4
GROUP INFORMATION 2Q09
Relevant events
of capital forecasted for the whole of 2009. The BIS
ratio stands at 12.2% (11.5% at 31-Mar-09).
The Group also holds latent capital gains of
€1,263m in its portfolio of equity holdings.
Additionally, BBVA holds latent capital gains in
quoted fixed income instruments and in buildings for
its own use.
The BBVA Group paid a first interim dividend of
€0.09 per share against 2009 earnings on 10th July
(paid in cash). This amount is consistent with the
remuneration policy announced at the presentation of
results for the fourth quarter of 2008.
In the Spain and Portugal area, appropriate price
management and work to maintain business volume
led to a 5.4% increase in net interest income. Once
again this was the principal factor behind the area’s
income. Furthermore, strict control helped to reduce
operating costs 6.5% in the same period. As a result
operating income rose 5.9% year-on-year and
efficiency improved to 34.4%. This offset higher
loan-loss provisions and net attributable profit
declined 1.7% to €1,270m, nearly the same as the
first half of 2008.
The Wholesale Banking & Asset Management area
confirmed the strength and recurrency of its revenues,
which is practically at the same level as the first half
last year. Corporate and Investment Banking reported
a notable increase in net interest income and Global
Markets’ franchise earnings and trading also did well.
These improvements offset the drop in sales from the
industrial holdings portfolio which took place last
year. Together with the downward trend in the area’s
costs this resulted in operating income of €758m and
net attributable profit of €539m.
Despite the more difficult economic conditions in the
Mexico area selective growth of lending and customer
funds, together with active price management, helped
net interest income to rise 5.2% year-on-year in
pesos. Cost controls in the area contributed to a
6.4% rise in net income, which came to €1,717m
(up 12.7% excluding the revenues from VISA). This
amount offset the increase in provisioning, which was
due to the economic situation and to the bank’s
conservative criteria. Thus net attributable profit in
the first half came to €724m.
Although the environment in the United States area
was especially complex, it required no government
help and continued to generate earnings and to
increase lending and customer funds year-on-year.
Net interest income rose 2.1% in dollars during the
first half. A sharp drop in operating costs lifted
operating income 2.3% to €425m and this easily
covered the high loan-loss provisions. As a result net
attributable profit came to €85m (€125m excluding
amortisation of intangible assets).
The South America area enjoyed the greatest degree
of business growth. Work to defend interest spreads
and cost controls boosted operating income 31.1%.
Net attributable profit in the first half came to
€463m (up 29.0% year-on-year at constant rates).
Economic environment
In the second quarter of 2009 the international
economic crisis continued to make itself felt, causing
economic activity in many countries to contract and
international trade to falter. However it appears we
have already endured the biggest declines in GDP
because the latest indicators show the drop in output in
the second quarter was less severe than in the first.
Moreover confidence indices point to signs of recovery.
These expectations led to rises in stock markets, lower
credit spreads and rises in commodity prices. The
international economic and monetary authorities
continued their expansion policies to mitigate the
problems of the financial sector and the real economy.
Likewise governments took steps to support financial
systems and stimulate spending.
In Europe the latest information for the first quarter
indicates GDP in the euro zone fell 2.5%
quarter-on-quarter. This was worse than the last quarter
of 2008. Furthermore growth forecasts for 2009 and
2010 have been revised downwards, mainly owing to
the sharp drop in the internal demand for capital goods.
The indicators point to a new decline in economic
activity in the second quarter although not as intense as
the first quarter. In this context the European Central
Bank maintained an expansionary monetary policy,
cutting interest rates two quarter points to 1.0%.
In the United States, GDP in the first quarter fell 1.5%
compared to the previous quarter. However the
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