RNS Number:0099O
Banco Bilbao Vizcaya Argentaria SA
28 July 2003
QUARTERLY REPORT
January-June 2003
Contents
2 BBVA Group Highlights
3 BBVA Group in the first half of 2003
8 Income statement
15 Balance sheet and activity
20 Capital base
21 The BBVA share
22 Business areas
24 Retail Banking in Spain and Portugal
27 Wholesale and Investment Banking
30 America
34 Corporate Activities
BBVA Group Highlights
BBVA Group Highlights
(Consolidated figures)
30-06-03 30-06-02 ^% (YoY)
BALANCE SHEET (millions of euros)
Total assets 277,874 283,100 (1.8)
Total lending (gross) 147,620 146,236 0.9
Customer funds recorded on balance sheet 182,771 183,375 (0.3)
Other customer funds managed 112,024 115,109 (2.7)
Total customer funds managed 294,795 298,484 (1.2)
Shareholders' funds (including profit for the year) 13,126 13,230 (0.8)
INCOME STATEMENT (millions of euros)
Net interest income 3,348 4,258 (21.4)
Core revenues 4,946 6,140 (19.4)
Ordinary revenues 5,349 6,492 (17.6)
Operating profit 2,479 2,995 (17.2)
Operating profit (Argentina and Brazil consolidated under equity 2,449 2,657 (7.8)
method)
Pre-tax profit 1,873 1,875 (0.1)
Attributable net income 1,167 1,166 0.1
DATA PER SHARE AND MARKET CAPITALISATION (30-06)
Share price 9.15 11.45 (20.1)
Market capitalisation (millions of euros) 29,242 36,593 (20.1)
Attributable net income 0.37 0.36 0.1
Book value 4.11 4.14 (0.8)
PER (Price Earning Ratio; times) (1) 13.9 21.3
P / BV (Price/Book value; times) 2.2 2.8
RELEVANT RATIOS (%)
Operating income / ATA 1.82 2.04
ROE (Attributable net income / Average equity) 18.9 18.1
ROA (Net income / Average total assets) 1.10 1.09
RORWA (Net income / Risk weighted assets) 1.87 1.90
Cost / income ratio 46.6 46.3
NPL ratio 2.12 1.86
Coverage ratio 159.4 178.5
CAPITAL ADEQUACY RATIOS (BIS rules) (%)
Total 12.0 12.5
Core capital 6.0 5.9
OTHER INFORMATION
Number of shares (millions) 3,196 3,196
Number of shareholders 1,183,969 1,180,843
Number of employees 86,791 95,171
. Spain 31,275 31,392
. America (2) 53,464 61,726
. Rest of the world 2,052 2,053
Number of branches 6,968 7,685
. Spain 3,384 3,436
. America (2) 3,384 4,038
. Rest of the world 200 211
N.B.: Non-audited data. Consolidated statements follow generally accepted
accounting principles of Bank of Spain Circular 4/91 and later Circulars.
(1) The 1H03 PER is calculated taking into consideration the median of the
analysts' estimates (July 2003).
(2) This heading includes BBVA Group' s banking and pension management
activities in all Latin American countries in which it is present.
BBVA Group in the first half of 2003
The rapid end to armed conflict in Iraq in the second quarter of 2003 eased
uncertainty and helped stock markets to recover. However, weakness continued in
the main economic areas of the world although growth in Spain was relatively
better. Hope of recovery is now focused on the end of the year.
In view of this situation the European Central Bank and the Federal Reserve once
again cut interest rates -to record lows of 2% and 1%, respectively. This placed
further pressure on the business margins of banks. The euro continued to
appreciate against the dollar during the quarter.
Seen in this context the BBVA Group highlights during the first half year were
as follows:
* Net attributable profit for the second quarter rose to 653 million euros. This
was 27.2% higher than the previous quarter and 12.9% higher than the same
quarter of 2002. The amount is the highest earnings figure since the second
quarter of 2001. Net attributable profit for the first half, which was 1,167
million euros, exceed the figure for the same period last year by 0.1%. At
constant exchange rates the increase is 9.6%.
* Return on equity (ROE) was 18.9% and this exceeded ROE in first half of 2002
(18.1%). Return on assets (ROA) was 1.10%.
* The increase in attributable profit in the semester (at a constant exchange
rate) is the consequence of operating income growing by 10.4% (6.7% in the first
quarter); there was a neutral effect of the items that make the profit and loss
account between operating income and earnings before tax. In this case lower
capital gains were offset by lower extraordinary losses.
* The increase in operating income in the semester came from all business areas:
the increase was 1.1% in Retail Banking in Spain and Portugal, 16.7% in
Wholesale and Investment Banking and 17.2% in America. In the second quarter all
lines on the income statement in terms of year-on-year figures outperformed
those of the first quarter.
* Costs remained under control and even fell back in domestic businesses. The
cost/income ratio improved further to 46.2% at the end of the first half,
compared to 47.4% for the same period last year and 47.1% in the first quarter.
Improvements were noted in all three business areas.
* In the second quarter activity increased in Spain especially in regard to
Retail Banking. This was aided by the roll-out of a series of innovative
products for various business segments. Further growth in lending and new funds
was more than equal to the erosion of customer spreads and had a positive effect
on net interest income. Customer spreads within the Group recorded moderate
drops due to the fall in market rates.
* In the Wholesale Banking business - where the Group is the leading franchise
in Spain- attributable profit in the first half rose to 218 million euros. This
figure is 25.7% higher than the same period last year.
* Good results in Mexico, especially in terms of liquid funds, loans with higher
yields and fee income, is contributing to a healthier basic margin. The increase
in revenues together with effective control of operating expenses resulted in an
increase of 28.2% in operating income during the first half.
* Attributable profit at other Group banks in Latin America during the first
half of the year came to 83 million euros. This figure was 64.7% higher than the
first half of 2002 expressed at constant exchange rates and 5.2% higher at
current rates.
* Non-performing loans (NPL) continued to improve during the quarter, closing at
1.57% excluding Argentina and Brazil (1.64% at March 31st 2003 and 1.70% at
December 31st 2002). Coverage grew to 194.9%. The corresponding NPL figure for
the Spanish resident sector fell during the quarter to 0.75%, which is lower
than average for the entire financial system.
* The capital base of the BBVA Group is extremely sound. Core capital stands at
6.0%, Tier I is 8.1% and BIS ratio is 12.0%.
The sale of BBV Brasil and the taking of the stake of 4.44% in Bradesco mean
that earnings generated in Brazil are being incorporated in the 2003 figures by
the equity method. Due to accounting instability in Argentina during 2002, its
results continue to be isolated to provide a more precise picture of the Group's
performance. Therefore the statutory income statement is accompanied by a
corresponding proforma statement where income generated in Argentina and Brazil
in 2002 and 2003 is included using the equity method. This entails no change in
attributable earnings. Unless otherwise indicated, the following remarks refer
to the latter financial statement.
The depreciation of Latin-American currencies against the euro had a significant
effect on the Group's income in the region. There was a notable depreciation in
the first half of 2002 and first half of 2003 in the Mexican peso (28.9%), the
Venezuelan bolivar (53.2%), the Chilean peso (25.3%), the Colombian peso (35.7%)
and the U.S. dollar (18.8%). The above proforma statement also contains a column
with the variations shown at constant exchange rates in order to isolate this
effect.
Income for the period
The BBVA Group once again displayed its capacity to generate recurrent earnings.
Operating income in the second quarter was 1,268 million euros and this was 8.7%
greater (at constant exchange rate) than the previous quarter and 14.0% greater
than the same quarter of 2002. It is the highest figure in the last six
quarters. This improvement over the previous quarter meant that cumulative
operating income for the first half was 2,449 million euros - a rise of 10.4%
over the previous year and 6.7% greater than the first quarter.
Operating income from Retail Banking in Spain and Portugal in the second quarter
grew by 3.8% compared to the first quarter. The figure for the half year is 1.1%
greater than the same period last year. Year-on-year growth in Wholesale and
Investment Banking for the first half-year rose to 16.7%. In America operating
income increased by 17.2% expressed at constant exchange rates, supported by
growth in Mexico.
Net interest income between April and June came to 1,711 million
euros. This is the highest quarterly figure at constant exchange rates achieved
in 2002 or 2003. The cumulative amount for the half-year increased by 4.9% (a
decrease of 11.5% at current exchange rates). Income from domestic retail
business increased by 0.7% as growth in activity was more than able to offset
narrower spreads. America grew by 15.5% at constant exchange rates, Mexico by
18.6% and the other banks by 13.1%.
Net fee income in the first half was 1,555 million euros, an increase of 2.9%.
Year-on-year comparisons continue to be affected by domestic business due to
market weakness and a drop in the average fees on mutual funds. In the second
quarter, the increase in funds under management and more stable fee income
caused fund management fee income to grow. Net fee income in America grew in
Mexico (15.6%) and in the other banks (12.2%).
The basic margin grew by 4.2% at constant exchange rates to 4,898 million euros.
Together with 336 million euros from earnings on financial transactions (which
climbed 32.4% through contributions from the wholesale business), it resulted in
operating income of 5,234 million euros. This was 5.7% higher than the first
half of 2002.
Operating expenses fell by 13.5% in current euros and increased by only 2.2% in
constant euros. Reductions in domestic business expenses continued (2.2% in
Retail Banking and 11.2% Wholesale Banking). In America, expenses rose by 5.1%
at constant exchange rates (only 1.9% in Mexico). This was considerably less
than the inflation rate in the region.
The changes in income and expenses meant that the cost/income ratio continued to
improve, falling to 45.3% in the second quarter (compared to 47.1% in the first
quarter). For the half-year it was 46.2% (47.4% a year earlier). All three
business areas recorded improvements in this ratio: 45.2% for Retail Banking,
29.2% for Wholesale and Investment Banking and 43.0% in America.
Net income from companies carried by the equity method in the first half
exceeded the same period last year by 16.1%. This was due in part to the
adjustment made in 2002 to the final 2001 figures for Repsol and BNL (104
million euros). It was also affected in the current year by publication of the
final 2002 results for associate companies - mainly Telefonica and Terra (96
million euros). Income from Group operations, which includes capital gains of
343 million euros from the sale of the holding in Credit Lyonnais, fell by 42.7%
compared to the first half of 2002.
The Group has made provisions of 993 million euros, which is a fall of 30.0% at
current exchange rates. Out of this figure, 647 million euros were allocated to
loan loss provisions (a lower figure than the previous year due to the effect of
exchange rates and due to the transfer of Argentina to Group 5 country-risk
where coverage was rised to 50% in the first half of 2002 and only a further 25%
was necessary in the current half-year). Amortisation of goodwill was 301
million euros, an increase of 15.1%. The increase was due to the amortisation in
this quarter of 39 million euros related to the investment in Bradesco.
Consequently the specific reserve set up for this purpose in 2002 has been
released. Lastly any year-on-year comparison of extraordinary income must take
into account the fund of 209 million euros set up in 2002 following an
announcement by Telefonica regarding amortisation of its UMTS licences. This was
later reflected in the net income from companies consolidated by the equity
method.
