24
4Q09
Credit risk
The BBVA’s customer-relation based business model
and the risk-management methods it has applied are
allowing it to outperform the industry average in
cost of risk, non-performing asset (NPA’s) and
coverage ratios in all the areas in which it operates.
Diversification in both the geographical location and
the nature of its loan-book has meant the Group has
been able to attenuate the worst effects of the crisis,
despite its negative impact on markets such as Spain
and the USA.
Risk and economic capital management
The fourth quarter of 2009 continued to be marked
both by uncertainty about when economic recovery
might kick in and what the scope of such recovery
would be. BBVA has thus performed a detailed
re-evaluation of its loan-books applying criteria of
maximum prudence. This should help it to stay ahead
of potential trends and shore up the balance sheets of
its subsidiary businesses to reflect any possibilities of
impairments in the forthcoming months. Thus, the
Group will be better able to face the complicated
environment expected for 2010 whilst taking
Credit risk management
(Million euros)
TOTAL RISK EXPOSURE (1)
Non-performing assets
Total risks
Provisions
•Specific
•Generic and country-risk
NPA ratio (%)
NPA coverage ratio (%)
MEMORANDUM ITEM:
Foreclosed assets
Foreclosed asset provisions
Coverage (%)
(1) Including contingent liabilities.
Risk management
31-12-09
advantages of any business opportunities arising. Its
policy of maximum prudence has led BBVA to take
the following actions:
In the United States the Group re-analysed the
portfolio of commercial real estate. It then came
up with a subjective reclassification of €644m to
its doubtful assets, setting aside €533m for
additional provisioning: the Group first revised
appraisal values of the collateral associated with
the commercial real estate portfolio and wrote off
any differences, and also made additional
provisions that increased the coverage ratio.
In Spain & Portugal, analysis focussed on the
consumer-lending and real-estate developer loan
books and about €1,817m in lending that is still
performing has been booked under doubtful assets
in a one-off reclassification exercise; specific and
substandard provisions have been increased and
more provisions set aside in the Consumer
Finance unit.
In Mexico the metrics used to calculate internal
expected-loss models for credit-card lending have
30-09-09
30-06-09 31-03-09 31-12-08
15,602 12,500 11,774 10,543 8,568
364,776 363,812 369,313 374,962 378,635
8,943 8,459 8,023 8,000 7,841
5,969 4,422 4,132 3,679 3,282
2,975 4,037 3,891 4,321 4,558
4.3 3.4 3.2 2.8 2.3
57 68 68 76 92
861 698 546 461 391
208 151 123 108 98
24 22 22 23 25
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