46
BUSINESS AREAS 2Q09
South America
Good revenue performance was facilitated by correct
pricing of entry prices and customer spreads. This has offset
the more sluggish growth rates in business volumes. At the
end of June, the loan book stood at €25,268m, with
year-on-year growth of 5.7% (up 11.5% at current
exchange rates), despite the recent months’ slowdown in
lending to individuals (up 4.6%) and companies (up 5.9%).
However, customer funds continued to perform positively
in the banking, pension and insurance businesses. In the
banks, customer funds closed at €32,828m (including
off-balance sheet funds), with a year-on-year increase of
18.6% and positive growth in all products, especially
current and savings accounts (up 27.8%). In the insurance
business, the recovery of the financial markets plus
increased sales activity pushed assets under management up
to €31,565m by the end of June. This rise was greater
than the sharp drop in the third and fourth quarters of the
previous year, such that year-on-year growth was positive
by 3.5%, without including the impact of Consolidar AFJP.
The year-to-date figure for funds gathered increased year
on year by 9.1% over the same period in 2008. The
business written by the insurance companies grew 5.4%
year on year (excluding the impact of taking Consolidar
Salud off the books at the end of 2008).
Greater business volumes and better spreads brought net
interest income up to €1,210m in the six-month period,
growing 17.8% against the same period of 2008. Fee
income also performed well, reaching €410m for the half
year. This 11.0% growth continued to be focussed on
business lines relating to customer activity. Net trading
income brought in high earnings (265), reflecting recovery
in financial markets. This made it possible for some banks
to report capital gains on divestments from their
fixed-income portfolios, and excellent returns on the
pension managers’ and insurance companies’ own trading
positions. The gross income for the half year thus reached
€1,876m. This was 22.1% higher than in the first six
months of 2008.
As mentioned above, another key element during this half
year was cost control. In the first six months of 2009,
operating expenses were €744m. This 10.5% growth
against the first half of 2008 was significantly below average
inflation in the region. Good cost performance and higher
revenues meant further improvement in the cost-income
ratio, which reached 39.7% (from 44.4% one year earlier).
It also fuelled growth in operating income, which rose
31.1% to a total of €1,132m for the six-month period.
The strict policy applied to risk approval and the active
recovery of arrears in all units prevented the slightly slower
rate of growth in business volumes from significantly
diminishing asset quality. This is reflected in the
non-performing asset ratio (NPA ratio), whose figure of
2.6% at the end of June was similar to the 2.3% reported
three months earlier.
Impairment losses on financial assets were €212m during
the first half of 2009, growing 49.6% against the previous
year, but only 22.4% against the 2008 average. The
coverage ratio on non-performing assets continued high, at
129%.
Finally, this year, the Euromoney magazine, whose yearly
awards are amongst the most prestigious prizes in the
international financial industry, named BBVA as the Best
Bank in Latin America. The Group also received the Best
Bank award in Argentina, Venezuela and Paraguay.
Banking business
The entities comprising the Group’s banking business in
the area contributed an attributable profit of €410 during
the half year. This was a year-on-year improvement of
21.3%. The most relevant information on each bank is
given below.
In Argentina, the moderate rate of growth in lending at
BBVA Banco Francés has not prevented revenues from
growing significantly. Net interest income reported a
year-on-year rose 21.0%, fuelled by active defence of the
bank’s spreads, whilst fee income grew 35.9%. With
revenues performing well and the increase in expenses
slowing down, operating income rose by 35.7% against the
previous year. However, the half-year attributable profit,
€73m, was virtually flat against the first half of 2008,
which had practically zero provisions.
In Chile, the banking business contributed €41m in
attributable profit. This was 54.2% higher than the
previous year, reflecting exceptional revenue performance.
Gross income grew €45.6% year on year, fuelled by
excellent fee income from the six months (up 43.5%) and
net trading income stemming from capital gains on
fixed-income portfolio sales. Operating income rose 82.8%
to €122m. Growth in business volumes flattened out
somewhat over recent months, although retail lending and
current and savings accounts continued to show favourable
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