In the semester, the various positive and negative effects below the operating
income line on the income statement tend to cancel each other out. Therefore the
increase in operating income (without the exchange rate effect) carries through
to earnings before tax, which rose by 13.5% to 1,830 million euros (1.2% less in
constant euros). Compared to the first half of 2002, corporate income tax has
increased. This is due to the lower level last year as a result of a deduction
for devaluation of American currencies. On the other hand, minority interests
fell, due to the lower cost of preference shares. This was the result of the
redemption of old issues and the lower rates of new issues.
Therefore, net attributable profit for the Group in the first half of 2003 came
to 1,167 million euros. This amount is 9.6% higher than the first half of last
year calculated at constant exchange rates, and 0.1% higher at current exchange
rates.
Balance sheet and business activity
Year-on-year comparisons of the Group balance sheet and its business activity
continue to be affected by the depreciation of American currencies against the
euro. Between June 30th 2002 and June 30th 2003 the Mexican peso depreciated by
16.7%, the Venezuelan bolivar by 26.7%, the Chilean peso by 14.2%, the Colombian
peso by 25.6% and the U.S. dollar by 12.7%. However, the effect is lower than in
previous quarters because a large part of the depreciation which occurred last
year was included in the figures at June 30th 2002.
At June 30th 2003 total Group assets came to 278 billion euros, which is only
1.8% less than one year ago (at the end of March it was 10.4% less). Business
volume, calculated by adding total loans and customer funds, came to 442 billion
euros, a year-on-year decrease of just 0.5% - despite changes in exchange rates
and the withdrawal from Brazil. Excluding Argentina and Brazil and calculated at
constant exchange rates, the business volume grew by 5.1%.
Lending comes to 148 billion euros, 0.9% higher than the figure at June 30th
2002 (at the end of March lending had fallen by 5.4%). Excluding Argentina and
Brazil and at constant exchange rates, the increase is 5.6%. Loans to other
resident sectors accelerated by 9.7%, reaching 94 billion euros. Once again the
fastest growth came in secured loans, which grew by 15.4% (17.3% in market
mortgages), while financial leasing also grew (26.7%) followed by credit card
lending (10.9%).
Loans to non-residents increased slightly in the second quarter. The overall
year-on-year decline at June 30th 2003 eased to 15.0% due to the lower impact
of currency depreciation and selective loan growth depending on the country.
A reduction in non-performing loans (NPL) and the growth in lending during the
quarter, led to further improvement in the key indicators of asset quality. At
the end of June the NPL ratio was 1.57% (excluding Argentina and Brazil)
compared to 1.64% at March 31st 2003 and 1.70% at December 31st 2002. Compared
to the end of the previous quarter, the NPL ratio for Retail Banking fell
further to 0.91% and in Wholesale Banking it fell to 0.99%. In America the ratio
increased to 4.40% through the application of doubtful-loan criteria in certain
countries. The coverage ratio now stands at 194.9% (excluding Argentina and
Brazil).
Total customer funds managed by the Group came to 295 billion euros at the end
of June. This was an increase of 3.5% over March 31st 2003. The year-on-year
decline slowed to 1.2% and this figure would be an increase of 4.9% if the
impact of exchange rates, Argentina and Brazil is excluded.
During the quarter, funds on the balance sheet grew by 2.2% to 183 billion
euros. This figure is now nearly the same as in June 2002. (Excluding Argentina
and Brazil and calculated at constant exchange rates, the figure grew by 5.6%.)
Deposits from other resident sectors exceeded 68 billion euros, with an increase
of 7.7% in transactional deposits. This was especially noted in savings accounts
(which grew by 13.7%) after including the balances captured during the
"Libreton" 15-day savings book campaign in May. Fixed deposit accounts were
affected by volatility in euro deposits (if this is excluded they grew by 3.8%).
The Group also captured funds through the placement of bills of exchange and
other financial products that are recorded partly under marketable securities.
The year-on-year change in Public Sector debits basically reflects the closure
of the Law Court account in the first quarter. Non-resident deposits grew by
2.5% in the second quarter. The year-on-year decline therefore eased from 24.0%
in March to 4.6%. This was aided by the growth in local currency terms despite
the negative impact of exchange rates. As in the resident sector, the best
performers were current accounts and savings accounts, especially in Mexico.
Off-balance-sheet funds (mutual funds, pension funds and customers' portfolios),
grew by 5.8% over March to 112 billion euros. They are now only 2.7% below the
June 30th 2002 figure. Mutual funds in Spain are beginning to recover, recording
significant growth in guaranteed funds while pension funds are recording year-
on-year increases of 8.5% in Spain. This was also true of the America in this
quarter (increase of 4.5%).
Capital base
The capital base of the BBVA Group remains strong. According to BIS rules, at
June 30th 2003 the capital base was 20,096 million euros and the capital base
surplus came to 5,389 million euros. Risk weighted assets increased
significantly due to higher activity in the quarter.
Core capital amounts to 10,060 million euros as of 30th June an increase over
the 9,733 million of 31st March. The resulting ratio is maintained at 6.0%
despite the said increase in risk weighted assets.
The other components of the Tier I (preference shares) is affected by the early
redeption of two preference share issues on April 20th and June 30th of $ 200
million and $ 248 million respectively, in view of market conditions (coupons
were 7.2% and 8.0%).
Total preference shares amount to 3,567 million euros at 30-6-03, a drop of
10.7% over 31-3-03. Their weighting in Tier I has been reduced 3 percentage
points to a 26.2% which allows a comfortable margin (to reach 30%) to launch new
issues of this instrument in the future.
Total Tier I amounted to 13,627 million euros at 30-6-03, a ratio of 8.1%.
Adding Tier II funds the BIS ratio stands at 12.0%. In the month of July a new
subordinated debt issue was launched totalling 600 million euros for a 10 year
period. If this late issue was included in the calculation the BIS ratio would
be raised over 12.3%.
Standard & Poor's maintained BBVA's ratings and increased the outlook to stable.
Fitch also confirmed its ratings with a stable outlook.
The BBVA Share
In the second quarter the world's stock markets commenced significant recovery:
Euro Stoxx 50 (+18.8%), S&P (+14.9%) and Nikkei (+13.9%). Once investors had put
the geopolitical uncertainty generated by the Iraq conflict behind them, their
attention turned to the international economic situation and its possible
development, and to company results. As in the first quarter, the Euro Zone
market was dominated by Euro Stoxx 50 futures operations and share baskets which
track the index.
Against this background, the BBVA share price rose by 19.9% in the second
quarter. It outperformed the Ibex 35 (16.9%) and the Euro Stoxx 50, although it
underperformed the Euro Stoxx Banking Index (23.6%). The latter index represents
the banking sector in the Euro area. Liquidity of BBVA shares increased during
the quarter as average daily trading rose to 32 million shares. Average daily
turnover was 279 million euros (269 million euros in the previous quarter).
With regard to shareholder remuneration, a gross complementary dividend of 0.078
euros per share against the 2002 results was paid on April 10th. On July 10th
the first interim dividend of 0.09 euros per share was paid against 2003
results. This year it is the Bank's intention to pay a dividend similar to 2002.
Income Statement
Consolidated income statement
(Millions of euros)
1H03 ^% (YoY) 1H02
Financial revenues 6,565 (28.5) 9,181
Financial expenses (3,480) (32.3) (5,138)
Dividends 263 22.2 215
NET INTEREST INCOME 3,348 (21.4) 4,258
Net fee income 1,598 (15.1) 1,882
CORE REVENUES 4,946 (19.4) 6,140
Net trading income 403 14.3 352
ORDINARY REVENUES 5,349 (17.6) 6,492
Personnel costs (1,629) (16.2) (1,943)
General expenses (862) (19.1) (1,065)
GENERAL ADMINISTRATIVE EXPENSES (2,491) (17.2) (3,008)
Depreciation and amortization (258) (24.5) (343)
Other operating revenues and expenses (net) (121) (17.5) (146)
