able to capitalise on a balance sheet with a limited
risk profile and limited leveraging.
In BBVA’s business with customers in the euro zone the
sharp decline in interest rates in recent quarters initially
had a positive effect because assets were repriced more
slowly than liabilities. However, now the reduction in
the yield on loans (down 73 basis points to 3.68%) is
greater than the decline in the cost of funds (down 37
basis points to 0.85%). Consequently the customer
spread has dropped to 2.83%, 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. Net interest
income for the first nine months in Spain & Portugal
and in those Wholesale Banking units that operate in
the euro zone increased 4.5% year-on-year. Another
significant indicator is the ratio of net interest income to
average total assets, which remains stable in all the
Spanish units (retail businesses and CBB).
Customer spread (euro area)
(Percentage)
Yield on total
net lending
Customer
spread
Cost of
deposits
5.90
3.01
2.89
6.07
3.30
2.77
2Q 3Q
4Q 1Q
2Q
2008
2009
In Mexico interbank interest rates fell again in the third
quarter (the average TIIE was 4.9%, compared to
5.9% in the second quarter). This decline had an
impact on the cost of deposits, which dropped 47 basis
points. The lower interest rates were accompanied by a
change in the portfolio mix, with consumer products
and cards playing an increasingly smaller role. These
factors caused the yield on loans to lose 86 basis points
during the quarter. Therefore the customer spread
declined to 11.4%, compared to 11.8% in the second
quarter, even so, this is still high. Business volume
6.11
3.06
3.05
remained unchanged in the last 12 months and so the
5.16
3.22
1.94
4.41
3.19
1.22
3.68
2.83
0.85
3Q
area’s net interest income grew 3.9% year-on-year at
constant exchange rates.
In the United States net interest income for the first
nine months rose 2.6% in dollars, supported by
business volumes that are higher than a year earlier and
the work carried out on repricing.
Finally, net interest income in South America continues
to grow strongly (up 15.6% at constant exchange
rates), supported by the increase in customer funds, by
the high level of lending and especially by the
improvement in spreads.
Gross income
Net fee income contributed €3,267m in the first nine
months, which was 4.5% less than the same period last
year (1.9% less at constant exchange rates). It is still
affected by fees on mutual funds and pensions, which
fell 18.3% year-on-year. However fees on banking
services now exceed the level of a year earlier (up
0.9%) despite the slowdown in business.
Net trading income contributed €1,124m in the first
nine months, which is €295m less than the same
period last year because 2008 included €232m from
the VISA IPO.
Dividend income in the first nine months came to
€290m, compared to €402m in the same period last
year. The difference is due to Telefonica’s second
dividend (€133m), which was booked in the third
quarter last year whereas this year it will be booked in
the fourth quarter.
Income by the equity method comes to €6m for the
year to September. This is significantly lower than 2008
(€268m), which included among other €212m on sales
from the industrial holdings portfolio.
Finally, other operating income and expenses rose
28.9% to €399m thanks to the excellent performance
of income from insurance business, which increased
33.4% to €538m. This income offset charges to
deposit guarantee funds, which were up 32.4%
year-on-year, increasing faster than business. The
3Q09 GROUP INFORMATION
Earnings
9
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