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

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The changes in the principal headings of the income statement in this business area were: • The balance of "Net interest income" for the six months ended June 30, 2010 was €138 million, a 25.6% decrease from the €186 million recorded for the six months ended June 30, 2009. This fall is mainly due to the exhaustion of decline in interest rates in the euro zone. • The balance of “Net fees and commissions" for the six months ended June 30, 2010 was -€91 million, an increase of 17.8% in fees, compared with the figure of -€77 million for the six months ended June 30, 2009. • The balance of “Net gains (losses) on financial assets and liabilities and net exchange differences” for the six months ended June 30, 2010 was €401 million, compared with €79 million recorded for the six months ended June 30, 2009, primarily as a result of rotation in the sovereign bond portfolio, taking advantage of the volatile markets to achieve results. • The balance of “Other operating income and expenses” for the six months ended June 30, 2010 was €163 million, a 30.1% decrease over the €233 million recorded for the six months ended June 30, 2009. As a result of the foregoing, the balance of “Gross income” for the six months ended June 30, 2010 was €611 million, an increase of 45.3% over the €420 million recorded for the six months ended June 30, 2009. • The balance "Operating expenses” for the six months ended June 30, 2010 was €410 million, an increase of 18.3% on the €346 million recorded for the six months ended June 30, 2009, mainly due to the costs of developing the new technological platform. As a result of the foregoing, the "Operating income" for the six months ended June 30, 2010 was €201 million compared with the €74 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 €701 million, compared with €181 million recorded for the six months ended June 30, 2009, mainly as a result of increased loan-loss provisions determined collectively thanks to the Group’s operating result, with the goal of continuing to improve BBVA’s coverage. • The balance of "Provisions (net)” and “Other gains (losses)” for the six months ended June 30, 2010 amounted to -€358 million, an increase of 27.9% on the -€280 million recorded for the six months ended June 30, 2009, mainly due to continuing provisions for foreclosed assets and real estate assets designed to maintain coverage at an adequate level. As a result of the foregoing, the balance of “Income before tax” for the six months ended June 30, 2010 was €858 million, compared with a loss of €386 million recorded for the six months ended June 30, 2009. • The balance of “Income tax” for the six months ended June 30, 2010 was €260 million, compared with €235 million recorded for the six months ended June 30, 2009. As a result, “Net income” for the six months ended June 30, 2010 was a loss of €598 million, compared with a loss of €151 million recorded for the six months ended June 30, 2009. • The "Net income attributed to non-controlling interests" for the six months ended June 30, 2010 was €12 million, compared with a loss of €25 million recorded for the six months ended June 30, 2009. Finally, the balance of “Net income attributed to parent company” for the six months ended June 30, 2010 was a loss of €586 million, compared with a loss of €176 million recorded for the six months ended June 30, 2009. 18
6. RISK EXPOSURE The BBVA Group’s system of risk management and risk exposure is described in Note 7 “Risk exposure” in the accompanying interim consolidated financial statements. Exposure to subprime credit risk The application across the BBVA Group of prudent risk policies has resulted in very limited exposure to subprime credit risk with respect to mortgage loans, mortgage-backed securities and other securitized financial instruments originated in the United States. The Group’s banks have not originated risk products specifically for the subprime segment. However, the financial crisis that began in the United States in 2007, and the consequent decline in economic conditions and increased inability to pay on the part of certain borrowers, has implied a downgrade in their respective credit ratings. It is important to note, however, that the classification of a financial instrument as a subprime credit risk does not necessarily signify that such financial instrument is either past due or impaired or that we have not assigned such financial instrument a “high” or “very high” estimate of recoverability. As of June 30, 2010, the amount of home mortgage credit risk transactions corresponding to customers in the United States whose credit quality had dropped below the “subprime” level totaled €592 million, 0.17% of the Group’s total customer credit risk (€513 million and 0.16% respectively as of December 31, 2009). Of this amount, as of June 30, 2010, only €65 million were past due or impaired (€66 million as of December 31, 2009). In addition, as of June 30, 2010, the net carrying amount of structured credit instruments with underlying subprime assets amounted to €14 million (see Note 8), of which 83% have a high credit rating from the main rating agencies operating in the market (€13 million and 85% respectively, as of December 31, 2009). Structured credit instruments As of June 30, 2010, the carrying amount of structured credit instruments in the Group was €3,644 million, of which the majority is guaranteed by agencies and insurance companies. Of this total, €171 million were recognized under “Financial assets held for trading”, €361 million under “Financial instruments at fair value through profit or loss” and €3,112 million under “Available for sale financial assets”. The valuation methods of this kind of financial product are described in Note 8, “Fair value of financial instruments” in the accompanying consolidated financial accounts. 7. THE GROUP'S CAPITAL BASE The BBVA Group’s capital base, calculated according to rules defined in accordance with the Basel II capital accord, was €39,286 million as of June 30, 2010, 0.4% down on the figure as of December 31, 2009, mainly due to the greater contribution of Core Capital. The risk-weighted assets (APR) have increased 6.4% over the period to €309,617 million as of June 30, 2010, due mainly to the appreciation of currencies on the Group’s non-euro positions. Excess of capital resources over the 8.0% of risk-weighted assets required by the regulation stood at €14,517 million. Core capital as of June 30, 2010 stood at €24,929 million, more than €1,738 million higher than the figure as of December 31, 2009, due primarily to withheld attributable profit, which has absorbed the impact of the purchase of the additional share of CNCB during the half year. It represents 8.1% of risk-weighted assets, compared to 8.0% as of December 31, 2009. Adding preference shares to core capital, Tier I as of June 30, 2010 stood at €28,351 million, 9.2% of the risk-weighted assets. This is a fall of 20 basis points on the figure as of December 31, 2009. Preference shares amount to 18.4% of the total core capital (Tier I). Other eligible capital (Tier II) mainly consists of subordinated debt, latent capital gains and excess generic provisions up to the limit set forth in the regulations. At June 30, 2010, Tier II stood at €10,935 million, i.e. 3.5% of risk-weighted assets. The changes in Tier I and Tier II can basically be explained by the increase in deductions in the holdings in financial institutions due to purchase of the additional holding in CNCB and the reduction in latent gains as a result of the behavior of the financial markets during the period. 19
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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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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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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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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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45. OTHER OPERATING INCOME AND EXPE
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linked to the movement of the Total
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48. PROVISIONS (NET) The net allowa
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The table below breaks down the mai
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The amount disposed of the loans gr
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BBVA executive team. It is to end o
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Commission (CNMV) announced the lif
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BANCO BILBAO VIZCAYA ARGENTARIA, S.A. AND ... - BBVA

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