIMILAR EXPENSES
|
(3,520 | ) | (4,294 | ) | (6,053 | ) | (3,840 | ) | ||||||||
|
NET INTEREST INCOME
|
6,937 | 6,383 | 6,858 | 7,024 | ||||||||||||
|
DIVIDEND INCOME
|
257 | 272 | 248 | 195 | ||||||||||||
|
SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE
EQUITY METHOD
|
151 | 184 | 27 | 93 | ||||||||||||
|
FEE AND COMMISSION INCOME
|
2,678 | 2,704 | 2,638 | 2,667 | ||||||||||||
|
FEE AND COMMISSION EXPENSES
|
(406 | ) | (439 | ) | (457 | ) | (418 | ) | ||||||||
|
NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES
|
1,067 | 374 | 446 | 446 | ||||||||||||
|
NET EXCHANGE DIFFERENCES
|
56 | 397 | 352 | 300 | ||||||||||||
|
OTHER OPERATING INCOME
|
1,771 | 1,772 | 1,755 | 1,645 | ||||||||||||
|
OTHER OPERATING EXPENSES
|
(1,631 | ) | (1,617 | ) | (1,487 | ) | (1,666 | ) | ||||||||
|
GROSS INCOME
|
10,880 | 10,030 | 10,380 | 10,286 | ||||||||||||
|
ADMINISTRATION COSTS
|
(4,015 | ) | (4,192 | ) | (3,734 | ) | (3,928 | ) | ||||||||
|
Personnel expenses
|
(2,364 | ) | (2,450 | ) | (2,291 | ) | (2,360 | ) | ||||||||
|
General and administrative expenses
|
(1,651 | ) | (1,742 | ) | (1,443 | ) | (1,568 | ) | ||||||||
|
DEPRECIATION AND AMORTIZATION
|
(365 | ) | (396 | ) | (354 | ) | (343 | ) | ||||||||
|
PROVISIONS (NET)
|
(270 | ) | (212 | ) | (152 | ) | (306 | ) | ||||||||
|
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)
|
(2,419 | ) | (2,299 | ) | (1,945 | ) | (3,528 | ) | ||||||||
|
NET OPERATING INCOME
|
3,811 | 2,931 | 4,195 | 2,181 | ||||||||||||
|
IMPAIRMENT LOSSES ON OTHER ASSETS (NET)
|
(196 | ) | (293 | ) | (271 | ) | (1,347 | ) | ||||||||
|
GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS
NON-CURRENT ASSETS HELD FOR SALE
|
11 | 30 | 9 | 11 | ||||||||||||
|
NEGATIVE GOODWILL
|
1 | — | — | 99 | ||||||||||||
|
GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT
CLASSIFIED AS DISCONTINUED OPERATIONS
|
24 | 103 | 70 | 789 | ||||||||||||
|
INCOME BEFORE TAX
|
3,651 | 2,771 | 4,003 | 1,733 | ||||||||||||
|
INCOME TAX
|
(941 | ) | (486 | ) | (961 | ) | (180 | ) | ||||||||
|
INCOME FROM CONTINUING TRANSACTIONS
|
2,710 | 2,285 | 3,042 | 1,553 | ||||||||||||
|
INCOME FROM DISCONTINUED TRANSACTIONS (NET)
|
— | — | — | — | ||||||||||||
|
NET INCOME
|
2,710 | 2,285 | 3,042 | 1,553 | ||||||||||||
|
Net Income attributed to parent company
|
2,527 | 2,079 | 2,799 | 1,411 | ||||||||||||
|
Net income attributed to non-controlling interests
|
183 | 206 | 243 | 142 | ||||||||||||
|
Six Months
|
Six Months Ended
|
|||||||||||||||
|
Ended June 30,
|
Six Months Ended
|
June 30,
|
Six Months Ended
|
|||||||||||||
| 2010 | December 31, 2010 | 2009 | December 31, 2009 | |||||||||||||
| Euros | ||||||||||||||||
|
EARNINGS PER SHARE
|
||||||||||||||||
|
Basic earnings per share
|
0.63 | 0.54 | 0.73 | 0.35 | ||||||||||||
|
Diluted earnings per share
|
0.63 | 0.54 | 0.73 | 0.35 | ||||||||||||
X-1
Table of Contents
APPENDIX XI.
