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

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debtors includes mortgages, cash guarantees and other collateral such as pledged securities. Other kinds of credit enhancements may be put in place such as guarantees. - Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. • Held-to-maturity investments: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument. • Hedging derivatives: Credit risk is minimized through contractual netting agreements, where positiveand negative-value derivatives with the same counterparty are settled at their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction. • Financial guarantees, other contingent exposures and drawable by third parties: They have the counterparty’s personal guarantee and, in some cases, the additional guarantee from another credit institution with which a credit derivative has been subscribed. The Group’s collateralized credit risk as of June 30, 2010 and December 31, 2009, excluding balances deemed impaired, is broken down in the table below: Millions of Euros Collateralized Credit Risk June December 2010 2009 Mortgage loans 132,732 127,957 Operating assets mortgage loans 3,976 4,050 Home mortgages 106,106 99,493 Rest of mortgages 22,650 24,414 Secured loans, except mortgage 22,675 20,917 Cash guarantees 265 231 Secured loan (pledged securities) 528 692 Rest of secured loans 21,882 19,994 Total 155,407 148,874 In addition, the derivatives carry contractual, legal compensation rights that have effectively reduced credit risk by €35,163 million as of June 30, 2010 and by €27,026 million as of December 31, 2009. As of June 30, 2010, specifically in relation to mortgages, the average amount pending loan collection represented 54% of the collateral pledged (54% as of December 31, 2009). Credit quality of financial assets that are neither past due nor impaired BBVA has ratings tools that enable it to rank the credit quality of its operations and customers based on a scoring system and to map these ratings to probability of default (“PD”) scales. To analyze the performance of PD, the Bank has a series of historical databases that house the pertinent information generated internally. The scoring tools vary by customer segment (companies, corporate clients, SMEs, public authorities, etc.). Scoring is a decision model that contributes to both the arrangement and management of retail type loans: consumer loans, mortgages, credit cards for individuals, etc. Scoring is the tool used to decide to whom a loan should be assigned, what amount should be assigned and what strategies can help establish the price, because it is an algorithm that sorts transactions in accordance with their credit rating. Rating tools, as opposed to scoring tools, do not assess transactions but focus on customers instead: companies, corporate clients, SMEs, public authorities, etc. For wholesale portfolios where the number of defaults is very low (sovereigns, corporates, financial entities) the internal ratings models are fleshed out by benchmarking the statistics maintained by external rating agencies (Moody's, Standard & Poor’s and Fitch). To this end, each year the Bank compares the PDs compiled by the agencies at each level of risk rating and maps the measurements compiled by the various agencies to the BBVA master rating scale. Once the probability of default for the transactions or customers has been determined, the so-called business cycle adjustment starts. This involves generating a risk metric outside the context estimate, seeking 52
to gather information that represents behavior for an entire economic cycle. This probability is linked to the Group's master rating scale. BBVA maintains a master rating scale with a view to facilitating the uniform classification of the Group’s various asset risk portfolios. The table below depicts the abridged scale which groups outstanding risk into 17 categories as of June 30, 2010: Internal Rating Probability of default (basic points) Reduced List (17 groups) Average Minimum from >= Maximum AAA 1 - 2 AA+ 2 2 3 AA 3 3 4 AA- 4 4 5 A+ 5 5 6 A 8 6 9 A- 10 9 11 BBB+ 14 11 17 BBB 20 17 24 BBB- 31 24 39 BB+ 51 39 67 BB 88 67 116 BB- 150 116 194 B+ 255 194 335 B 441 335 581 B- 785 581 1,061 C 2,122 1,061 4,243 The table below outlines the distribution of exposure including derivatives by internal ratings, to financial entities and public institutions (excluding sovereign risk), of the Group’s main institutions as of June 30, 2010 and December 31, 2009: Credit Risk Distribution by Internal Rating June December 2010 2009 AAA/AA+/AA/AA- 22.74% 19.55% A+/A/A- 29.20% 28.78% BBB+ 7.70% 8.65% BBB 6.34% 7.06% BBB- 6.72% 6.91% BB+ 4.91% 4.46% BB 7.13% 6.05% BB- 5.65% 6.45% B+ 5.19% 5.38% B 3.25% 3.34% B- 0.95% 0.88% CCC/CC 0.22% 2.49% Total 100.00% 100.00% 53
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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 46 and 47: - In the denominator, the average n
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 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
Page 94 and 95: Millions of Euros December 2009 Dem
Page 96 and 97: The item “Subordinated Liabilitie
Page 98 and 99: The breakdown of the commitments pe
Page 100 and 101: June 30, 2010 and December 31, 2009
Page 102 and 103: 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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