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

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- In the denominator, the average number of shares in circulation is increased by the estimated number of shares after the conversion if done that day, generating the so-called "Average adjusted number of shares” in the table above. As of June 30, 2010 and 2009, except for the aforementioned convertible bonds, there were no other financial instruments, share option commitments with employees or discontinued transactions that could potentially affect the calculation of the basic earnings per share. 6. BASIS AND METHODOLOGY FOR SEGMENT REPORTING Segment reporting represents a basic tool in the oversight and management of the Group’s various businesses. The Group compiles reporting information on as disaggregated a level as possible, and all data relating to the businesses these units manage is recognized in full. These disaggregated units are then amalgamated in accordance with the organizational structure preordained by the Group into higher level units and, ultimately, the business segments themselves. Similarly, all the companies making up the Group are also assigned to the different segments according to their activity. Once the composition of each business segment has been defined, certain management criteria are applied, noteworthy among which are the following: • Economic capital: Capital is allocated to each business based on capital at risk (CaR) criteria, in turn predicated on unexpected loss at a specific confidence level, determined as a function of the Group’s target capital ratio. This target level is applied at two levels: the first is adjusted core capital, which determines the allocated capital. The Bank uses this amount as a basis for calculating the return generated on the equity in each business (ROE). The second level is total capital, which determines the additional allocation in terms of subordinate debt and preferred securities. The calculation of the CaR combines credit risk, market risk, structural risk associated with the balance sheet equity positions, operational risk, fixed assets and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel II Capital Accord, with economic criteria prevailing over regulatory ones. Due to its sensitivity to risk, CaR is an element linked to management policies in the businesses themselves. It standardizes capital allocation between them in accordance with the risks incurred and makes it easier to compare profitability. In other words, it is calculated in a way that is standard and integrated for all kinds of risks and for each operation, balance or risk position, allowing its riskadjusted return to be assessed and an aggregate to be calculated for the return by client, product, segment, unit or business area. • Internal transfer prices: the calculation of the net interest income of each business is performed using rates adjusted for the maturities and rate reset clauses in effect on the various assets and liabilities making up each unit’s balance sheet. The allocation of profits across business units is performed at market prices. • Allocation of operating expenses: Both direct and indirect expenses are allocated to the segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate/institutional expenses incurred. • Cross selling: On certain occasions, consolidation adjustments are made to eliminate overlap accounted for in the results of one or more units as result of cross-selling focus. Description of the Group’s business segments The business areas described below are considered the Group's business segments. The composition of the Group's business areas as of June 30, 2010 was as follows: • Spain and Portugal, which includes: the Retail Banking network in Spain, including the segments of individual customers, private banking and small business and retailer banking in the domestic market; Corporate and Business Banking, which encompasses the segments of SMEs, corporations, institutions and developers in the domestic market; and all other units, among which are Consumer Finance, BBVA Seguros and BBVA Portugal. • Mexico: includes the banking, pensions and insurance businesses in the country. 44
• South America: includes the banking, pensions and insurance businesses in South America. • United States: includes the banking and insurance businesses in the U.S., as well as those in Puerto Rico. • Wholesale Banking & Asset Management (“WB&AM”), made up of: Corporate and Investment Banking, which includes the work of offices in Europe and Asia with large corporations and companies; Global Markets, responsible for liquidity assets management and distribution services in the same markets; Asset Management, which includes the management of investment and pension funds in Spain; Project Management, which includes the development of long-term business projects and private equity business developed through Valanza; and Asia, with the participation in the CITIC Group. In addition, WB&AM is present in the above businesses both in Mexico and South America, but its activity and results are included in those business areas for the purposes of these consolidated financial statements. Corporate Activities: performs management functions for the Group as a whole, essentially management of asset and liability positions in euro-denominated interest rates and in exchange rates, as well as liquidity and capital management functions. The management of asset and liability interest-rate risks in currencies other than the euro is recognized in the corresponding business areas. It also includes the Industrial and Financial Holdings unit and the Group’s non-international real estate businesses. In 2010, certain changes were made in the criteria applied in 2009 in terms of the composition of some of the different business areas, such as: • The United States and WB&AM: in order to give a global view of the Group's business in the United States, we decided to include the New York office, formerly in WB&AM, in the United States area. This change is consistent with BBVA’s current method of reporting its business units. • South America: The adjustment for the hyperinflation is included in 2010 in the accounting statements for Banco Provincial (Venezuela); this will also be carried out for the 2009 statements to make them comparable. At year-end 2009, said impact was included under Corporate Activities. The data for 2009 have been reworked to ensure that the different years are comparable. The total breakdown of the Group’s assets by business areas as of June 30, 2010 and December 31, 2009 was as follows: Millions of Euros Total Assets by Bussiness Areas June December 2010 2009 Spain and Portugal 219,440 215,823 Mexico 73,758 62,855 South America 48,631 44,378 The United States 75,011 77,896 WB&AM 137,454 106,563 Corporate Activities 14,623 27,550 Total 568,917 535,065 45
Page 1: BANCO BILBAO VIZCAYA ARGENTARIA, S.