GLOSSARY
| Adjusted acquisition cost | The acquisition cost of the securities less accumulated amortizations, plus interest accrued, but not net of any other valuation adjustments. | |
| Amortized cost | The amortized cost of a financial asset is the amount at which it was measured at initial recognition minus principal repayments, plus or minus, as warranted, the cumulative amount taken to profit or loss using the effective interest rate method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or change in measured value. | |
| Assets leased out under operating lease | Lease arrangements that are not finance leases are designated operating leases. | |
| Associates | Companies in which the Group is able to exercise significant influence, without having control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly. | |
| Available-for-sale financial assets | Available-for-sale (AFS) financial assets are debt securities that are not classified as held-to-maturity investments or as financial assets designated at fair value through profit or loss (FVTPL) and equity instruments that are not subsidiaries, associates or jointly controlled entities and have not been designated as at FVTPL. | |
| Basic earnings per share | Calculated by dividing profit or loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period | |
| Business combination | The merger of two or more entities or independent businesses into a single entity or group of entities. | |
| Cash flow hedges | Derivatives that hedge the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could effect profit or loss. | |
| Commissions and fees | Income and expenses relating to commissions and similar fees are recognized in the consolidated income statement using criteria that vary according to their nature. The most significant income and expense items in this connection are: | |
|
• Feed and commissions relating linked to
financial assets and liabilities measured at fair value through
profit or loss, which are recognized when collected.
|
||
|
• Fees and commissions arising from
transactions or services that are provided over a period of
time, which are recognized over the life of these transactions
or services.
|
||
|
• Fees and commissions generated by a
single act are accrued upon execution of that act.
|
||
| Contingencies | Current obligations arising as a result of past events, certain in terms of nature at the balance sheet date but uncertain in terms of amount and/or cancellation date, settlement of which is deemed likely to entail an outflow of resources embodying economic benefits. | |
| Contingent commitments | Possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. |
XI-1
Table of Contents
| Contingent risks | Transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts. | |
| Current tax assets | Taxes recoverable over the next twelve months. | |
| Current tax liabilities | Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve months. | |
| Debt obligations/certificates | Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer, including debt securities issued for trading among an open group of investors, that accrue interest, implied or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form of securities or book-entries, irrespective of the issuer. | |
| Deferred tax assets | Taxes recoverable in future years, including loss carryforwards or tax credits for deductions and tax rebates pending application. | |
| Deferred tax liabilities | Income taxes payable in subsequent years. | |
| Defined benefit commitments | Post-employment obligation under which the entity, directly or indirectly via the plan, retains the contractual or implicit obligation to pay remuneration directly to employees when required or to pay additional amounts if the insurer, or other entity required to pay, does not cover all the benefits relating to the services rendered by the employees when insurance policies do not cover all of the corresponding post-employees benefits. | |
| Defined contribution commitments | Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement benefits are determined by contributions to a fund together with investment earnings thereon. The employer’s obligations in respect of its employees current and prior years’ employment service are discharged by contributions to the fund. | |
| Deposits from central banks | Deposits of all classes, including loans and money market operations, received from the Bank of Spain and other central banks. | |
| Deposits from credit institutions | Deposits of all classes, including loans and money market operations received, from credit entities. | |
| Deposits from customers | Redeemable cash balances received by the entity, with the exception of debt certificates, money market operations through counterparties and subordinated liabilities, that are not received from either central banks or credit entities. This category also includes cash deposits and consignments received that can be readily withdrawn. |
XI-2
Table of Contents
| Diluted earnings per share | This calculation is similar to that used to measure basic earnings per share, except that the weighted average number of shares outstanding is adjusted to reflect the potential dilutive effect of any stock options, warrants and convertible debt instruments outstanding the year. For the purpose of calculating diluted earnings per share, an entity shall assume the exercise of dilutive warrants of the entity. The assumed proceeds from these instruments shall be regarded as having been received from the issue of ordinary shares at the average market price of ordinary shares during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at the average market price of ordinary shares during the period shall be treated as an issue of ordinary shares for no consideration. Such shares are dilutive and are added to the number of ordinary shares outstanding in the calculation of diluted earnings per share. | |