OPERATING PROFIT 2,479 (17.2) 2,995
Net income from companies under the equity method 115 44.5 80
Memorandum item: dividends received (182) 14.3 (159)
Amortization of goodwill (301) 15.1 (262)
Net income from Group transactions 278 (42.7) 485
Net loan loss provisions (847) (14.7) (993)
Net securities writedowns - n.m. 3
Extraordinary items (net) 149 n.m. (433)
PRE-TAX PROFIT 1,873 (0.1) 1,875
Corporate income tax (373) 32.8 (281)
NET INCOME 1,500 (5.9) 1,594
Minority interests (333) (22.4) (428)
. Preference shares (120) (20.8) (150)
. Other (213) (23.4) (278)
ATTRIBUTABLE NET INCOME 1,167 0.1 1,166
Consolidated income statement
Argentina and Brazil consolidated under the equity method)
(Millions of euros)
% at constant
1H03 ^% (YoY) exchange rate 1H02
Financial revenues 6,403 (18.8) (4.7) 7,884
Financial expenses (3,323) (23.1) (10.7) (4,320)
Dividends 263 23.1 27.4 214
NET INTEREST INCOME 3,343 (11.5) 4.9 3,778
Net fee income 1,555 (12.7) 2.9 1,781
CORE REVENUES 4,898 (11.9) 4.2 5,559
Net trading income 336 (0.4) 32.4 337
ORDINARY REVENUES 5,234 (11.2) 5.7 5,896
Personnel costs (1,589) (12.5) 1.1 (1,816)
General expenses (829) (15.3) 4.4 (979)
GENERAL ADMINISTRATIVE EXPENSES (2,418) (13.5) 2.2 (2,795)
Depreciation and amortization (249) (18.6) (3.1) (305)
Other operating revenues and expenses (net) (118) (15.8) 8.1 (139)
OPERATING PROFIT 2,449 (7.8) 10.4 2,657
Net income from companies under the equity method 118 16.1 15.5 101
Memorandum item: dividends received (182) 13.2 20.4 (161)
Amortization of goodwill (301) 15.1 15.1 (262)
Net income from Group transactions 278 (42.7) (42.8) 485
Net loan loss provisions (647) (26.7) (14.0) (883)
Net securities writedowns - n.m. n.m. 3
Extraordinary items (net) (67) (73.2) (62.8) (248)
PRE-TAX PROFIT 1,830 (1.2) 13.5 1,853
Corporate income tax (331) 27.5 68.4 (260)
NET INCOME 1,499 (5.9) 5.9 1,593
Minority interests (332) (22.4) (5.3) (427)
. Preference shares (120) (20.8) (20.8) (150)
. Other (212) (23.4) 6.3 (277)
ATTRIBUTABLE NET INCOME 1,167 0.1 9.6 1,166
Consolidated income statement: quarterly evolution
(Millions of euros)
2003 2002
2Q 1Q 4Q 3Q 2Q 1Q
Financial revenues 3,190 3,375 3,813 4,240 4,662 4,519
Financial expenses (1,653) (1,827) (2,077) (2,569) (2,649) (2,489)
Dividends 161 102 77 66 131 84
NET INTEREST INCOME 1,698 1,650 1,813 1,737 2,144 2,114
Net fee income 792 806 920 866 911 971
CORE REVENUES 2,490 2,456 2,733 2,603 3,055 3,085
Net trading income 206 197 231 182 146 206
ORDINARY REVENUES 2,696 2,653 2,964 2,785 3,201 3,291
Personnel costs (800) (829) (895) (860) (941) (1,002)
General expenses (442) (420) (539) (470) (515) (550)
GENERAL ADMINISTRATIVE EXPENSES (1,242) (1,249) (1,434) (1,330) (1,456) (1,552)
Depreciation and amortization (130) (128) (146) (142) (166) (177)
Other operating revenues and expenses (net) (62) (59) (58) (57) (66) (80)
OPERATING PROFIT 1,262 1,217 1,326 1,256 1,513 1,482
Net income from companies under the equity method 89 26 77 (124) (59) 139
Memorandum item: dividends received (114) (68) (53) (30) (100) (59)
Amortization of goodwill (170) (131) (288) (129) (126) (136)
Net income from Group transactions 78 200 (95) (29) 373 112
Net loan loss provisions (524) (323) (439) (311) (556) (437)
Net securities writedowns - - - - - 3
Extraordinary items (net) 246 (97) (118) 118 (347) (86)
PRE-TAX PROFIT 981 892 463 781 798 1,077
Corporate income tax (164) (209) (244) (128) (7) (274)
NET INCOME 817 683 219 653 791 803
Minority interests (164) (169) (155) (164) (212) (216)
. Preference shares (56) (64) (63) (63) (74) (76)
. Other (108) (105) (92) (101) (138) (140)
ATTRIBUTABLE NET INCOME 653 514 64 489 579 587
Consolidated income statement (Argentina and Brazil
consolidated under the equity method): quarterly evolution
(Millions of euros)
2003 2002
2Q 1Q 4Q 3Q 2Q 1Q
Financial revenues 3,129 3,274 3,624 3,569 3,818 4,066
Financial expenses (1,579) (1,744) (1,986) (1,947) (2,082) (2,238)
Dividends 161 102 76 66 129 84
NET INTEREST INCOME 1,711 1,632 1,714 1,688 1,865 1,912
Net fee income 771 784 891 836 872 910
CORE REVENUES 2,482 2,416 2,605 2,525 2,737 2,822
Net trading income 176 160 208 98 178 159
ORDINARY REVENUES 2,658 2,576 2,813 2,622 2,915 2,981
Personnel costs (779) (810) (856) (817) (894) (922)
General expenses (425) (404) (497) (435) (480) (498)
GENERAL ADMINISTRATIVE EXPENSES (1,204) (1,214) (1,353) (1,251) (1,374) (1,420)
Depreciation and amortization (126) (123) (138) (135) (150) (155)
Other operating revenues and expenses (net) (60) (58) (56) (56) (63) (77)
OPERATING PROFIT 1,268 1,181 1,266 1,180 1,328 1,329
Net income from companies under the equity method 89 29 (131) (130) (44) 145
Memorandum item: dividends received (114) (68) (54) (30) (100) (59)
Amortization of goodwill (170) (131) (288) (130) (126) (136)
Net income from Group transactions 78 200 58 (29) 373 112
Net loan loss provisions (335) (312) (267) (295) (504) (379)
Net securities writedowns - - - - - 3
Extraordinary items (net) 10 (77) (118) 179 (243) (5)
PRE-TAX PROFIT 940 890 520 776 784 1,069
Corporate income tax (124) (207) (318) (120) 5 (264)
NET INCOME 816 683 203 655 789 805
Minority interests (163) (169) (138) (167) (210) (218)
. Preference shares (56) (64) (63) (63) (75) (76)
. Other (107) (105) (76) (104) (135) (142)
ATTRIBUTABLE NET INCOME 653 514 64 489 579 587
Breakdown of yields and costs
2Q03 1Q03 4Q02
% of ATA % Yield/Cost % of ATA % Yield/Cost % of ATA % Yield/Cost
Credit entities 10.5 3.96 10.5 4.01 10.6 5.77
. Euros 4.1 2.65 4.3 2.22 3.6 0.62
. Foreign currencies 6.4 4.79 6.2 5.26 7.0 8.40
Lending 52.7 5.60 53.0 6.01 51.9 6.36
. Euros 40.4 4.72 40.0 4.96 37.7 5.19
- Resident 36.5 4.79 36.3 5.06 34.6 5.23
- Other 3.9 4.00 3.7 3.95 3.1 4.76
. Foreign currencies 12.3 8.51 13.0 9.23 14.2 9.46
Securities portfolio 27.9 5.31 27.3 5.73 28.3 5.46
. Fixed-income securities 24.3 5.14 23.6 5.98 24.7 5.82
- Euros 14.5 3.36 13.8 3.61 13.7 4.00
- Foreign currencies 9.8 7.77 9.8 9.32 11.0 8.06
. Equity securities 3.6 6.41 3.7 4.11 3.6 3.02
- Companies under the equity 2.6 6.53 2.6 3.90 2.5 3.10
method
- Other holdings 1.0 6.11 1.1 4.63 1.1 2.83
Non-earning assets 8.9 - 9.2 - 9.2 -
AVERAGE TOTAL ASSETS 100.0 4.86 100.0 5.18 100.0 5.47
Credit entities 19.3 3.07 18.2 3.69 20.8 3.56
. Euros 11.5 2.33 11.4 2.74 11.4 3.32
. Foreign currencies 7.8 4.15 6.8 5.27 9.4 3.85
Customer funds 65.7 2.65 66.1 2.99 64.0 3.30
. Customer deposits 51.3 2.49 52.4 2.83 51.7 3.13
- Euros 31.4 1.87 30.8 2.01 29.4 2.21
- Resident deposits 18.6 1.32 19.2 1.42 19.6 1.58
- Other 12.8 2.67 11.6 3.00 9.8 3.48
- Foreign currencies 19.9 3.47 21.6 4.00 22.3 4.34
. Debt and other marketable 14.4 3.19 13.7 3.58 12.3 4.03
securities
- Euros 12.2 3.03 11.1 3.47 9.2 3.80
- Foreign currencies 2.2 4.11 2.6 4.06 3.1 4.68
Shareholders' funds 4.4 - 4.8 - 4.3 -
Non-interest bearing 10.6 - 10.9 - 10.9 -
liabilities
AVERAGE TOTAL LIABILITIES 100.0 2.40 100.0 2.73 100.0 2.92
NET INTEREST MARGIN / ATA 2.46 2.45 2.55
Net fee income (1)
(Millions of euros)
1H03 ^% (YoY) 1H02
NET FEE INCOME 1,555 (12.7) 1,781
Collection and payment services 646 (8.8) 708
. Credit and debit cards 277 (0.9) 279
. Others 369 (14.0) 429
Client assets 510 (18.0) 622
. Mutual and pension funds 469 (16.9) 565
. Portfolios managed 41 (28.7) 57
Other securities services 225 (17.0) 272
. Purchase / sale of securities 59 (23.2) 77
. Underwriting and placing 34 (11.5) 39
. Custody services 132 (15.4) 156
Other commissions 174 (2.8) 179
(1) Argentina and Brazil under the equity method.
General and administrative expenses (1)
(Millions of euros)
1H03 ^% (YoY) 1H02
PERSONNEL COSTS 1,589 (12.5) 1,816
Wages and salaries 1,182 (13.3) 1,363
. Fixed remuneration 965 (13.5) 1,115
. Variable remuneration 217 (12.5) 248
Employee welfare expenses 292 (4.5) 306
. Of which: pension funds 75 12.5 67
Training expenses and other 115 (21.5) 147
GENERAL EXPENSES 829 (15.3) 979
Premises 176 (19.7) 219
Computer equipment 171 (7.1) 184
Communications 100 (19.7) 124
Publicity 59 (19.4) 74
Corporate expenditure 33 (13.0) 38
Other expenses 216 (16.5) 258
Taxes 74 (8.7) 82
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 2,418 (13.5) 2,795
(1) Argentina and Brazil under the equity method.
Net income on Group transactions and total net provisions (1)
(Millions of euros)
1H03 ^% (YoY) 1H02
NET INCOME ON GROUP TRANSACTIONS 278 (42.7) 485
TOTAL NET PROVISIONS (993) (30.0) (1,419)
Net loan loss provisions (647) (26.7) (883)
Amortization of goodwill (301) 15.1 (262)
Net securities writedowns - n.m. 3
Special reserves (45) (83.9) (277)
(1) Argentina and Brazil under the equity method.
