BBVA in 2012

Definition of the aggregateCorporate Activities basically includes the costs of the headquarters with strictly corporatefunctions, certain allocations to provisions such as early retirements and others of a corporatenature. The area also performs financial management functions for the Group as a whole,essentially management of asset and liability positions for interest rates in the euro-denominatedbalance sheet and for exchange rates, as well as liquidity and capital management functions. Themanagement of asset and liability interest-rate risk in currencies other than the euro is recordedin the corresponding business areas. Finally, it includes certain portfolios and assets not linkedto customers, with their corresponding revenues and costs, such as the industrial and financialholdings and the Group’s real-estate assets in Spain assigned to holding services and foreclosed orpurchased assets.EarningsThe most relevant aspects of earnings in this area in 2012 are summarized below:• Net interest income was slightly less negative than in 2011, at –€697m compared with–€614m, due to the increased wholesale-funding costs arising from the current situation inthe euro zone. However, all the issues have been placed at below the price of the Spanishsovereign.• Favorable performance of NTI, basically as a result of the capital gains registered on therepurchase of securitization bonds in the second quarter of 2012 and of subordinated debtin the fourth quarter. As a result, there has been significant growth of 89.7% in NTI in 2012 to€828m.• Gross income is a negative €69m (–€8m a year ago).• Operating expenses continue to reflect the Group’s investment effort in staff training,technology, brand and infrastructure. They increased by 13.5% year-on-year to €1,107m.• There has been a significant increase in provisions to absorb the impairment on the real-estateand foreclosed assets in Spain, though this was offset in part by the badwill generated from theUnnim operation. As a result, provisions and other gains/losses are a negative €1,569m(– €1,049m in 2011).• As a result, the net attributable profit in 2012 is –1,649m, compared with –€1,405m in 2011.This more negative performance compared with the previous year is mainly due to theaforementioned provisioning effort.Asset/Liability ManagementThe Assets and Liabilities Management unit is responsible for managing structuralinterest-rate and foreign-exchange positions, as well as the Group’s overall liquidity andshareholders’ funds.Liquidity management helps to finance the recurring growth of the banking business atsuitable maturities and costs, using a wide range of instruments that provide access to alarge number of alternative sources of finance. A core principle in the BBVA Group’s liquiditymanagement continues to be to encourage the financial independence of its subsidiariesin the Americas. This aims to ensure that the cost of liquidity is correctly reflected in priceformation and that there is sustainable growth in the lending business. Short-term andlong-term wholesale financial markets were affected by heightened uncertainty in 2012,showing mixed performance:Corporate Activities197