BBVA in 2012

The main reason for better earnings is the improvement in asset quality, which has had a positiveimpact on loan-loss provisions, as it has freed up loan-loss reserves. However, revenue growth hasbeen limited due to the current environment of low interest rates and a relatively flat curve whichincreased pressure on net interest income in the sector.In lending sticks out the corporate and industrial sectors which continued to perform well,despite the uncertainty regarding fiscal policy. This growth is even clearer in the fourth quarterin commercial real estate (companies with collateral) and in credit card balances (due to theChristmas holiday season). Lending conditions are likely to remain strict in 2013, particularly forresidential loans, in light of the high financial burden of households.The main indicators of asset quality show a positive trend. However, the NPA ratio in theresidential portfolio rose slightly in the third quarter of 2012.Deposits remained robust throughout the year, helped by the lack of high-yielding investmentalternatives and the recent uncertainty regarding the fiscal cliff.The dollar’s final exchange rate against the euro depreciated on a year-on-year basis, butthe average rates appreciated year-on-year. Therefore, the impact of the currency on theGroup’s balance sheet and business activity is negative, but positive on earnings. To assist inthe understanding of the area’s business figures for the year, unless otherwise indicated, thecomments below refer to percentage changes at constant exchange rates.Management prioritiesIn 2012, the United States has focused on completing the transformation process toward acustomer-centric organization and thus on laying the foundations for future growth.The main highlight in the year has been the successful implementation of the new bankingplatform in all BBVA Compass branches in the 7 states where it operates. This complexconversion process was executed seamlessly and according to the originally planned timeline.It has received very positive feedback from users and customers. Benefits include an enhancedcustomer experience through differentiated, efficient, faster and customer-centric processes.From the point of view of risks, and in order to strengthen their monitoring and control,a corporate risk management (ERM) program has been implemented which includes theupgrade and enhancement of several tools, processes and controls. A new commercial lendingorigination platform for SMEs, a new loan grading system and several enhanced processes andmethodologies designed to better estimate and forecast of loan-loss provisions and economiccapital needs under different scenarios are just some examples of the key accomplishmentsachieved in 2012.In 2012 BBVA Compass began the migration to the new Alnova IT platform in order to build andstrengthen the franchise in the country. The migration of the deposit module was completedbefore the end of the year. In addition to increased levels of internal control and providing moreproductive and efficient processes, the platform allows BBVA Compass to evolve from aproduct-oriented organization toward a customer-centric institution. It also enables the bankto be the first in its area of influence to process information in real time. BBVA Compass hasalso continued to use sponsorships to reinforce the brand awareness and generate businessopportunities in all the segments. The inauguration of the BBVA Compass Stadium in Houstonis an example of this. Brand recognition has increased considerably in Southeast Texas followingthe inauguration of this stadium and the partnership with the Houston Dynamo, a Major LeagueSoccer team. BBVA Compass has also continued to make the most of its relationship withthe NBA to promote the franchise in all the markets. In addition, it has created local business188 Business areas