Balance Sheet and activity
Consolidated balance sheet
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
Cash on hand and on deposit at Central Banks 9,073 25.9 8,714 7,208
Due from credit entities 18,845 0.8 20,675 18,698
Total net lending 142,637 0.9 139,435 141,382
Fixed-income portfolio 68,982 (6.1) 64,743 73,483
. Government debt securities 18,032 (12.6) 17,719 20,636
. Other debt securities 50,950 (3.6) 47,024 52,847
Equities portfolio 9,588 (13.5) 9,795 11,090
. Companies under the equity method 6,545 (8.2) 7,334 7,127
. Other holdings 3,043 (23.2) 2,461 3,963
Goodwill in consolidation 4,106 (8.4) 4,296 4,480
Property and equipment 4,254 (16.3) 4,331 5,085
Treasury stock 60 32.6 104 45
Prior years' losses at consolidated companies 3,360 6.3 3,351 3,162
Other assets 16,969 (8.1) 16,386 18,467
TOTAL ASSETS 277,874 (1.8) 271,830 283,100
Due to credit entities 52,964 (6.4) 52,019 56,566
Customer funds 182,771 (0.3) 178,825 183,375
. Deposits 142,414 (5.0) 138,961 149,901
. Marketable debt securities 34,072 27.8 33,471 26,652
. Subordinated debts 6,285 (7.9) 6,393 6,822
Other liabilities 19,811 (2.6) 18,796 20,338
Net income 1,500 (5.9) 683 1,594
Minority interests 5,449 (8.5) 5,931 5,956
Capital 1,566 - 1,566 1,566
Reserves 13,813 0.8 14,010 13,705
TOTAL LIABILITIES 277,874 (1.8) 271,830 283,100
Other customer funds managed 112,024 (2.7) 105,925 115,109
. Mutual funds 44,772 (3.9) 41,515 46,604
. Pension funds 38,265 5.7 36,587 36,216
. Customer portfolios and assets 28,987 (10.2) 27,823 32,289
MEMORANDUM ITEMS:
Average total assets 274,429 (7.3) 272,212 296,042
Risk weighted average assets 162,121 (4.0) 161,465 168,897
Average shareholders' funds 12,432 (4.4) 12,848 13,002
Total lending
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
Public sector 12,427 (5.2) 12,241 13,104
Residents 94,343 9.7 91,194 86,018
. Secured loans 48,516 15.4 46,777 42,035
. Commercial loans 7,171 1.5 7,012 7,067
. Other term loans 31,864 4.8 31,238 30,417
. Credit card debtors 972 10.9 940 877
. Other 1,854 (25.6) 1,644 2,492
. Finance leases 3,966 26.7 3,583 3,130
Lending to non-residents 37,724 (15.0) 37,459 44,394
. Secured loans 11,154 (14.6) 11,152 13,056
. Other 26,570 (15.2) 26,307 31,338
Non-performing loans 3,126 14.9 3,274 2,720
GROSS LENDING 147,620 0.9 144,168 146,236
Loan loss provisions (4,983) 2.6 (4,733) (4,854)
NET LENDING 142,637 0.9 139,435 141,382
MEMORANDUM ITEM (Excluding Argentina and Brazil):
Total lending 140,367 2.4 136,989 137,014
Variation of non-performing loans
(Millions of euros)
2Q03 1Q03 4Q02
INITIAL BALANCE 3,274 3,473 3,061
Net change (148) (199) 412
+ Entries 665 523 1,108
- Outflows (534) (305) (519)
- Write-offs (279) (417) (177)
END OF THE PERIOD BALANCE 3,126 3,274 3,473
Non-performing and loan loss provisions
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
TOTAL NON-PERFORMING ASSETS 3,219 6.7 3,481 3,015
Non-performing assets 3,126 14.9 3,274 2,720
. Public sector 65 45.1 65 45
. Resident 707 (6.0) 725 752
. Non-resident sector 2,354 22.4 2,484 1,923
Non-performing off-balance sheet items 93 (68.4) 207 295
TOTAL RISK 163,586 0.9 159,815 162,071
Total lending (gross) 147,620 0.9 144,168 146,236
Off-balance items 15,966 0.8 15,647 15,835
PROVISIONS 5,229 3.5 4,983 5,052
Loan loss provisions 4,983 2.6 4,733 4,854
Off-balance items provisions 246 24.3 250 198
MEMORANDUM ITEMS:
Assets repossessed 452 (26.8) 457 617
Reserves 219 (8.3) 241 239
Coverage (%) 48.5 52.7 38.7
NPL ratios and coverage
(Percentage)
30-06-03 31-03-03 30-06-02
NPL RATIOS:
Non-performing loans / Total lending 2.12 2.27 1.86
Non-performing assets / Total risk 1.97 2.18 1.86
COVERAGE RATIO:
Coverage of non-performing loans 159.4 144.6 178.5
Coverage of total risks 162.4 143.2 167.5
Coverage with mortgage guarantees 179.4 164.9 200.4
MEMORANDUM ITEM (Excluding Argentina and Brazil):
Non-performing loans / Total lending (gross) 1.57 1.64 1.61
Coverage of non-performing loans 194.9 187.4 197.4
Customer funds managed
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
CUSTOMER FUNDS RECORDED ON BALANCE SHEET 182,771 (0.3) 178,825 183,375
DEPOSITS 142,414 (5.0) 138,961 149,901
Public sector 3,662 (62.8) 3,917 9,854
Resident 68,355 3.1 66,366 66,290
. Current accounts 20,872 3.3 19,381 20,213
. Savings accounts 16,687 13.7 14,390 14,670
. Time deposits 18,945 (11.8) 20,298 21,489
. Assets sold with repurchase agreement 11,851 19.5 12,297 9,918
Non-resident sector 70,397 (4.6) 68,678 73,757
. Current and savings accounts 24,247 (2.2) 23,790 24,801
. Time deposits 40,175 (4.0) 39,934 41,841
. Assets sold with repurchase agreement and other accounts 5,975 (16.0) 4,954 7,115
MARKETABLE DEBT SECURITIES 34,072 27.8 33,471 26,652
Mortgage bonds 11,717 100.5 11,708 5,844
Other 22,355 7.4 21,763 20,808
SUBORDINATED DEBT 6,285 (7.9) 6,393 6,822
OTHER CUSTOMER FUNDS MANAGED 112,024 (2.7) 105,925 115,109
Mutual funds 44,772 (3.9) 41,515 46,604
Pension funds 38,265 5.7 36,587 36,216
Customers' portfolios and assets 28,987 (10.2) 27,823 32,289
TOTAL CUSTOMER FUNDS MANAGED 294,795 (1.2) 284,750 298,484
MEMORANDUM ITEM (excluding Argentina and Brazil):
Balance sheet carried in customer funds 180,328 0.5 176,416 179,474
Other customer funds managed 109,135 (2.8) 103,236 112,336
Total customer funds managed 289,463 (0.8) 279,652 291,810
Other customer funds managed
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
SPAIN 56,830 (0.5) 54,909 57,137
MUTUAL FUNDS 34,619 (0.9) 33,181 34,943
Mutual Funds (ex Real Estate) 34,177 (1.5) 32,795 34,712
. Money Market 10,653 4.0 10,551 10,242
. Fixed-income 11,995 (1.5) 11,963 12,179
Of which: Guaranteed 6,323 3.4 6,100 6,115
. Balanced 2,765 (33.4) 2,871 4,151
Of which: International funds 2,653 (20.4) 2,301 3,335
. Equities 8,174 3.0 6,773 7,937
Of which: Guaranteed 5,392 25.6 4,177 4,291
International funds 2,278 (26.4) 2,187 3,094
. Global 590 190.3 637 203
Real Estate Mutual Funds 442 91.0 386 231
PENSION FUNDS 11,358 8.5 11,033 10,466
Individual pension plans 5,761 11.1 5,612 5,185
Corporate pension funds 5,597 6.0 5,421 5,281
CUSTOMER PORTFOLIOS AND ASSETS 10,853 (7.5) 10,695 11,728
REST OF THE WORLD 55,194 (4.8) 51,016 57,972
Mutual funds 10,153 (12.9) 8,334 11,661
Pension funds 26,907 4.5 25,554 25,750
Customer portfolios and assets 18,134 (11.8) 17,128 20,561
OTHER CUSTOMER FUNDS MANAGED 112,024 (2.7) 105,925 115,109
Goodwill in consolidation
(Millions of euros)
30-06-03 ^% (YoY) 31-03-03 30-06-02
Global and proportional integration method 2,710 (9.5) 2,806 2,993
. Banks in America 1,975 (3.5) 2,042 2,047
. Pension fund management companies in America 474 (27.1) 494 650
. Other 261 (12.0) 270 296
Carried by the equity method 1,396 (6.1) 1,490 1,487
GOODWILL IN CONSOLIDATION 4,106 (8.4) 4,296 4,480
Capital base (BIS rules)
(Millions of euros)
30-06-03 31-03-03 (1) 30-06-02
CAPITAL (TIER I) 13,627 13,727 13,705
Capital 1,566 1,566 1,566
Reserves (2) 10,276 10,483 10,367
Minority interests 5,449 5,931 5,942
. Preference shares 3,567 3,994 4,007
. Other 1,882 1,937 1,935
Deductions (4,544) (4,767) (5,048)
. Goodwill (4,106) (4,296) (4,480)
. Other (438) (471) (568)
Attributable net income 1,167 514 1,166
Dividends (287) - (288)
CAPITAL (TIER II) 6,469 6,573 6,872
Subordinated debt 4,695 4,764 5,163
Revaluation reserves and other 2,639 2,522 2,527
Deductions (865) (713) (818)
TOTAL CAPITAL BASE 20,096 20,300 20,577
Minimum equity required 14,707 15,192 14,661
CAPITAL BASE SURPLUS 5,389 5,108 5,916
MEMORANDUM ITEM:
Risk-weighted assets 167,761 161,650 164,922
BIS RATIO (%) 12.0 12.6 12.5
CORE CAPITAL 6.0 6.0 5.9
TIER I (%) 8.1 8.5 8.3
TIER II (%) 3.9 4.1 4.2
(1) Considering the Brazilian transaction as closed. If not, the ratios would be:
Core capital 6.0%, TIER I 8.5% TIER II 3.6% BIS RATIO 12.1%
(2) Does not include revaluation reserves as these are considered TIER II.
Ratings
Short term Long term Financial strength
Moody's P-1 Aa2 B+
Fitch - IBCA F-1+ AA- B
Standard & Poor's A-1+ AA- -
The BBVA share
30-06-03 31-03-03 30-06-02
Number of shareholders 1,183,969 1,189,260 1,180,843
Number of shares issued 3,195,852,043 3,195,852,043 3,195,852,043
Daily average number of shares traded 31,966,836 31,442,809 23,465,278
Daily average trading (millions of euros) 278.77 269.27 306.03
Maximum price (euros) 10.39 10.39 14.21
Minimum price (euros) 6.83 6.83 10.41
Closing price (euros) 9.15 7.63 11.45
Book value per share (euros) 4.11 3.88 4.14
Market capitalisation (millions of euros) 29,242 24,384 36,593
Stock performance ratios
30-06-03 31-03-03 30-06-02
Price / Book value (times) 2.2 2.0 2.8
PER (Price Earning Ratio; times) (1) 13.9 11.4 21.3
Yield (Dividend / Price; %) (2) 3.83 4.59 3.04
(1) PER at 30-6-03 is calculated using the median of the profit estimated by
analysts (July 2003).
(2) Dividend yield at 30-6-03 is calculated using the median of analysts'
estimates (July 2003).
Business areas
This chapter breaks down the BBVA Group's activities and earnings to show the
contribution of each individual business area.
It starts with the lowest level units where all the accounting information
related to their business is recorded. Subsequently and in accordance with the
existing business structure, the units are classified and grouped to determine
the composition of each area. All companies belonging to the Group are also
assigned to business areas depending on their activity. Where necessary units
are split and allocated to more than one area if the diversity of their
activities so requires.
Once the structure of each area has been established, the management adjustments
inherent in the model are applied. With regard to allocation of equity, the
model uses a business capital allocation system based on the risks incurred by
each business, evaluating the capital needs in terms of the lending, operational
and market risks. First, the model quantifies the volume of strict equity
(capital and reserves) attributable to the risks in each area, which is used to
determine the return on equity (ROE) of each business. Next, the other capital
base components (attributable subordinated debt and preferential shares) as well
as the associated costs, are allocated.
There is one exception to the equity-allocation methodology described above. In
particular, for the Mexico and Banking in America units, BBVA has maintained the
book equity that would arise from a consolidated subgroup in each country.
Therefore the full equity figure represents the BBVA Group's share, while
minorities are recorded under Other Eligible Funds.
Furthermore, the model allocates all direct and indirect expenses to the
relevant business areas except for expenses of a markedly corporate or
institutional nature (from the Group's standpoint) that are not clearly linked
to the corresponding activities.
Lastly, it should be underscored that the method used to calculate the net
activity of each business (Retail, Wholesale and America) does not eliminate
intergroup transactions that affect more than one area because these are
considered an integral part of each business unit's activities. When intergroup
transactions are eliminated during consolidation they are posted to the
Corporate Activities area and thus certain items on the corresponding balance
sheet may have a negative balance.
In order to afford a realistic view of the business and permit a uniform
comparison of the areas, the earnings of Group companies in Argentina and Brazil
are recorded by the equity method under Corporate Activities.
