In the third quarter of 2009 BBVA continued to
demonstrate the strength and high level of recurrent
earnings with net attributable profit of €1,380m in the
quarter. Once again this was supported by the growth
of net interest income and the containment of
operating costs. Furthermore the Group made
substantial progress in strengthening its capital
adequacy, adding gains from the sale of real estate in
Spain and from the placement of a convertible bond
issue, to the additional capital generated organically.
In terms of credit risk, new additions to
non-performing assets declined.
The most relevant aspects of the BBVA Group’s
performance in its main business areas during the third
quarter are summarised below:
Recurrent revenues increased. In the year-to-date
net interest income rose 19.7% year-on-year thanks
to a successful pricing policy and to appropriate
management of the balance sheet in the context of a
slowdown in business. This positive performance
helped to offset the smaller volume of other
revenues, helping gross income for the first nine
months to grow 6.6% compared to the same period
last year (up 9.7% at constant exchange rates).
Operating costs are dropping at a faster rate, falling
2.4% year-on-year in the year to 30-Sep-09. This
helped to lift operating income for the same period
to €9,274m, an increase of 13.5% compared to the
first nine months of last year (up 18.1% at constant
exchange rates).
The Group completed the sale and lease-back of 948
properties in Spain (mainly branches) for €1,154m,
generating €830m in capital gains. These gains were
used to increase the Group’s generic loan-loss
provisions and therefore had no impact on net
attributable profit.
Impairment losses on financial assets stabilised
further during the quarter, again at around 30% of
operating income (excluding the €830m mentioned
above).
Group information
Relevant events
All business areas contributed to the Group’s net
attributable profit, which came to €4,179m for the
first nine months. As a result BBVA continues to be
one of the most profitable big banking groups with
an ROE of 21.2% and ROA of 1.11%.
BBVA’s loan portfolio continues to preserve its high
quality and to generate good news in terms of risk
management. On one hand, gross additions to
non-performing assets continue to decline as well as
the the well-conceived policy of recoveries, in a
context of highly selective purchases of properties.
This helps to slow the growth of the non-performing
asset ratio. And on the other hand, the decision to use
the capital gains from the sale and lease-back of the
bank’s properties to increase the generic provision has
improved the coverage ratio. As a result of these
developments BBVA ended the quarter with the non-
performing asset ratio at 3.4%, 73 basis points lower
than the average for its European competitors (based
on the latest available figures). The coverage ratio
stands at 68%.
Two aspects of the capital base deserve a mention.
First, the Group’s ability to generate core capital
organically was again apparent in the third quarter,
contributing 20 basis points. Second, in September
the bank placed a €2,000m bond issue, convertible
to ordinary shares, which will provide additional
flexibility in capital management. Thus core capital
rose to 8.0% at 30-Sep-09 (7.1% at 30-Jun-09) and
the BIS ratio increased to 13.4% (12.3% at
30-Jun-09).
At the end of the third quarter BBVA also had
€1,711m in latent capital gains on its more liquid
portfolios of equity holdings. The above is without
adding capital gains on other portfolios.
As customary at this time, BBVA paid a second
interim dividend of €0.09 per share in cash against
2009 earnings on 12-Oct-09.
The Spain & Portugal Area contributed €1,877m to
the Group’s net attributable profit. This was similar
3Q09
3
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