During the second year of the international crisis
BBVA continued, quarter by quarter, to demonstrate
its ability to generate recurrent earnings thanks to a
business model that is based on customer trust and
superior risk management. The high level of
revenues is the main reason why the Group ended
2009 with significant improvements in:
Capital adequacy: core capital stands at 8.0%, an
increase of 180 basis points since 31-Dec-08.
Efficiency: an improvement of more than 4
percentage points during the year.
Balance sheet: strengthened by assiduous analysis
of non-performing assets and provisioning that
maintains suitable levels of coverage.
Liquidity Risk: the liquidity gap is smaller and
collateral available as a second line of liquidity
has increased.
These achievements did not prevent the bank from
maintaining attractive shareholder remuneration in
the form of cash dividends. It also retains a
significant amount of latent capital gains and –more
importantly– it did not depart from the management
priorities it set in 2009. Consequently BBVA was
able to increase critical mass extending its franchise
in the United States through the Guaranty operation
and to increase its interest in China Citic Bank
(CNCB)– all without the need to sell strategic assets.
The most significant aspects of the Group’s
performance in its main business areas in the fourth
quarter and for the entire year are summarised
below:
As usual, revenues in the fourth quarter were
excellent. Gross income for the quarter came to
€5,288m, an increase of 16.0% compared to the
same period in 2008, and the total for 2009 was
€20,666m (up 8.9%).
Group information
Relevant events
Operating costs fell 1.1% during the year and
therefore operating income rose 17.0% to
€12,308m. As a result efficiency (measured by
the cost/income ratio) improved to 40.4%
(44.6% at 31-Dec-08).
One priority in the fourth quarter was to
strengthen the balance sheet of the Group and
its franchises. The aim was to ensure they would
be in optimum condition to tackle the complex
conditions expected in 2010 and to capitalise on
any business opportunities that might arise in the
different business areas. In this respect BBVA took
the following actions:
– It set aside an additional €300m for early
retirements, bringing the total for 2009 to
€551m. This enables BBVA to continue
implementing its transformation plan for the
distribution network.
– It increased provisions associated with various
foreclosed or acquired assets in Spain by about
€200m following a revised valuation. This
brought the total to €475m for the year. The
coverage ratio now stands at 32%.
– It increased loan-loss provisions after a detailed
analysis of the Group’s more problematic
portfolios. In the Spain & Portugal Area it
provided for non-performing assets in the
consumer finance unit above the requirements
of the legal calendar following maximum
prudence criteria. This required €164m in the
quarter (€377m for the entire year). And it
used a large part of the €830m of additional
provisions made in the third quarter to cover
the real estate developer portfolio. In Mexico
higher provisions in the quarter (€73m) were
related to the credit-card portfolio when
expected-loss criteria were tightened following
recalibration of the internal models. In the
United States provisions were €715m higher
4Q09
3
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