BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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The explanations of the changes in the principal items in the accompanying consolidated income statements are as follows: • “Net interest income” for the six months ended June 30, 2010 totaled €6,937 million, an 1.2% increase over the €6,858 million recorded for the six months ended June 30, 2009. This increase is mainly due to pricing policies and the management of customer spreads, designed to transfer the greater cost of credit and liquidity risk to asset operations, contain the cost of funds and optimize their structure, and select products or segments with a greater risk-adjusted return. The increase is also due to the management of structural interest-rate and liquidity risks in the euro balance sheet, characterized by anticipation and governed by prudential criteria designed to generate a sound balance sheet, with a low level of leverage and reduced risk profile. • The balance of “Dividend income” for the six months ended June 30, 2010 was €257 million, a 3.4% increase over the €248 million recorded for the six months ended June 30, 2009. This increase was the result of the increased dividends received from Telefónica. It was partly offset by the fact that the dividends of some Spanish companies, which were normally paid in January each year, were paid this time in December 2009. • The balance of “Share of profit or loss of entities accounted for using the equity method” for the six months ended June 30, 2010 was €151 million, compared with €27million recorded for the six months ended June 30, 2009, mainly due to the increase in the contribution of China National Citic Bank (CNCB). • The balance of “Net fees and commissions” the six months ended June 30, 2010 was €2,272 million, a 4.2% increase over the €2,181 million recorded for the six months ended June 30, 2009, due stable fees for mutual funds and pensions, and the increase of fees linked to banking services and asset custody. • The balance of “Net gains (losses) on financial assets and liabilities and net exchange differences” for the six months ended June 30, 2010 was €1,123 million, a 40.6% increase over €799 million recorded for the six months ended June 30, 2009, due mainly to the positive effect of the devaluation of the bolivar on some positions and the management of COAP portfolios to adjust their duration and take advantage of market volatility in sovereign debt markets to make gains through the sale of certain financial instruments. • The balance of “Other operating income and expenses” for the six months ended June 30, 2010 was €140 million, a 47.9% decrease of €268 million recorded for the six months ended June 30, 2009, mainly as a result of the adjustment for the hyperinflation in Venezuela. There was also an effect from the provision to deposit guarantee funds made in various countries in which the Group operates. As a result, the balance of “Gross income” for the six months ended June 30, 2010 was €10,880 million, a 4.8% increase from €10,380 million for the six months ended June 30, 2009. The balance of "Operating expenses” ” for the six months ended June 30, 2010 amounted €4,380 million, a 7.1% increase compared with €4,088 million for the six months ended June 30, 2009, partly due to exchange-rate effects. This increase was also the result of greater rental costs following the sale and leaseback operation on properties in Spain carried out in September 2009; and on the positive outlook for the Group's business, which has maintained the transformation plans and boosted investment in growth plans that are being implemented in different units. As a result of the foregoing, the "Operating income" for the six months ended June 30, 2010 was €6,500 million, a 3.3% increase from the 6,292 million recorded for the six months ended June 30, 2009. • The balance of “Impairment losses on financial assets (net)” for the six months ended June 30, 2010 was €2,419 million, a 24.4% increase over the €1,945 million recorded for the six months ended June 30, 2009, mainly as a result of increased loan-loss provisions determined collectively which have been made to increase the Group's coverage. • The balance of "Provisions (net)” for the six months ended June 30, 2010 was €270 million, an increase of 76.8% on the €153 million for the six months ended June 30, 2009, mainly due to greater provisions determined collectively for contingent exposures and commitments. • The balance of “Other gains (losses)" for the six months ended June 30, 2010 was a loss of €160 million, a fall of 16.7% on the loss of €192 million for the six months ended June 30, 2009. This figure 4
includes the loan-loss provisions for foreclosures and real estate assets that have been carried out to maintain the coverage of these assets after the deterioration related to the real-estate business. • As a result, the balance of “Income before tax” for the six months ended June 30, 2010 was €3,651 million, an increase of 8.8% over the €4,003 million for the six months ended June 30, 2009. • The balance of “Income tax” for the six months ended June 30, 2010 was €941 million, a fall of 2.1% on the €961 million for the six months ended June 30, 2009. The slight increase was mainly due to the rise in the tax rate in Mexico starting as of January 1, 2010. As a result, “Net income for the six months ended June 30, 2010 was €2,710 million, a fall of 10.9% on the €3,042 million for the six months ended June 30, 2009. • “Net income attributed to non-controlling interests" for the six months ended June 30, 2010 was €183 million, a fall of 24.7% on the €243 million for the six months ended June 30, 2009, mainly due to the effect of the appreciation in the euro against foreign currencies. Finally, the balance of “Net income attributed to parent company” for the six months ended June 30, 2010 was €2,527 million, a fall of 9.7% on the €2,799 million for the six months ended June 30, 2009. Earnings per share (EPS) for the six months ended June 30, 2010 were €0.66 per share, a fall of 13.3% on the €0.76 per share for the six months ended June 30, 2009. The fall is greater than that registered in “Net income attributed to parent company”, mainly due to the effect of the issue of convertible bonds in September 2009 (see Note 5). Return on equity (ROE) for the six months ended June 30, 2010 was 17.9%, with a fall on the 21.5% for the six months ended June 30, 2009, but an increase on the figure of 16.0% at the close of 2009. The return on total average assets (ROA) for the six months ended June 30, 2010 was 0.99%, less than the 1.12% for the six months ended June 30, 2009, but an increase on the figure of 0.85% at the close of 2009. The efficiency ratio for the six months ended June 30, 2010 was 40.3%, compared with the figure of 39.4% for the six months ended June 30, 2009 and on the 40.4% at the close of 2009. 5