| Early retirements | Employees that no longer render their services to the entity but which, without being legally retired, remain entitled to make economic claims on the entity until they formally retire. | |
| Economic capital | Eligible capital for regulatory capital adequacy calculations. | |
| Effective interest rate | Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the expected life of the instrument based on its contractual period as well as its anticipated amortization, but without taking the future losses of credit risk into consideration. | |
| Equity | The residual interest in an entity’s assets after deducting its liabilities. It includes owner or venturer contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities, and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, minority interests. | |
| Equity instruments | An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. | |
| Equity method | The equity method is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the investee, adjusted for dividends received and other equity eliminations. | |
| Exchange/translation differences | Gains and losses generated by currency trading and the differences arising on translating monetary items denominated in foreign currency to the functional currency, exchange differences on foreign currency non-monetary assets accumulated in equity and taken to profit or loss when the assets are sold and gains and losses realized on the disposal of assets at entities with a functional currency other than the euro. | |
| Fair value | The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. | |
| Fair value hedges | Derivatives that hedge the exposure of the fair value of assets and liabilities to movements in interest rates and/or exchange rates designated as a hedged risk. | |
| Fees | See Commissions, fees and similar items |
XI-3
Table of Contents
| Financial guarantees | A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits, technical or financial guarantees, irrevocable letters of credit issued or confirmed by the entity, insurance contracts or credit derivatives in which the entity sells credit protection, among others. | |
| Financial instrument | A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial liability or equity instrument of another entity. | |
| Financial liabilities at amortized cost | Financial liabilities that do not meet the definition of financial liabilities designated at fair value through profit or loss and arise from the financial entities’ ordinary activities to capture funds, regardless of their instrumentation or maturity. | |
| Full consolidation |
• preparing consolidated financial
statements, an entity combines the balance sheets of the parent
and its subsidiaries line by line by adding together like items
of assets, liabilities and equity. Intragroup balances and
transactions, including amounts payable and receivable, are
eliminated in full.
|
|
|
• Group entity income statement income and
expense headings are similarly combined line by line into the
consolidated income statement, having made the following
consolidation eliminations: a) income and expenses in respect of
intragroup transactions are eliminated in full. b) profits and
losses resulting from intragroup transactions are similarly
eliminated.
|
||
|
• The carrying amount of the parent’s
investment and the parent’s share of equity in each
subsidiary are eliminated.
|
||
| Gains or losses on financial assets and liabilities, net | This heading reflects fair value changes in financial instruments - except for changes attributable to accrued interest upon application of the interest rate method and asset impairment losses (net) recognized in the income statement - as well as gains or losses generated by their sale - except for gains or losses generated by the disposal of investments in subsidiaries, jointly controlled entities and associates an of securities classified as held to maturity. | |
| Goodwill | Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not able to be individually identified and separately recognized. | |
| Hedges of net investments in foreign operations | Foreign currency hedge of a net investment in a foreign operation. | |
| Held-to-maturity investments | Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. |
XI-4
Table of Contents
| Held for trading (assets and liabilities) | Financial assets and liabilities acquired or incurred principally for the purpose of selling or repurchasing them in the near term with a view to profiting from variations in their prices or by exploiting existing differences between their bid and ask prices. | |
| This category also includes financial derivatives not qualifying for hedge accounting, and in the case of borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under repurchase agreements or received on loan (“short positions”). | ||
| Impaired/doubtful/non-performing portfolio | Financial assets whose carrying amount is higher than their recoverable value, prompting the entity to recognize the corresponding impairment loss | |
| Impaired financial assets | A financial asset is deemed impaired, and accordingly restated to fair value, when there is objective evidence of impairment as a result of one or more events that give rise to: | |
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1. A measurable decrease in the estimated future cash flows
since the initial recognition of those assets in the case of
debt instruments (loans and receivables and debt securities).
