4
GROUP INFORMATION 3Q09
Relevant events
to the same period last year. Although banking
business is slowing, the more conservative lending
performed well in the quarter, including residential
mortgages and lending to institutions and large
companies. Savings and current accounts, and
pension funds also performed well. As mentioned,
gross additions to non-performing assets continued
to slow, and as a result the increment in the
non-performing asset ratio was less than previous
quarters. Lastly, capital gains from the sale and
lease-back of real estate were used to strengthen the
bank’s balance sheet by allocating them entirely to
generic loan-loss provisions.
The Wholesale Banking & Asset Management
Area continued to demonstrate the strength and
success of its business model based on customer
focus, as reflected by the high percentage of
recurrent earnings. Corporate & Investment
Banking and Global Markets enjoyed an excellent
quarter, which largely offset lower revenues from
divestments of industrial and real estate holdings.
Moreover, containment of administration costs and
the lower level of loan-loss provisions helped
income before tax in the first nine months to
increase 16.0% compared to the same period last
year. Nonetheless net attributable profit is only
3.7% higher because the capital gains recognised in
2008 were taxed at a low rate.
Despite the significant deterioration of its economy
and the drop in business, in Mexico revenues rose
4.8% year-on-year in local currency. Strict control of
costs explains the 7.1% rise in operating income.
Impairment on financial assets and provisions were
at similar levels of previous quarters in a context of
deceleration of the growth of the NPA ratio. The
improvement in operating income offset the higher
provisions and thus net attributable profit was in
line with previous quarters (€1,101m for the
year-to-date).
In the United States BBVA continued to generate
earnings without the need for government help and
despite the very difficult economic context. In
August BBVA Compass acquired the operations of
Guaranty Bank from the Federal Deposit Insurance
Corporation (FDIC). This reinforces the Group’s
presence in this country, complementing and
anticipating BBVA Compass’s plans for organic
growth in the Sunbelt. This operation is another
sign of BBVA’s strength and solid capital position,
which allows it to tackle such operations and to
take advantage of opportunities even in difficult
times such as those in the international financial
sector.
Lastly, South America turned in another very
positive quarter despite the general business
slowdown. Revenues increased significantly and
expenses were kept under progressive control
without impairing asset quality. In the first nine
months the area’s net attributable profit rose 27.5%
year-on-year to €689m (up 27.8% at current
exchange rates).
Economic environment
The outlook for the global economy is still surrounded
by considerable uncertainty. Although the measures
adopted around the world could rebuild confidence and
result in sustainable recovery, if they fail to achieve an
appropriate balance between economic stimulus and
long-term sustainability, the financial markets could
again become unfavourable.
In Europe the economy appears to be recovering.
Forecasts point to GDP growth in the second half,
although it may be close to zero, and surveys related to
the third quarter confirm the feeling of stabilisation.
Overall, uncertainty is still high and the volatility of
some figures calls for cautious interpretation. The
European Central Bank has decided to maintain rates
at a low level and believes this is appropriate in a
context in which inflation is expected to turn slightly
positive in the coming months.
In the United States the speed of the economic
slowdown has moderated in recent quarters and
various indicators, such as demand and the housing
market, are showing positive signs. Consumer
confidence has improved and the housing market
appears to be stabilising in terms of volume and prices.
However the job market continues to degenerate. For
this reason the authorities decided to keep interest rates
low to preserve the stability of the financial system and
to stimulate consumption.
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