46
BUSINESS AREAS 4Q09
The United States
in the near future as recovery in emerging markets
stimulates demand for exports.
Inflation is expected to remain low but positive.
Although economic activity is increasing, it is emerging
from a level so low that abundant resource slack will
counteract upward pressures from fiscal and monetary
stimuli. And as producers’ costs will remain low, they
are able to maintain a profit without raising prices.
Given the slack in the economy, the Fed is expected to
gradually wind down the monetary stimulus. The
strategy is anticipated to focus first on the withdrawal
of quantitative easing and then, albeit in the medium
term, on raising interest rates. These are currently at
between 0% and 0.25%.
The final dollar exchange rate against the euro has gone
down 3.4% in the last twelve months, ending 2009 at
US$1.44 to the euro. However, the average exchange
rate recorded an appreciation of 5.4% year over year, to
US$1.39 per euro. Unless otherwise indicated, all
comments below refer to changes at a constant
exchange rate.
BBVA USA ended the year with a €34,108m loan book
and customer deposits of €32,538m, 12.0% and 30.7%
higher than the previous year, respectively. This was
primarily due to the Guaranty acquisition in August
2009. Excluding Guaranty balances, loan balances were
down 2.2% and customer deposits increased 4.1%.
The area’s earnings for the year include two one-off
charges booked to the fourth quarter for €1,050m. One
is the extraordinary allocation to provisions (€346m)
and the other is goodwill impairment (€704m). These
should shore up the USA franchise’s balance sheet and
capital adequacy to prepare it for 2010 and enable it to
be ready to take advantage of any market opportunities.
Operating profit speeded up its year-on-year growth to
20.3%, reaching €875m. The main causes were good
revenue performance and the excellent behaviour of
operating costs. Net interest income showed a
significant rise, triggered by increasing business volumes
following the incorporation of Guaranty’s balances. Net
trading income also grew strongly, helped by more
customer transactions and the higher value of some
portfolios given the lower interest rates. This
counteracted the drop in Other net revenues as Federal
Deposit Insurance Corporation (FDIC) fees went up.
Costs decreased 6.7% year on year due to lower
amortization of intangibles and lower merger and
integration costs.
Losses from impairment of financial assets stood at
€1,419m. This was €1,054m more than in 2008,
reflecting the high loan-loss provision allocations made
during 2009. The collaterals associated to the
commercial real-estate loan book were re-assessed and
additional provisions set aside to boost coverage. This,
along with the goodwill impairment charge, generated
an attributable loss in the area of €1,071m. This figure
is €21m without the €1,050m for one-off charges.
Finally, the NPA ratio rose to 5.2%. In part this was due
to the €644m reclassified as doubtful loans after the
detailed analysis of the commercial real-estate loan
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