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BANCO BILBAO VIZCAYA ARGENTARIA, S.
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27. COMMON STOCK...................
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Translation of consolidated financi
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Millions of Euros LIABILITIES AND E
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Millions of Euros June June Notes 2
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BANCO BILBAO VIZCAYA ARGENTARIA, S.
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The BBVA Group ICFR Model is summar
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2.2. ACCOUNTING POLICIES AND VALUAT
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- Other financial instruments The f
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In the case of unsecured transactio
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2.2.2. TRANSFERS AND DERECOGNITION
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The fair value of non-current asset
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2.2.7. BUSINESS COMBINATIONS The re
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insurees, as the case may be, based
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• The discount rate used is deter
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2.2.16. FOREIGN CURRENCY TRANSACTIO
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2.2.22. CONSOLIDATED STATEMENTS OF
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IFRIC 17 - Distributions of non-cas
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The Group’s activity is mainly lo
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Changes in the Group The most signi
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- In the denominator, the average n
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The breakdown of the consolidated n
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Management & Asset Allocation, Risk
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Maximum exposure to credit risk The
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debtors includes mortgages, cash gu
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Policies and procedures for prevent
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December 2009 Less than 6 Months Pa
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7.2 MARKET RISK a) Market Risk Mark
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Below are the average interest rate
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7.4. RISK CONCENTRATIONS Below is p
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Determining the fair value of finan
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Financial Instruments LEVEL 2 Valua
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The changes in the six months ended
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10.2. DEBT SECURITIES The breakdown
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11. OTHER FINANCIAL ASSETS DESIGNAT
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12.3. EQUITY INSTRUMENTS The breakd
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13.2. LOANS AND ADVANCES TO CREDIT
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Millions of Euros December 2009 Amo
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December 2009 Currency Risk Interes
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17.1. ASSOCIATES The following tabl
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17.3. INFORMATION ABOUT ASSOCIATES
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The main activity of the Group is c
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21.3 RECONCILIATION The reconciliat
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23. FINANCIAL LIABILITIES AT AMORTI
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Millions of Euros December 2009 Dem
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The item “Subordinated Liabilitie
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The breakdown of the commitments pe
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June 30, 2010 and December 31, 2009
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Post-employments Benefits in Spain
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Post-Employment Actuarial Hypothesi
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during which to increase the common
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Reserves Assigned to the Consolidat
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Millions of Euros Valuation Adjustm
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on equity (ROE) by each business; a
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39. INTEREST, INCOME AND SIMILAR EX
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39.3. AVERAGE RETURN ON INVESTMENTS
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41. SHARE OF PROFIT OR LOSS OF ENTI
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BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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