rates). At a time when business is slowing this
improvement was due to improved customer spreads,
to successful management of the balance sheet and to
the Group’s solid liquidity and capital adequacy (as
reflected by its rating). This allowed to obtain funds
without paying high interest rates. Furthermore the
rise in net interest income was unaffected by a change
in the portfolio mix as consumer finance and cards
played an increasingly smaller role.
In business with customers in the euro area, the
sharp decline of interest rates has affected both the
cost of deposits and the yield on loans. The former
fell 72 basis points since the first quarter, to 1.22%;
the latter declined 75 basis points to 4.41%. As a
result, the customer spread has been maintained
during the quarter at 3.19% from 3.22% the
previous quarter. Net interest income for the half
year in Spain & Portugal and the Wholesale Banking
units operating in the euro area rose 5.3%
year-on-year.
Customer spread (euro area)
(Percentage)
Yield on total
net lending
Customer
spread
Cost of
deposits
5.90
3.01
2.89
In Mexico interbank interest rates continued falling in
the second quarter (the average TIIE was 5.9%,
compared to 8.0% in the first quarter). This decrease,
together with the adjustment in business mix (less
weight given to consumer finance and cards), was
reflected in the yield on loans. The latter fell 88 basis
points compared to the first quarter and the cost of
deposits retreated 74 basis points. This led to a slight
narrowing of the customer spread, which was
11.82% in the second quarter compared to 11.96%
in the first. Nonetheless an increase in business
volume from June 2008 to June 2009 boosted the
area’s net interest income for the first half 5.2%
year-on-year in local currency.
6.07
3.30
2.77
2Q 3Q 4Q
1Q
2008
6.11
3.05
3.06
5.16
3.22
1.94
2009
4.41
3.19
1.22
2Q
South America again presented record net interest
income. In the first half it rose 17.8% year-on-year at
constant exchange rates, supported by higher levels of
lending and deposits, and by higher spreads. Lastly, in
the United States net interest income in the first half
grew 2.1% year-on-year in local currency based on
the higher balance of lending, an increase in deposits
and the repricing effort.
Gross income
In the second quarter of 2009 net fees and
commissions contributed €1,102m, exceeding the
previous quarter (€1,079m). In the first half they fell
4.5% year-on-year, due mainly to fee income on
mutual and pension funds, which fell 14.7%
(although the rate of decline is slowing). Despite the
slowdown in lending, banking fees are practically the
same as the first half of 2008 (down only 0.4%).
However in the second quarter they were up 2.5%
compared to the previous quarter.
Net trading income came to €799m, which was
€360m less than the same period last year. This was
mainly due to high income obtained in the first half
of 2008, which included €232m from the VISA IPO.
Dividend income contributed €248m in the first half
of 2009. The second quarter of 2009 included the
dividends from China Citic Bank (CNCB).
Income by the equity method came to €27m, far
lower than the €173m obtained in the first half of
2008, which included €131m from the sale of an
interest in Gamesa.
Lastly, other operating income and expenses in the
first half amounted to €268m, an increase of 26.0%
thanks to an excellent performance by the insurance
business, which rose 31.0% year-on-year to €365m.
However contributions to deposit guarantee funds in
countries where bank operates jumped 43.7%
year-on-year. This was higher than the rise in
business and the principal reason was the higher
contribution rate in the United States. The second
quarter of 2009 includes an extraordinary
contribution of $28m to the Federal Deposit
Insurance Corporation (FDIC).
2Q09 GROUP INFORMATION
Earnings
9
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