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2. A significant or prolonged drop in fair value below cost
in the case of equity instruments.
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| Income from equity instruments | Dividends and income on equity instruments collected or announced during the year corresponding to profits generated by investees after the ownership interest is acquired. Income is recognized gross, i.e., without deducting any withholdings made, if any. | |
| Insurance contracts linked to pensions | The fair value of insurance contracts written to cover pension commitments. | |
| Inventories | Assets, other than financial instruments, under production, construction or development, held for sale during the normal course of business, or to be consumed in the production process or during the rendering of services. Inventories include land and other properties held for sale at the real estate development business. | |
| Investment properties | Investment property is property (land or a building — or part of a building — or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own use or sale in the ordinary course of business. | |
| Jointly controlled entities | Companies over which the entity exercises control but are not subsidiaries are designated “jointly controlled entities”. Joint control is the contractually agreed sharing of control over an economic activity or undertaking by two or more entities, or controlling parties. The controlling parties agree to share the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. It exists only when the strategic financial and operating decisions require unanimous consent of the controlling parties. | |
| Leases | A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially equivalent to the combination of principal and interest payments under a loan agreement. |
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Table of Contents
| Liabilities associated with non-current assets held for sale | The balance of liabilities directly associated with assets classified as non-current assets held for sale, including those recognized under liabilities in the entity’s balance sheet at the balance sheet date corresponding to discontinued operations. | |
| Liabilities under insurance contracts | The technical reserves of direct insurance and inward reinsurance recorded by the consolidated entities to cover claims arising from insurance contracts in force at period-end. | |
| Loans and advances to customers | Loans and receivables, irrespective of their type, granted to third parties that are not credit entities and that are not classified as money market operations through counterparties. | |
| Loans and receivables | Financing extended to third parties, classified according to their nature, irrespective of the borrower type and the instrumentation of the financing extended, including finance lease arrangements where the consolidated subsidiaries act as lessors. | |
| Minority interests | Minority interest is that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent, including minority interests in the profit or loss of consolidated subsidiaries for the reporting period. | |
| Mortgage-backed bonds | Fixed-income securities guaranteed with the mortgage loans for the issuing entity, which, in accordance with current legislation to that effect, are not subject to the issuance of mortgage bonds. | |
| Non-current assets held for sale | A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale transaction, rather than through continuing use, and which meets the following requirements: | |
| a) it is immediately available for sale in its present condition at the balance sheet date, i.e. only normal procedures are required for the sale of the asset. | ||
| b) the sale is considered highly probable. | ||
| Other equity instruments | This heading reflects the increase in equity resulting from various forms of owner contributions, retained earnings, restatements of the financial statements and valuation adjustments. | |
| Other financial assets/liabilities at fair value through profit or loss |
• Assets and liabilities that are deemed
hybrid financial assets and liabilities and for which the fair
value of the embedded derivatives cannot be reliably determined.
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• These are financial assets managed
jointly with “Liabilities under insurance contracts”
valued at fair value, in combination with derivatives written
with a view to significantly mitigating exposure to changes in
these contracts’ fair value, or in combination with
financial liabilities and derivatives designed to significantly
reduce global exposure to interest rate risk.