This Quarterly Report breaks down the information per area into the following
lines of business:
* Retail Banking in Spain and Portugal: formed by the retail business, asset
management and private banking business conducted by the Group in Spain and
Portugal. Therefore it includes the individual customer and SME segments in the
domestic market, the Finanzia/Uno-e Group (which specialises in e-banking,
consumer financing, card distribution and renting activities), BBVA Portugal,
the private banking business, the pension and mutual fund management business,
and the earnings associated with the insurance business.
* Wholesale and Investment Banking: this covers the Group's businesses with
large companies and institutions through national and international corporate
banking and institutional banking. In addition, it also includes the trading
room businesses in Spain, Europe and New York, the securities business and
depository and custodial services. Furthermore, it includes other business and
real estate project activities that are not covered through the Group's
interests in large corporations.
* America: consists of activities and earnings of the Group's affiliate banks in
Latin America and of their associate holdings, including pension fund managers
and insurance companies as well as the international private banking business.
This area does not include the earnings generated in Argentina and Brazil (which
are recorded as income from companies by the equity method, under Corporate
Activities) in order to provide an equitable comparison of the various
businesses.
* Corporate Activities: includes holdings in large industrial corporations and
financial institutions, as well as the activities and earnings of support units
such as the Assets and Liabilities Committee. Furthermore, it comprises other
items, such as country-risk allocations and goodwill amortisation charges, that
cannot be assigned to the areas on account of their nature (except those related
to interests held by Business and Real Estate Projects, in the Wholesale and
Investment Banking area). Lastly, and for the reasons specified above, it
includes the earnings of the Group companies based in Argentina and Brazil,
which are recorded as equity accounting income.
This area structure reflects the current organisation that manages and monitors
the BBVA Group's business activities. The 2002 figures, which are shown for
comparison, are based on the same criteria.
Attributable net income by business areas
(Millions of euros)
1H03 ^% (YoY) 1H02
Retail Banking in Spain and Portugal 604 0.1 603
Wholesale and Investment Banking 218 25.7 174
America 344 (9.9) 381
Corporate Activities 1 (85.5) 8
ATTRIBUTABLE NET INCOME 1,167 0.1 1,166
ROE and efficiency
(Percentage)
ROE Cost/Income Ratio
1H03 1H02 1H03 1H02
Retail Banking in Spain and Portugal 30.3 32.7 45.2 46.0
Wholesale and Investment Banking 22.0 17.7 29.2 35.3
America 22.5 22.2 43.0 45.2
BBVA GROUP 18.9 18.1 46,2(1) 47,4(1)
(1) Argentina and Brazil consolidated by the equity method.
Retail Banking in Spain and Portugal
Income statement
(Millions of
euros)
Retail Banking in Spain and Portugal Memorandum item:
Commercial & SME Banking Asset Management and
Private Banking
1H03 ^%(YOY) 1H02 1H03 ^%(YoY) 1H03 ^%(YoY)
NET INTEREST 1,603 0.7 1,592 1,442 0.2 20 (19.8)
INCOME
Net fee income 703 (3.6) 729 597 (1.4) 97 (12.2)
CORE REVENUES 2,306 (0.6) 2,321 2,039 (0.3) 117 (13.6)
Net trading 23 4.4 22 21 3.9 1 n.m.
income
ORDINARY REVENUES 2,329 (0.6) 2,343 2,060 (0.3) 118 (12.6)
Personnel costs (692) (1.3) (701) (628) (1.9) (26) 8.3
General expenses (361) (4.0) (376) (316) (2.0) (16) 6.2
GENERAL (1,053) (2.2) (1,077) (944) (1.9) (42) 7.5
ADMINISTRATIVE
EXPENSES
Depreciation and (59) (5.0) (62) (52) (4.0) (2) (8.5)
amortization
Other operating (26) (0.6) (26) (25) (0.9) (1) (4.1)
revenues and
expenses
OPERATING PROFIT 1,191 1.1 1,178 1,039 1.5 73 (21.2)
Net income from 2 n.m. (10) (1) (54.7) 1 (26.9)
companies under
the equity method
Amortization of - - - - - - -
goodwill
Net income on - - - - - - -
Group
transactions
Net loan loss (244) 14.3 (213) (226) 17.0 (2) 2.9
provisions
Extraordinary 9 148.7 4 10 125.9 (1) (51.6)
items (net) and
other
PRE-TAX PROFIT 958 (0.1) 959 822 (1.2) 71 (20.7)
Corporate income (315) (0.1) (315) (273) (1.9) (23) (19.2)
tax
NET INCOME 643 - 644 549 (0.9) 48 (21.4)
Minority (39) (2.0) (41) (35) (6.8) (4) (8.4)
interests
ATTRIBUTABLE NET 604 0.1 603 514 (0.4) 44 (22.3)
INCOME
Balance Sheet
(Millions of
euros)
30-06-03 ^%(YoY) 30-06-02 30-06-03 ^%(YoY) 30-06-03 ^%(YoY)
Total lending 84,562 11.5 75,855 78,850 11.6 728 (6.0)
Securities 152 (74.4) 592 9 (67.8) 38 (67.3)
portfolio
Cash, interbank & 1,939 (54.0) 4,214 1,142 2.6 220 (88.6)
monetary assets
Inter-area 15,845 3.5 15,312 14,377 1.0 1,143 19.9
positions
Property and 676 0.5 673 554 1.5 15 (5.1)
equipment
Other assets 706 (4.4) 738 408 (15.8) 35 (2.5)
TOTAL ASSETS / 103,880 6.7 97,384 95,340 9.5 2,179 (43.0)
LIABILITIES
Deposits 51,751 (0.9) 52,212 47,648 2.0 1,345 (51.8)
Debt securities 6 (56.7) 14 - - - -
Income for the 643 - 644 549 (0.9) 48 (21.4)
period
Equity 6,937 6.5 6,515 5,743 6.7 569 7.6
. Shareholders' 3,984 6.1 3,753 3,314 6.6 337 7.2
funds
. Other eligible 2,953 6.9 2,762 2,429 6.8 232 8.2
funds
Interbank 2,599 (14.5) 3,038 30 (24.6) 2 (99.1)
accounts
Inter-area 38,869 21.0 32,135 38,690 21.1 78 (24.5)
positions
Other liabilities 3,075 8.8 2,826 2,680 10.1 137 31.4
OTHER CUSTOMER
FUNDS MANAGED
. Mutual funds 34,237 (0.2) 34,321 30,152 (9.1) 3,703 372.9
. Pension funds 11,563 9.3 10,581 5,432 7.3 5,933 9.6
. Customer 7,094 (47.5) 13,513 791 (55.7) 6,303 (46.3)
portfolios and
assets(1)
Relevant ratios
(Percentage)
30-06-03 30-06-02 30-06-03 30-06-03
ROE 30.3 32.7 31.1 28.2
Cost / income 45.2 46.0 45.8 35.9
ratio
NPL ratio 0.91 1.03 0.87 0.03
Coverage ratio 256.7 207.5 264.9 n.m.
(1) In the 2q03 a 3 bn euros transfer has been made from Commercial&SME banking to the Asset Management and Private
banking business area. In homogenous terms Y-o-Y changes would be 0.1% and 3.2% respectively.
(2) In the 2q03 a 220 million euros transfer has been made from Commercial&SME to the Asset management and Private
banking business area. In homogenous terms the Y-o-Y changes would be 16% and 5.8% respectively.
(3) In the 2q03 transfers have been made from this Business area to the America business area (International private
banking) for an amount of 2,600 million euros and to the Wholesale and Investment banking business area (2,500 million).
This Group Area manages retail business, investment- and pension-funds, as
well as insurance-related activities in Spain and Portugal. Apart from serving
the segments of private customers and SMEs, through the subsidiaries Finanzia
and Uno-e it is also involved in financing sales of consumer products, card
distribution, renting and e-banking.
Positive performance in the second quarter has allowed the Area to improve all
the lines on the income statement, both against the previous quarter (QoQ) and
against the first quarter of last year (YoY). The second-quarter operating
income was nearly 4% higher than in the first, so the cumulative figure for the
first semester has grown 1.1%, reaching 1,191 million euros. After provisioning
14.3% more for loans, due basically to the increase in generic provisions
derived from the overall growth of the loan portfolio, attributable profit is
now 604 million euros, a similar level to the first semester of 2002. The Area's
return on equity (ROE) in the first half of the year was 30.3%.
Higher recurrent profit has mainly come from the higher net interest income.
This has increased 1.5% over the first quarter (0.7% YoY), reflecting more
commercial initiatives, backed by the launch of innovative products and the
application of suitable price management techniques to the lower spreads caused
by interest rates hitting record lows.
Lending activities from April to June showed the highest quarterly balance-sheet
increase recorded over the last eighteen months. Thus, y-o-y growth reached
11.5% (10.3% to the end of March). Excluding loans under the VPO programme
(subsidised housing), average investment balances have increased 13.4% over the
last year, improving for all customer segments. Personal borrowing went up 15.5%
(of which free-market housing mortgages accounted for 17.3%), SME borrowing
10.8% and businesses borrowing 12.4%. The Group has managed to make this dynamic
performance compatible with a sustained reduction in the NPL ratio, which has
recorded a new low, at 0.91% on 30-6-03, while the coverage ratio has gone up to
256.7%.
Deposits are showing 5.3% y-o-y growth (3.5% to end of March), after excluding
the effect of no longer operating the Courts account, going up to 7% in the case
of average monthly balances. Investment funds have shown excellent performance.
Apart from recovering a positive y-o-y growth, after increasing assets by 1,715
million euros over the quarter, the fastest growing funds are also the highest
fee collectors, bringing up and stabilising the average fee on funds for the
Group as a whole.
The 3.0% rise in second quarter fees against the previous quarter was mainly
fuelled by fees on banking services for collections and payments and the
recovery of investment and pension funds. In comparison to the first half of
2002, the most outstanding growth figures were in card fees and commissions
(+15.1%), account administration (+6.6%) and insurance (+10.3%). However, the y-
o-y performance of securities intermediation and fund management fees is still
contributing to a total drop of 3.6% (-5.7% in the first quarter).
The Area's operating expenses are being kept below last year's levels, showing a
2.2% reduction over the first six months. The cost/income ratio for the period,
at 45.2%, represents progress over the first quarter of the year and also over
the corresponding period for the previous year (46.0%).
Commercial Banking and SME Banking, which contribute over 85% of the Area's
margins and profit, have generated an operating income of 1,039 million euros
this semester, with 1.5% growth against the same period of last year. The
ordinary revenue remains at a similar level to 2002, while operating expenses
has gone down 1.9%. Loan provisioning has increased 17.0% due to the higher
amounts being put into the statistical fund and covering the generic provision
to cover increased lending activity. Attributable profit reached 514 million
euros, a similar figure to the first semester of last year.
BBVA was the first financial institution to broaden its catalogue of mortgage
products in view of expectations that interest rates will be rising again in the
future. It offers a wide range of solutions, including the first ever fixed
interest mortgage on the Spanish market with a term of 30 years, the Hipoteca
Mix Dos Tramos ("Two Tranche Mix"), which guarantees a fixed rate for the first
five years, and a cover policy (CAP) that the customer can take out to hedge
against rate increases.
