branches in Spain which were used for provisions
with no effect on net attributable profit. In the
fourth quarter a one-off charge for €1,050m net
of tax was set aside in the United States for the
impairment of goodwill and loan-loss provisions
to increase the coverage ratio.
In 2008 one-offs resulted in a net charge of
€395m against net attributable profit (€509m of
capital gains from the sale of an interest in
Bradesco, less €602m in provisions associated
with non-recurring early retirements and a €302m
charge associated with the Madoff fraud).
Including one-offs, net attributable profit in the
fourth quarter was €31m but if they are excluded,
profit comes to €1,082m (similar to the same
quarter of 2008). For the complete year net
attributable profit without one-offs came to
€5,260m, a slight decrease of 2.8% compared to
€5,414m in 2008. At constant exchange rates there
was an increase over the previous year of 2.0%.
Net interest income
Net interest income continued to be the main
driving force behind the Group’s income in the
fourth quarter. It reached a new high of €3,589m,
rising 16.2% compared to the same quarter of 2008.
The total for the year came to €13,882m, an
increase of 18.8% compared to €11,686m in 2008
(up 23.4% without the effect of exchange rates).
The main reasons behind this growth are the active
commercial policies of the business areas and the
appropriate management of structural risks on the
balance sheet.
Price management in the business areas easily offset
the growth of unprofitable assets, such
non-performing assets (NPA), and the slowdown in
banking business. As noted in the third quarter, there
are three aspects of such management leading to an
improvement in spreads: passing on the higher cost
of risk to lending operations and containing the cost
of funds; identifying products or segments with
better risk-adjusted returns; and optimising the
structure of customer funds.
Management of structural risks, such as interest and
liquidity risk, was characterised by anticipation and
strict prudence. This helped to create a solid balance
sheet with low leveraging and a low risk profile. On
one hand, the bank built up portfolios that helped to
stabilise net interest income and the economic value
of the balance sheet. And on the other, the high
growth of lending in previous years was financed by
liabilities that were suitably structured in terms of
maturity, type of instrument and diversification.
In business with customers in the euro zone the
sharp drop in interest rates had at first a positive
effect because the yield on loans (mainly mortgages)
fell more slowly than the cost of funds. However
now the fall in the yield on loans (down 27 basis
points to 3.41%) is greater than the decline in the
cost of funds (down 24 basis points to 0.61%). Thus
4Q09 GROUP INFORMATION
Earnings
9
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