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| 1Q10 | BBVA Group highlights | Group information | Risk and economic capital management | Business areas | Corporate responsibility |
This area combines the results of two units: Financial
Management and Holdings in Industrial & Financial
Companies. It also books the costs from central units
with strictly corporate functions and makes allocations
to corporate and miscellaneous provisions, e.g., for
early retirements. In addition, it incorporates the newly
created Real-Estate Management unit, which brings
together the entire Group’s non-international real-estate
business.
The net interest income of Corporate Activities in the
first quarter of the year has once more performed well,
at €95m, compared with the figure of €6m in the same
period of 2009. This was mainly the result of the good
management of the euro balance sheet. It is particularly
worth highlighting the net trading income, as a result
of the sound rotation of the ALCO portfolio, in which
there have been significant capital gains thanks to the
use made of price volatility in sovereign bond markets.
These two items, together with restraint in operating
costs, have led to an operating income of €74m,
compared with the –€208m the previous year.
Impairment losses on financial assets were €232m, due
basically to greater generic provisions. Provisions have
also been increased for early retirements during the
period and for other gains (losses), through the
application of criteria of maximum prudence in the
valuation of foreclosed or acquired assets and those
from the real estate fund, on which updated valuations
were applied. Finally, the area’s attributable profit in
the first three months of the year was –€265m, close to
the –€262m in the same period last year.
ASSET/LIABILITY MANAGEMENT
The Asset/Liability Management unit works through
the ALCO, and 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 helps to fund the recurrent
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 has long been to encourage the
Spain and Portugal
Mexico
South America
The United States
Wholesale Banking & Asset Management
Corporate Activities
financial independence of its subsidiaries in the
Americas. This aims to ensure that the cost of liquidity
is correctly reflected in price formation and that there
is sustainable growth in the lending business. In the
first quarter of 2010, thanks to the decisive role of
central banks and governments, liquidity conditions on
the interbank markets continued to be comfortable.
Spanish sovereign risk has only been affected
exceptionally by the Greek crisis, and even in this
situation, the medium-term markets have continued
operating in favorable conditions. The positive trend in
the liquidity gap of the BBVA businesses in the first
quarter has been notable. It has enabled the Group to
maintain and strengthen its sound position, due to the
weight of retail customer deposits in the structure of
the balance sheet and the ample collateral available for
the Bank as a second source of liquidity. For 2010 as a
whole, BBVA’s current and potential sources of liquidity
easily surpass expected drainage.
Capital management in the Group 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 the efficient allocation
of capital to the 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). The current
levels of capitalization ensure compliance with all these
objectives. In the first three months of the year there
have been numerous issues for significant amounts to
cover a large part of the estimated funding
requirements for the whole year. These issues were sold
at very attractive rates, as BBVA has been able to access
the market at the same price as the operations
guaranteed by the Spanish Treasury. Another important
point is the diversity of sources of funding used, both
by type of instrument and markets and maturities, and
the positive reception by the markets, with a high level
of participation by international investors.
Foreign exchange risk management of BBVA’s
long-term investments, basically stemming from its
franchises in Latin America, aims to preserve the
Group’s capital ratios and give stability to its income
statement, while controlling the impact on reserves and
the costs of this management. In the first quarter, BBVA
maintained an active policy to hedge its investments in
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