In consumer loans, the revenues from the car loan business, Crediton Coche, have
soared. This kind of loan allows customers to delay paying the final instalment
as a function of the car's value, making it easier for them to change cars, and
also incorporates a significant discount on the car insurance if the policy is
taken out with BBVA Seguros.
Important initiatives have been taken to help shops and small businesses.
Soluciones Inmediatas ("Immediate Solutions") gives shopkeepers instant
financing for sales, without paperwork or having to make several trips to the
bank, whilst in leasing, revenues have increased by approximately 30%.
Amongst balance-sheet funds, the Quincena del Ahorro (Libreton BBVA), the two-
week savings special on the BBVA passbook account, in May, took a new and very
successful approach, somewhat different to what was done in previous years. This
boosted the efficacy of the campaign and also cemented customer loyalty. The
campaign brought in approximately 1.5 billion euros of new business, handing out
over 600,000 gifts. In term deposits, customers have given an enthusiastic
welcome to the Libreta Flexible ("Flexible Passbook"), which has turned over 2.5
billion euros in the last five months since its launch in February.
Asset Management and Private Banking have continued to develop their business
models. In the second quarter, BBVA Privanza was legally absorbed into BBVA and
progress has been made in implementing BBVA Patrimonios, an exclusive,
personalised customer service, with specialist management of such customers'
assets and investments.
In the first six months of the year, there has been a significant surge in the
gathering of investment funds, especially guaranteed funds. BBVA's range has
continued to grow with new funds that allow participants to make the most out of
improved market performance at all times. This has allowed the bank to raise
almost 2 billion euros in such funds over the semester.
Despite the increase in contributions and the recovery of financial markets,
year-on-year comparison of assets under management continues to be affected by
the big dip experienced in the second semester of the previous year. This has
led to a y-o-y drop in fees and means that the unit's attributable profit to
30th June, 44 million euros, is still below last year's. However, in the second
quarter, the profit is higher than in the first and already at similar levels to
the previous year's.
The Special Financial Services Unit comprises Finanzia, Uno-e, Renting, Dinero
Express and finance businesses in Portugal. To 30th June, this Unit managed over
1.3 billion euros of business, with y-o-y growth of 16%, while loans have gone
up 13.9% to 2,437 million euros.
In Portugal, the various commercial plans put into effect have boosted
operations, leading to y-o-y growth of over 30% in mortgage loans and a greater
market share. This has meant the net interest income rising to 28 million euros,
with y-o-y growth of 1.7%, despite the falling market rates. Meanwhile,
operating expenses have remained at the same level as a year ago.
BBVA is market leader in life insurance distributed over bank networks, with a
notable lead over the next competitor. This quarter, it has launched "Vida 15",
an innovative product incorporating cover for death and including a guarantee in
the event of survival, so that the insuree can recover up to 50% of the premiums
paid until the insurance expiry date.
42% more capital has been raised in insurance related savings products over the
last twelve months, and 670 million euros of premiums have been written over the
last six months. BBVA Seguros' pre- tax profits to June were 87 million euros,
21% increase over the same period in 2002.
Wholesale and Investment Banking
Income statement
(Millions of
euros)
Wholesale and Investment Banking Memorandum item:
Wholesale Banking Markets
1H03 ^%(YoY) 1H02 1H03 ^%(YoY) 1H03 ^%(YoY)
NET INTEREST 348 (11.2) 391 258 0.4 51 (47.9)
INCOME
Net fee income 91 (15.0) 107 69 (1.3) 24 (39.2)
CORE REVENUES 439 (12.0) 498 327 - 75 (45.4)
Net trading 66 n.m. (27) 12 n.m. 46 n.m.
income
ORDINARY REVENUES 505 7.4 471 339 3.8 121 0.4
Personnel costs (96) (8.2) (105) (59) (0.6) (32) (18.1)
General expenses (51) (16.5) (61) (24) (10.4) (25) (22.7)
GENERAL (147) (11.2) (166) (83) (3.6) (57) (20.1)
ADMINISTRATIVE
EXPENSES
Depreciation and (6) 2.9 (5) (2) (7.5) (3) 10.7
amortization
Other operating (2) n.m. - (2) 25.3 (1) 131.1
revenues and
expenses
OPERATING PROFIT 350 16.7 300 252 6.4 60 31.2
Net income from 22 n.m. (4) 2 n.m. - n.m.
companies under
the equity method
Amortization of (1) (65.1) (3) - - - -
goodwill
Net income on 1 (93.8) 23 - - - n.m.
Group
transactions
Net loan loss (57) (13.9) (66) (50) (23.1) (3) n.m.
provisions
Extraordinary (3) n.m. 1 - n.m. (20) n.m.
items (net) and
other
PRE-TAX PROFIT 312 24.1 251 204 17.6 37 (17.7)
Corporate income (73) 32.3 (55) (60) 21.4 (6) 25.4
tax
NET INCOME 239 21.9 196 144 16.1 31 (23.5)
Minority (21) (7.6) (22) (15) (3.3) (4) (13.0)
interests
ATTRIBUTABLE NET 218 25.7 174 129 18.9 27 (24.5)
INCOME
Balance Sheet
(Millions of
euros)
30-06-03 ^%(YoY) 30-06-02 30-06-03 ^%(YoY) 30-06-03 ^%(YoY)
Total lending 38,988 (2.2) 39,862 37,387 (4.4) 1,480 132.6
Securities 26,777 (5.7) 28,387 3,847 (6.9) 21,957 (5.2)
portfolio
Cash, interbank & 36,329 (13.7) 42,113 10,541 55.4 25,551 (27.4)
monetary assets
Inter-area 40,160 (2.5) 41,191 - n.m. 40,099 (1.8)
positions
Property & 48 17.8 41 41 28.0 7 (22.0)
equipment
Other assets 6,529 (5.3) 6,895 468 (19.3) 5,992 1.2
TOTAL ASSETS / 148,831 (6.5) 158,489 52,284 2.3 95,086 (10.1)
LIABILITIES
Deposits 46,684 8.3 43,099 21,991 28.2 24,644 (5.1)
Debt securities 6,568 33.0 4,939 6,568 33.0 - -
Income for the 239 21.9 196 144 16.1 31 (23.5)
period
Equity 3,659 7.6 3,400 2,301 15.1 628 22.9
. Shareholders' 2,143 4.8 2,044 1,229 13.4 374 25.4
funds
. Other eligible 1,516 11.8 1,356 1,072 17.2 254 19.4
funds
Interbank 54,967 (19.4) 68,220 6,253 (30.0) 48,715 (17.8)
accounts
Inter-area 29,039 (6.1) 30,926 13,834 (14.6) 14,680 8.9
positions
Other liabilities 7,675 (0.4) 7,709 1,193 (7.8) 6,388 (1.2)
OTHER CUSTOMER
FUNDS MANAGED
. Mutual funds 763 3.8 735 763 3.8 - -
. Pension funds 2 (50.0) 4 2 (50.0) - -
. Customer 3,759 282.8 982 3,759 282.8 - -
portfolios and
assets
Relevant ratios
(Percentage)
30-06-03 30-06-02 30-06-03 30-06-03
ROE 22.0 17.7 21.9 17.2
Cost / income 29.2 35.3 24.4 47.2
ratio
NPL ratio 0.99 0.70 1.03 0.15
Coverage ratio 153.1 244.9 146.3 1,033.7
(1) In the 2003 an amount of 2,500 million euros has been transferred from Retail banking in Spain and Portugal
(Asset management and private banking).
Business areas
Wholesale and Investment Banking
Wholesale and Investment Banking comprises the domestic and international
business of Global Corporate Banking; Institutional Banking and, within the
Global Markets and Distribution Unit, trading rooms in Europe and New York,
equity and bond distribution, and depository and custodial services. It also
includes the Business and Property Projects Unit, and Global Transactional
Services, which offers products such as cash management, factoring, confirming
and trade finance.
The business strategy design, intense activity and canny adaptation to market
conditions have led to significant performance improvement in the main items
on the Area's income statement during the first semester of this year, compared
to the first quarter. Attributable profit for the first six months was 218
million euros, with y-o-y growth of 25.7%. Wholesale Banking contributed 129
million, Markets 27 million and Business and Property Projects 62 million.
Return on equity (ROE) for the Area went up to 22.0%, as compared to 17.8% in
the first semester of 2002.
Lending activities improved performance over the figures to the end of March.
The Unit pursued a policy of prudence in risk management, especially in
international business. This has significantly reduced the NPL ratio, cutting
it down from 1.22% to 31-3-03 to 0.99% by the end of June. Coverage was
extended from 135.5% to 153.1% over the same period.
Higher volumes, improved spreads and higher earnings on market operations
allowed the ordinary margin to recover over the semester (+7.4%). Along with
the ongoing cost-reduction drive, which has once again brought costs down by
11.2%, this has produced a 29.2% cost/income ratio, 610 basis points better
than in the first semester of 2002, and a 16.7% growth in the operating
income, which reached 350 million euros.
Wholesale Banking (Global Corporate Banking and Institutional Banking) has
obtained an attributable profit of 129 million euros, with 18.9% growth.
Excellent results were reported in domestic activities, where attributable
profit increased 29.1% to 112 million euros over the semester. The ordinary
margin went up 9.1% and the operating income 14.3%.
Global Corporate Banking followed a line of prudence, keeping volumes to
suitable levels within the current risk scenario. Meanwhile, it managed to
obtain significant fee income, whilst consolidating its policy of tailoring
prices to risk in each individual market.
Amongst the most significant operations of the second quarter of 2003 are the
syndicated loans of 2.7 billion euros to Banque PSA Finance and 2.5 billion
euros to Carrefour; the one-billioneuro syndicated loan to Enagas; the
refinancing of Enersis to a total of 2.33 billion euros; and the credit line
to Arcelor for 2,003 million.
BBVA is number one global arranger for project finance this semester, on the
global ranking published by Dealogic (Dealogic ProjectWare). This is the first
time that a Spanish bank has headed this table. The bank arranged operations
such as financing the 232 million-euros project for the Eurolink Motorway in
Ireland, and the 700 million-dollar project for building and running the SR-
125 highway in California.
In fixed-income securities, some of the most important transactions were the
issue of 5 billion euros of 10-year Government Bonds and a 150 million-euro
issue for John Deere Finance S.A., the first under its European Medium-Term
Notes programme. In May, it also arranged a 750 million-dollar securitisation
of oil exports for the Brazilian oil company, Petrobras.
The Corporate Finance Unit has acted as advisor to SEPI (the Spanish State
Industrial Holding Company) in the 2,689-million euros sale of its toll-road
company, Empresa Nacional de Autopistas. Bloomberg ranked BBVA third in Spain
in volume of operations announced or signed in the first half of 2003.
Institutional Banking is the Group Unit specialising in providing services to
public and private institutions in Spain, Brussels and Portugal. Suitable
price management and cost reductions have enabled it to achieve 17.6% growth
on its operating income and 21.6% on its attributable profit. Lending
activities have shown a y-o-y increase of 1.6% (4.0% on average balances) and
customer deposits, discounting the effect of the Courts withdrawing their
accounts, went up 6.2% (7.7% in average balances).