Page 4 and 5: 27. COMMON STOCK...................
Page 6 and 7: Translation of consolidated financi
Page 8 and 9: Millions of Euros LIABILITIES AND E
Page 10 and 11: Millions of Euros June June Notes 2
Page 16 and 17: BANCO BILBAO VIZCAYA ARGENTARIA, S.
Page 18 and 19: The BBVA Group ICFR Model is summar
Page 20 and 21: 2.2. ACCOUNTING POLICIES AND VALUAT
Page 22 and 23: - Other financial instruments The f
Page 24 and 25: In the case of unsecured transactio
Page 26 and 27: 2.2.2. TRANSFERS AND DERECOGNITION
Page 28 and 29: The fair value of non-current asset
Page 30 and 31: 2.2.7. BUSINESS COMBINATIONS The re
Page 32 and 33: insurees, as the case may be, based
Page 34 and 35: • The discount rate used is deter
Page 36 and 37: 2.2.16. FOREIGN CURRENCY TRANSACTIO
Page 38 and 39: 2.2.22. CONSOLIDATED STATEMENTS OF
Page 40 and 41: IFRIC 17 - Distributions of non-cas
Page 42 and 43: The Group’s activity is mainly lo
Page 44 and 45: Changes in the Group The most signi
Page 48 and 49: The breakdown of the consolidated n
Page 50 and 51: Management & Asset Allocation, Risk
Page 52 and 53: Maximum exposure to credit risk The
Page 54 and 55: debtors includes mortgages, cash gu
Page 56 and 57: Policies and procedures for prevent
Page 58 and 59: December 2009 Less than 6 Months Pa
Page 60 and 61: 7.2 MARKET RISK a) Market Risk Mark
Page 62 and 63: Below are the average interest rate
Page 64 and 65: 7.4. RISK CONCENTRATIONS Below is p
Page 66 and 67: Determining the fair value of finan
Page 68 and 69: Financial Instruments LEVEL 2 Valua
Page 70 and 71: The changes in the six months ended
Page 72 and 73: 10.2. DEBT SECURITIES The breakdown
Page 74 and 75: 11. OTHER FINANCIAL ASSETS DESIGNAT
Page 76 and 77: 12.3. EQUITY INSTRUMENTS The breakd
Page 78 and 79: 13.2. LOANS AND ADVANCES TO CREDIT
Page 80 and 81: Millions of Euros December 2009 Amo
Page 82 and 83: December 2009 Currency Risk Interes
Page 84 and 85: 17.1. ASSOCIATES The following tabl
Page 86 and 87: 17.3. INFORMATION ABOUT ASSOCIATES
Page 88 and 89: The main activity of the Group is c
Page 90 and 91: 21.3 RECONCILIATION The reconciliat
Page 92 and 93: 23. FINANCIAL LIABILITIES AT AMORTI
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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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APPENDIX I. FINANCIAL STATEMENTS OF
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Millions of Euros LIABILITIES AND E
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Millions of Euros (Continued) June
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APPENDIX II. Additional information
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APPENDIX III. Additional informatio
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APPENDIX V. Changes and notificatio
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APPENDIX VI. Fully consolidated sub
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APPENDIX VIII. Breakdown of the mos
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Outsanding as of June 30, 2010 of S
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APPENDIX IX. Consolidated balance s
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Diluted earnings per share Early re
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Other financial assets/liabilities
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BANCO BILBAO VIZCAYA ARGENTARIA, S.
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The explanations of the changes in
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4. SUMMARIZED INTERIM CONSOLIDATED
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Spain and Portugal Millions of Euro
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Mexico Millions of Euros Mexico Jun
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South America Millions of Euros Sou
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The United States Millions of Euros
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Wholesale Banking and Asset Managem
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The changes in the principal headin
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Aggregating Tier I and Tier II, as
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