4
GROUP INFORMATION 4Q09
Relevant events
than the third quarter. The Group first revised
appraisal values of the collateral associated
with the commercial real estate portfolio and
wrote off any differences. It then made
additional provisions that increased the
coverage ratio. In South America and in the
Wholesale Banking & Asset Management Area
no extra provisioning has been considered
necessary.
Profit in the fourth quarter was affected by the
negative impacts of hyperinflation in Venezuela
(€90m) and impairment of goodwill generated in
successive acquisitions to build the USA franchise,
totalling €704m net of taxes.
As a result net attributable profit for the quarter
came to €31m. Excluding one-off operations in
the United States related to the write-down of
goodwill and the additional loan-loss provisions
mentioned above, which together total €1,050m,
profit in the quarter was €1,082m (similar to the
fourth quarter of 2008). Net attributable profit
for the full year came to €4,210m. This would be
€5,260m without the effect of one-off items,
implying a slight decline of 2.8% compared to
2008. Excluding the effect of exchange rates, the
year-on-year comparison is positive (up 2.0%).
Therefore BBVA maintains a high return on
equity and on assets; ROE excluding one-offs is
20.0% (16.0% after one-offs) and ROA is 1.0%
(0.8% after one-offs).
All business areas except the United States
(affected by the one-off item) contributed to the
Group’s performance. Each area, in its own
segment or region, holds a prominent position
compared to its competitors in terms of revenue,
efficiency, profitability and asset quality.
The general volume of business is indicated by
the stable level of the Group’s total assets. During
2009 lending decreased slightly, a consequence of
the overall slowdown of the global economy.
Portfolios with lower risk became a bigger part of
total lending. Conversely, customer funds
increased thanks to a rise in assets under
management and to an increase in the lower-cost
funds (current and savings accounts).
BBVA continues to be extremely prudent in terms
of risk management with the goal of anticipating
any future problems associated with the difficult
economic situation. Apart from the actions
described above the Group decided to carry out
an extraordinary reclassification, declaring some
loans that are currently performing as doubtful.
This was the result of a detailed examination of
the Group’s most problematic portfolios,
affecting the Spain & Portugal Area (real estate
developers) and the United States (commercial
real estate). Therefore at 31-Dec-09 the NPA
ratio was 4.3%. Without the extraordinary
reclassification, gross additions to NPA status
continue to decline, in a context of a very
selective approach to property purchases in
Spain. The coverage ratio for NPAs was 57% at
31-Dec-09 and this is considered a suitable level.
If the collateral associated with these risks is
included, coverage rises to 165%.
In terms of the capital base, the Group’s core
capital remains unchanged from the third quarter
at 8.0%. In the fourth quarter organic generation
of core capital was 30 basis points (the
deterioration of goodwill in the USA does not
affect the capital base). The additional capital
offset the effect on goodwill when BBVA’s interest
in China Citic Bank became classified as a
substantial shareholding. The BIS ratio stands at
13.6% (13.4% at 30-Sep-09). During the year
BBVA generated 140 basis points of core capital
organically, easily exceeding the anticipated level.
At 31-Dec-09 BBVA also held €1,703m in latent
capital gains on its more liquid portfolios of
equity holdings. The above amount does not
include capital gains in other portfolios.
On 28-Dec-09 BBVA paid a third interim
dividend of €0.09 per share in cash against 2009
earnings. It thus maintains its dividend policy of a
30% cash payout.
In the Spain & Portugal Area recurrent revenues
(net interest income and net fee income) in the
fourth quarter was similar to the third quarter.
For the whole year, the positive evolution of net
interest income and the containment of
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