In the second quarter, Institutional Banking has won competitive tenders for
paying the wage-roll of the Instituto Nacional de Estadistica (National
Statistics Institute) and the wage-roll and current expenses for the Gerencias
Territoriales (local and regional administration offices for government
departments).
BBVA Portugal, through the Institutional Banking Unit in the country, was
chosen as the euro Treasury Bank for the European Commission, which will now
channel all the collections, payments and other banking services the
Commission needs in Portugal. BBVA is also the euro and dollar Treasury Bank
for Spain, which makes it the financial institution of reference for the
European Commission throughout the Iberian Peninsula.
In the second quarter, Global Markets and Distribution has been operating in an
environment marked by uncertainty around the war in Iraq. Despite this, the
Unit's ordinary revenue has not only maintained last year's levels, but has
actually grown 0.4%. This was fuelled by the results of lending activity in a
more lively market; the currency market, which recorded higher spot and
volatility trading and long-term interest-rate business, where sensitivities
were excellently managed in a highly volatile environment. All of this,
together with a strong cost reduction drive (-20.1%), has given the unit an
operating income growth of 31.2%.
The financial product distribution business, working from Madrid and over the
foreign network, has done an exceptional job in placing the above-mentioned
Government Bonds, establishing a new benchmark for the 10-year public debt
market. It has also successfully arranged several other fixed-return securities
operations. The Markets unit has produced the coverage for the BBVA Ranking II
Garantizado investment fund. It has also structured various operations
requiring dynamic hedging such as those done with the BBVA Partners fund and
Banca Zurich.
This quarter, BBVA adopted the strategic decision to integrate its securities
firm (BBVA Bolsa) into the Bank structure, in order to boost its global
business vision and provide integrated management services for customers. The
BBVA Group will also create an independent firm of analysts, to focus its
research and analytical activities. It will be one of the pioneers in adopting
this kind of structure to guarantee truly independent analysis.
BBVA has consolidated its leadership in currency trading, with a 49% market
share, according to the Bank of Spain's quarterly survey. It is also first in
total volume of trade on the Spanish securities markets to 30th June, with a
13% market share, and second on the Spanish continuous market, with 46,718
million euros traded and a market share of 10.0%. BBVA also holds the leading
position on the Portuguese PSI 20 derivatives market, with a 20% market share
(data to 31st May).
According to the latest data available to 31st March, BBVA Factoring is still
Spain's leader in transactional products. It has 38% of the market and
consolidated leadership in foreign collections and payments, with a 17.7%
market share.
The Business and Property Projects to 30-6-03 was managing a portfolio of 105
industrial holdings, with a book value of over 1.1 billion euros and latent
capital gains of 600 million euros.
As part of its portfolio turnover policy, it has divested 130 million euros
this semester, generating 32 million euros profits. The unit's operating
income was 35 million euros and attributable profit over 62 million, i.e. a
101% y-o-y increase.
America
Income statement
(Millions of euros)
^% at constant
1H03 ^% (YoY) exchange rate 1H02
NET INTEREST INCOME 1,454 (21.4) 15.5 1,850
Net fee income 798 (19.6) 10.4 993
CORE REVENUES 2,252 (20.8) 13.6 2,843
Net trading income 123 (51.5) (27.7) 253
ORDINARY REVENUES 2,375 (23.3) 10.4 3,096
Personnel costs (577) (28.0) 3.7 (801)
General expenses (443) (26.0) 7.0 (599)
GENERAL ADMINISTRATIVE EXPENSES (1,020) (27.1) 5.1 (1,400)
Depreciation and amortization (109) (31.1) (1.5) (158)
Other operating revenues and expenses (72) (27.4) 4.8 (100)
OPERATING PROFIT 1,174 (18.4) 17.2 1,438
Net income from companies under the equity 10 n.m. n.m. (3)
method
Amortization of goodwill - - - -
Net income on Group transactions - n.m. n.m. (3)
Net loan loss provisions (299) (25.3) 10.7 (401)
Extraordinary items (net) and other (144) (4.2) 66.4 (149)
PRE-TAX PROFIT 741 (15.9) 15.8 882
Corporate income tax (180) (20.5) 10.7 (226)
NET INCOME 561 (14.4) 17.6 656
Minority interests (217) (20.6) 10.7 (275)
ATTRIBUTABLE NET INCOME 344 (9.9) 22.4 381
Balance Sheet
(Millions of euros)
30-06-03 ^% (YoY) 30-06-02
Total lending 24,528 (13.5) 28,356
Securities portfolio 26,513 (12.4) 30,274
Cash, interbank & monetary assets 17,358 2.0 17,017
Inter-area positions 264 (79.7) 1,299
Property and equipment 2,294 (17.5) 2,780
Other assets 7,050 (9.7) 7,804
TOTAL ASSETS / LIABILITIES 78,007 (10.9) 87,530
Deposits 48,769 (14.1) 56,769
Debt securities 1,342 (19.0) 1,656
Income for the period 561 (14.4) 656
Equity 4,876 (4.8) 5,119
. Shareholders' funds 3,005 (4.0) 3,129
. Other eligible funds 1,871 (6.0) 1,990
Interbank accounts 13,017 (2.1) 13,291
Inter-area positions 615 (15.9) 731
Other liabilities 8,827 (5.2) 9,308
OTHER CUSTOMER FUNDS MANAGED
. Mutual funds 9,663 (9.2) 10,646
. Pension funds 23,942 0.7 23,772
. Customer portfolios and assets 18,113 1.9 17,781
Relevant ratios
(Percentage)
30-06-03 30-06-02
ROE 22.5 22.2
Cost / income ratio 43.0 45.2
NPL ratio 4.40 3.52
Coverage ratio 191.5 243.3
(1) In the 2003 an amount of 2,600 million euros has been transferred from Retail banking in Spain and Portugal
(Asset management and Private banking).
The America business area includes banks, pension fund managers and insurance
companies in North and South America plus the international private banking
business. The financial statements shown below exclude Argentina which for
special reasons is included in the Corporate Activities Area.
The second quarter witnessed a significant improvement in market sentiment with
regard to Latin-America. Capital began to flow into the region once again,
exchange rates improved significantly against the dollar and interest rates
fell back - in some cases by a considerable amount.
In this environment the quarterly results of the BBVA Group in the region
improved significantly. Attributable profit grew from 157 million euros in the
first quarter to 187 million euros in the second quarter. Attributable profit
of 344 million euros for the half-year were 22.4% higher at constant exchange
rates. However at current exchange rates earnings fell by 9.9% (by 18.9% in the
first quarter) although the performance of the Group's banking business in the
area has almost offset the exchange rate impact, as attributable profit fell by
only 2.9%.
A more useful analysis can be gained by considering the results in local
currency. The effect is the same if we use constant exchange rates and
therefore, from here onwards, variations are expressed in these terms. Viewed
in this manner, net interest income grew by 15.5% and fee income grew by 10.4%.
This reflected favourable business trends. Although earnings on market
operations fell by 27.7% (they were especially high in the first half of 2002),
operating income grew by 17.2%. This was aided by efforts to contain costs,
which grew by 5.1% - far lower than inflation in the region. Thus the
cost/income ratio improved by 220 basis points compared to the previous year,
falling to 43.0%. Growth in provisions eased to 10.7% due to the previously
high levels and to the improvement in asset quality. These factors combined to
increase attributable profit by 22.4%.
With regard to business activity, the BBVA Group recorded higher annual growth
in deposits than in lending. The sum of deposits and mutual funds rose by
11.3% - rises of 7.9% in Mexico and 20.1% in the other countries. Pension funds
under management increased by 20.9%. In year-on-year terms lending in the
entire area grew by 7.5%. In Mexico lending grew by 9.2% (excluding trustee
activities and support programmes) and by 5.7% in the other countries.
At the end of the quarter, the non-performing loan (NPL) ratio for the area was
4.40% although there was a difference between Mexico and the other countries.
In Mexico, the NPL ratio fell to 4.33% (it was 4.69% at March 31st 2003) and
coverage increased to 257.1%. On the other hand, the NPL ratio in other
countries of the region increased to 5.22% (it was 3.85% at March 31st 2003).
This was due to more stringent classification criteria in certain countries
and not to regional deterioration of asset quality. The reclassification did
not require additional provisions and so the coverage ratio for Latin America
excluding Mexico fell to 107.1%. Despite this reduction in the coverage for
certain countries, the overall coverage ratio for Latin America reached
191.5%.
The second quarter in Mexico was characterised by a sharp drop in interest
rates with falls of nearly 350 basis points in short-term rates. This reflected
the low inflation recorded in recent months and the moderate recovery of the
peso against the dollar. Reference rates for banking business in the last days
of the quarter were approaching all-time lows.
Banking business continued to develop favourable especially in regard to
customer funds. In year-onyear terms customer funds increased 7.9% (9.4% on
medium-range balances), driven by the favourable performance of lower-cost
liabilities. Sight deposits and peso savings grew by 15.0%. On the other hand,
fixed deposits were practically flat due to the transfer of funds (especially
the more expensive deposits in private banking) to mutual funds. BBVA Bancomer
consolidated its leadership in this business (especially in fixed income) and
recorded a year-on-year increase of 21.3% in total funds under management.
Consumer lending continued to lead the way with an increase of around 30% over
the previous year while the commercial portfolio started to show signs of
recovery and increased by 9.5%. Total loans, excluding trustee accounts and
support programmes, increased by 9.2% (8.6% on average balances).