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| These headings include customer loans and deposits effected via so-called unit-linked life insurance contracts, in which the policyholder assumes the investment risk. | ||
| Own/treasury shares | The amount of own equity instruments held by the entity. |
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| Personnel expenses | All compensation accrued during the year in respect of personnel on the payroll, under permanent or temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the current costs of servicing pension plans, own share based compensation schemes and capitalized personnel expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect of employee illness are deducted from personnel expenses. | |
| Post-employment benefits | Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on or after termination of service. | |
| Property, plant and equipment/tangible assets | Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired under finance leases. | |
| Proportionate consolidation method | The venturer combines and subsequently eliminates its interests in jointly controlled entities’ balances and transactions in proportion to its ownership stake in these entities. | |
| The venturer combines its interest in the assets and liabilities assigned to the jointly controlled operations and the assets that are jointly controlled together with other joint venturers line by line in the consolidated balance sheet. Similarly, it combines its interest in the income and expenses originating in jointly controlled businesses line by line in the consolidated income statement. | ||
| Provisions | Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past events, certain in terms of nature but uncertain in terms of amount and/or cancellation date. | |
| Provision expenses | Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the exception of provisions for pensions and contributions to pension funds which constitute current or interest expense. | |
| Provisions for contingent exposures and commitments | Provisions recorded to cover exposures arising as a result of transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may arise upon recognition of financial assets. | |
| Provisions for pensions and similar obligation | Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis-à-vis beneficiaries of early retirement and analogous schemes. | |
| Reserves | Accumulated net profits or losses recognized in the income statement in prior years and retained in equity upon distribution. Reserves also include the cumulative effect of adjustments recognized directly in equity as a result of the retroactive restatement of the financial statements due to changes in accounting policy and the correction of errors. | |
| Securitization fund | A fund that is configured as a separate equity and administered by a management company. An entity that would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by said assets. | |
| Share premium | The amount paid in by owners for issued equity at a premium to the shares’ nominal value. |
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Table of Contents
| Short positions | Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase agreements or received on loan. | |
| Subordinated liabilities | Financing received, regardless of its instrumentation, which ranks after the common creditors in the event of a liquidation. | |
| Subsidiaries | Companies which the Group has the power to control. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity’s voting power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an entity’s voting rights does not constitute control of it. Control also exists when the parent owns half or less of the voting power of an entity when there is: | |
|
• an agreement that gives the parent the
right to control the votes of other shareholders;
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• power to govern the financial and
operating policies of the entity under a statute or an
agreement; power to appoint or remove the majority of the
members of the board of directors or equivalent governing body
and control of the entity is by that board or body;
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• power to cast the majority of votes at
meetings of the board of directors or equivalent governing body
and control of the entity is by that board or body.
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| Substandard risk | All debt instruments and contingent risks which do not meet the criteria to be classified individually as non-performing or written-off, but show weaknesses that may entail for the entity the need to assume losses greater than the hedges for impairment of risks subject to special monitoring. | |
| Tax liabilities | All tax related liabilities except for provisions for taxes. | |
| Trading derivatives | The fair value in favor of the entity of derivatives not designated as accounting hedges. | |
| Value at Risk (VaR) | Value at Risk ( VaR ) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level | |
| VaR figures are estimated following two methodologies: | ||
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• VaR without smoothing, which awards equal weight to
the daily information for the immediately preceding last two
years. This is currently the official methodology for measuring
market risks vis-à-vis limits compliance of the risk.
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• VaR with smoothing, which weights more recent market
information more heavily.
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| This is a metric which supplements the previous one. | ||
| VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when the markets show less volatile trends, while it will tend to be lower when they present upturns in uncertainty. |
XI-8
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on The CompanyItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16. [reserved]Item 16A. Audit Committee Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16F. Change in Registrant S Certifying AccountantItem 16G. Corporate GovernancePart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsNote 7 Analyzes The Group S Main Risks That Are Hedged Using These Financial InstrumentsItem 2010 2009 2008