30
| 1Q10 | BBVA Group highlights | Group information | Risk and economic capital management | Business areas | Corporate responsibility |
Capital: Capital is allocated to each business according to
economic risk capital (ERC) criteria. This is based on the
concept of unexpected loss at a specific confidence level,
depending on the Group’s capital adequacy targets. These
targets have two levels: the first is core equity, which
determines the capital allocated. This amount is used 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 ERC combines credit risk, market risk, structural
balance-sheet risk, equity positions, operational risk and
fixed asset 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.
ERC is risk-sensitive and thus linked to the 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
across units. 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 profitability 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 of the various
assets and liabilities making up each unit’s balance sheet.
Earnings are distributed across revenue-generating and
Operating income and net attributable profit by business area
(Million euros)
Spain and Portugal
Mexico
South America
The United States
Wholesale Banking &
Asset Management
Corporate Activities
BBVA Group
Δ% at constant
1Q10 Δ% 1Q09
exchange rates
Spain and Portugal
Mexico
South America
The United States
Wholesale Banking & Asset Management
Corporate Activities
distribution units (e.g., in asset management products) at
market prices.
Assignment of operating expenses: both direct and
indirect costs are assigned to the business areas, except
where there is no clearly defined relationship with the
businesses, i.e. when they are of a clearly corporate or
institutional nature for the Group as a whole. 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: in some cases, consolidation adjustments are
required to eliminate shadow accounting entries in the
results of one or more units as result of cross-selling
incentives.
Recurrent economic profit by business area
(1 st Quarter 2010. Million euros)
Spain and Portugal
Mexico
South America
The United States
Wholesale Banking &
Asset Management
Corporate Activities
BBVA Group
Operating income Net attributable profit
1,076 (1.6) (1.6) 1,093 587 (6.5) (6.5) 628
840 1.5 (4.3) 828 347 (4.2) (9.7) 362
566 10.3 20.7 513 233 13.6 26.1 205
252 1.1 6.4 249 54 (22.3) (19.0) 69
376 9.1 9.1 344 284 20.3 20.3 236
74 n.m. n.m. (208) (265) 0.8 0.8 (262)
3,183 12.9 13.2 2,819 1,240 0.2 0.3 1,238
Adjusted net
attributable profit
539 340
404 309
221 140
65 (13)
234 133
(367) (367)
1,096 541
Δ% at constant
1Q10 Δ% 1Q09
exchange rates
Economic profit
(EP)
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.