America
Income statement
(Millions of euros)
Memorandum item: Mexico Banking in America
^% at ^% at
constant constant
1H03 ^% (YoY) exchange rate 1H03 ^%(YoY) exchange rate
NET INTEREST INCOME 952 (15.6) 18.6 473 (30.8) 13.1
Net fee income 535 (17.7) 15.6 109 (27.7) 12.2
CORE REVENUES 1,487 (16.4) 17.6 582 (30.2) 12.9
Net trading income 71 (51.6) (31.9) 32 (64.4) (36.3)
ORDINARY REVENUES 1,558 (19.1) 13.8 614 (33.6) 8.5
Personnel costs (364) (27.5) 1.9 (160) (32.7) 8.4
General expenses (274) (27.5) 1.9 (136) (27.1) 18.0
GENERAL (638) (27.5) 1.9 (296) (30.2) 12.6
ADMINISTRATIVE
EXPENSES
Depreciation and (68) (29.5) (0.9) (33) (37.9) (4.6)
amortization
Other operating (63) (24.4) 6.3 (9) (39.0) 3.3
revenues and
expenses
OPERATING PROFIT 789 (8.8) 28.2 276 (36.1) 6.3
Net income from 3 n.m. n.m. 1 (85.2) (74.9)
companies under the
equity method
Amortization of - - - - - -
goodwill
Net income on Group - - - - - -
transactions
Net loan loss (240) 9.1 53.4 (59) (67.7) (48.9)
provisions
Extraordinary items (78) 118.6 207.3 (59) (46.7) 1.7
(net) and other
PRE-TAX PROFIT 474 (19.4) 13.3 159 10.5 78.0
Corporate income tax (143) (25.7) 4.4 (26) 27.6 77.3
NET INCOME 331 (16.3) 17.6 133 7.8 78.1
Minority interests (136) (26.7) 3.0 (50) 12.3 105.7
ATTRIBUTABLE NET 195 (7.1) 30.6 83 5.2 64.7
INCOME
Balance Sheet
(Millions of euros)
30-06-03 ^% (YoY) 30-06-03 ^%(YoY)
Total lending 13,746 (15.1) 9,173 (12.8)
Securities portfolio 21,586 (13.8) 4,269 (5.5)
Cash, interbank & 10,569 (0.3) 3,030 38.4
monetary assets
Inter-area positions 2 (78.7) 2 (99.4)
Property and 1,504 (21.9) 672 (8.1)
equipment
Other assets 5,724 (6.3) 1,041 (14.4)
TOTAL ASSETS / 53,131 (11.3) 18,187 (6.7)
LIABILITIES
Deposits 31,807 (18.3) 12,723 0.3
Debt securities 872 (22.2) 470 (12.3)
Income for the 331 (16.3) 133 7.8
period
Equity 2,697 8.6 1,375 (18.5)
. Shareholders' 1,502 20.7 987 (20.9)
funds
. Other eligible 1,195 (3.6) 388 (11.5)
funds
Interbank accounts 10,129 6.0 2,035 (28.0)
Inter-area positions 32 (30.0) 2 (58.8)
Other liabilities 7,263 (1.5) 1,449 (11.7)
OTHER CUSTOMER FUNDS
MANAGED
. Mutual funds 6,547 1.0 880 (26.2)
. Pension funds 6,637 8.4 17,305 (1.9)
. Customer 7,852 (21.0) 136 (18.1)
portfolios and
assets
Relevant ratios
(Percentage)
30-06-03 30-06-03
ROE 25.7 16.3
Cost / income ratio 41.0 48.2
NPL ratio 4.33 5.22
Coverage ratio 257.1 107.1
Attributable profit in Mexico in the second quarter came to 98 million euros
and the total for the first halfyear was 195 million euros. Of this figure, 147
million euros was contributed by banking business, 26 million euros by pension
fund business and 21 million euros came from insurance business. At constant
exchange rates the increase over the previous year was 30.6%.
Despite the important drop in interest rates, net interest income in the second
quarter only fell slightly compared to the first quarter and the total for the
half-year increased by 18.6% compared to the previous year. Customer spreads
continued to be adequate thanks to price management and the reduction in
higher-cost liabilities, which softened the impact of the lower interest rates.
Fee income continued to grow strongly, even after the sharp gains of the
previous two years. Net fee income related to typical banking business grew by
18% in the half-year compared to the same period in 2002. In addition, fee
income and mutual fund income performed well in the second quarter helped by
the increase in managed funds. Fee income from Afore Bancomer (Mexican Pension
Fund Administrator) grew during the half-year to 101 million euros, an
increase of 7.7% over the previous year. This is significant in view of the
economic slowdown and increased unemployment in that country. Altogether fee
income now covers 83.9% of operating expenses, compared to 73.9% a year
earlier.
Cost control continues to be a priority. Continuous improvement in
rationalisation of structures and costs meant that, in local terms, operating
expenses during the first half-year were practically unchanged from the
previous year. It was even possible to absorb the higher cost of the
contribution to the Bank Savings Protection Institute. Thus the cost/income
ratio for BBVA Bancomer continued to improve to 41.0% at the end of the first
half, compared to 45.7% for the same period in 2002.
This meant that operating income continued to grow in line with recent
quarters, reaching 789 million euros in the first half, which was an increase
of 28.2% year-on-year at constant exchange rates.
Highlights from other countries are shown below.
In Venezuela, exchange controls led to a sharp increase in liquidity in
bolivars. There was therefore a corresponding increase in customer funds which
rose 36.5% and this offset the fall in interest rates and in lending. These
changes led to an increase of 19.7% in net interest income. The rest of the
statement contains more positive than negative factors (expenses grew at half
the rate of inflation and provisions declined due to the high rate of coverage
already in place). In the case of negative factors, income due to exchange rate
differences fell drastically following the introduction of fixed exchange
rates. Therefore attributable profit increased by 115% over 2002, reaching 39
million euros.
In Peru, growth of around 12%-13% in business activity, affecting both funds
and lending, and the fall in interest rates and spreads, meant that net
interest income increased by 5.9%. However, higher earnings on market
operations, the curtailment of costs and the reduction in provisioning meant
that attributable profit grew by 135.3% to 9 million euros. Earnings
attributable to the pension fund manager were 6 million euros, an increase of
16.2%.
In Chile, a surge in activity with increases of more than 20% in customer funds
and lending, resulted in a significant gain in market share in 2002 (one
percentage point in loans and nearly two points in deposits). This meant that
operating income grew 46.6% in the first half. Attributable profit doubled
compared to the previous year to 12 million euros. AFP Provida recorded
earnings of 13 million euros, falling 7.8% due to the increase in fees paid for
the higher loss ratio.
Puerto Rico had attributable profit of 20 million euros, which was practically
the same as 2002, despite the context of low interest rates, despite the
existence of certain non-recurrent earnings in the previous year and despite
the increase in the level of taxation.
Attributable profit generated in Panama were 9 million euros, an increase of
44.9%. Attention is also drawn to the improvement in Colombia, which reversed
recent trends and obtained earnings of 4 million euros in the last quarter.
This was the highest figure in the last two years.
Corporate Activities
Income statement
(Millions of euros)
1H03 ^% (YoY) 1H02
NET INTEREST INCOME (62) 11.6 (55)
Net fee income (37) (21.5) (48)
CORE REVENUES (99) (3.7) (103)
Net trading income 124 40.2 89
ORDINARY REVENUES 25 n.m. (14)
Personnel costs (224) 7.5 (209)
General expenses 26 (53.6) 57
GENERAL ADMINISTRATIVE EXPENSES (198) 30.3 (152)
Depreciation and amortization (75) (7.3) (80)
Other operating revenues and expenses (18) 43.3 (13)
OPERATING PROFIT (266) 2.4 (259)
Net income from companies under the equity method 84 (29.1) 118
Of which: Argentina and Brazil 40 32.0 31
Amortization of goodwill (300) 15.7 (259)
Net income on Group transactions 277 (40.5) 465
Net loan loss provisions (47) (76.8) (203)
Extraordinary items (net) and other 71 n.m. (101)
PRE-TAX PROFIT (181) (24.5) (239)
Corporate income tax 237 (29.6) 336
NET INCOME 56 (44.0) 97
Minority interests (55) (38.4) (89)
ATTRIBUTABLE NET INCOME 1 (85.5) 8
Balance Sheet
(Millions of euros)
30-06-03 ^% (YoY) 30-06-02
Total lending (2,731) 34.6 (2,030)
Securities portfolio 24,175 2.8 23,512
Cash, interbank & monetary assets (16,085) 10.1 (14,611)
Inter-area positions 12,254 104.6 5,990
Property and equipment 1,583 (9.7) 1,754
Other assets 7,288 19.2 6,112
TOTAL ASSETS / LIABILITIES 26,484 27.8 20,727
Deposits (2,714) 44.7 (1,876)
Debt securities 24,187 37.5 17,590
Income for the period 56 (44.0) 97
Equity 6,552 (19.6) 8,149
. Shareholders' funds 2,749 (12.4) 3,137
. Other eligible funds 3,803 (24.1) 5,012
Interbank accounts - - -
Inter-area positions - - -
Other liabilities (1,597) (50.6) (3,233)
This area comprises the Group's holdings in large industrial companies, its
strategic financial interests, the activities and earnings of support units
such as the Assets and Liabilities Committee and other activities that, due to
their nature, cannot be assigned to a particular business area. The latter
include country-risk provisions and amortisation of goodwill (except that
related to business projects within the Wholesale Banking Area). This area
also includes the results of Group affiliates in Argentina and Brazil via the
equity method. Their earnings reached 40 million euros in the first half of
2003 (31 million euros in the same period last year).
In the second quarter further progress was made in Argentina towards
normalisation of the financial system. Banking customers recovered their
confidence and a wave of deposits made it possible to relax the corralon
(withdrawal restraint law) without harming bank liquidity. In fact more than
80% of decontrolled funds remained with the banks. This percentage was even
higher at Banco Frances, which captured further deposits and enjoyed
considerable liquidity.
The Large Industrial Companies did not produce any capital gains during the
semester, although greater activity in the derivatives market and the overall
market recovery, generated earnings of 36 million euros in the market
operations line. All in all, their unit reached an attributable profit of 19
million euros.
In the second quarter, the Financial Stakes Unit recorded the pending gain of
127 million euros arising from the take-over of Credit Lyonnais by Credit
Agricole. The total capital gains generated by the transaction were thus 343
million euros. Furthermore the Bradesco operation was finally concluded in the
second quarter with the Group taking a 4.44% stake.
The Assets and Liabilities Committee administers the Group's interest rate and
exchange rate structure as well as its overall liquidity and shareholders'
equity. Attention is drawn to the active position with regard to the structural
risk portfolio for interest rates in 2003. At June 30th 2003 this came to
17,600 million euros after acquisitions of 6,200 million euros had been made
in the first half. In addition, exchange-rate coverage operations extended to
75% of the net asset value in Mexico and Chile. This unit pays the cost of the
coverage. There are also dollar/euro positions to cover the exchange-rate of
the other Latin American countries, so the overall area remains covered at
75%. During the first half the Assets and Liabilities Committee presented
market operations of 99 million euros and the attributable profit was 109
million euros.
The Corporate Activities Area includes operating costs of 279 million euros
generated by the central unit at corporate level (and not allocated to
individual businesses). It also absorbed other costs of an institutional nature
that cannot be assigned to a particular area (corporate IT projects,
retrenchment compensation, etc).
Goodwill amortisation charges in the first half came to 300 million euros. This
was higher than 2002 due to early amortisation of 39 million euros following
the Bradesco operation. As a consequence, the special purpose reserve made in
2002 is no longer required.
Loan loss provisions declined considerably compared to 2002 when the transfer
of Argentina to the Group 5 country-risk category made it necessary to make
additional provisions.
Lastly it should be pointed out that the business areas figures (for Retail,
Wholesale and the Americas) do not eliminate intergroup transactions affecting
these areas. These transactions are considered to be an integral part of the
activity and management of each business. All intergoup transactions
eliminated during consolidation have been assigned to the Corporate Activities
Area and therefore some items on its balance sheet may contain negative
amounts.
INVESTOR RELATIONS
* MADRID 28046 - P(o) Castellana, 81 - 23th floor
Tel: 34-91 537 52 40/73 20 and 34-91 374 42 22
Fax: 34-91 537 85 12
e-mail: inversores@grupobbva.com
* NEW YORK - 1345 Ave. of the Americas, 45th floor, NY 10105
Tel: 1-212-728 16 60 - Fax: 1-212-333 29 05
e-mail: julissa.bonfante@bbvany.com
INTERNET INFO (http://www.bbva.com)
This information is provided by RNS
The company news service from the London Stock Exchange
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