Earnings Jan - June 2001
Banco Bilbao Vizcaya Argentaria SA
24 July 2001
July 24, 2001
Earnings January-June 2001
BBVA INCREASES ATTRIBUTABLE PROFIT 24.1% TO
1,280 MILLION EUROS (212,955 MILLION PESETAS)
> Recurrent business is the basis for growth in earnings, with increases
exceeding 25% in all relevant margins
> Operating Income grew 30%, Business Income rose 25% and provisions doubled
capital gains generated
> The cost-control policy continued improving the efficiency ratio to 51.2%
> Growing contribution of BBVA America to the Group's earnings
> BBVA improved business growth rhythm, after concluding the integration, and
has gained market share in mutual funds
BBVA Group has obtained an attributable profit of 1,280 million euros (212,955
million pesetas) in the first half of 2001, up 24.1% on the same period of 2000.
These earnings, based on an increase in recurrent business, a strict control of
expenses and a prudent policy on provisions, are on track for satisfactory
fulfillment of the goals assumed by the Group for this year.
Earnings for the first six months of the year are characterized by double-digit
growth in all margins (Operating Income grew 30%, and Business Income 25%), the
continued improvement in their quality, the growing contribution of BBVA America
to the Group's earnings and the significant recovery of activity in all
businesses, after having culminated the operating integration of all branches
and central services of the bank.
The Group's efficiency has continued to improve in the period to 51.2%, versus
53.3% for the whole of 2000. The return on assets (ROA) rose to 1.13%, and the
return on equity (ROE) held at around 20%, after having assumed the effect of
the rights issue carried out in mid-2000.
Within the traditional policy of maintaining a prudent and solid balance sheet,
BBVA has earmarked more than 1,382 million euros to provisions, more than twice
the capital gains generated on the sale of various industrial holdings.
With regard to business activity, the second quarter of the year marked an
inflection point in the evolution of the most relevant magnitudes of business
with customers in the domestic market. Having culminated the integration stage,
significant increases were recorded in new mortgage and consumer credit
transactions, market share was once again gained in mutual funds, and savings
capture increased.
The development of the principal lines of action of Project Cre@ also forged
firmly ahead;
^ Development of a new banking model; 80,000 new customers have signed onto
Internet banking services.
^ Expansion in Latin America; The stake in BBVA Bancomer in Mexico was increased
to 48%, and 95.2% was attained in Banco Ganadero de Colombia.
^ Expansion in new businesses; a new stimulus was given to the BBVA-Telefonica
alliance, with Terra taking a stake in the capital of Uno-e, Telefonica entry
into BBVA Ticket, and BBVA'S entry into Atento, with 9%. An agreement was also
reached to integrate the Movilpago and Pagomovil projects, and new e-commerce
portals were launched.
^ Active business management; The Asset and Resource Optimization Plan (OPTAR)
generated liquidity of close to 1.5 billion euros and released capital in an
amount exceeding 780 million.
^ Management capacities; The new organizational structure defined at the
beginning of April represented a significant boost to the Group's corporate and
management capacities.
Earnings: high-quality, solid and recurrent
BBVA'S earnings in the first half of 2001 remained in line with the objectives
assumed by the Group, with significant increases in all margins, and an increase
of 37% in pre-tax Income. This has enabled the Group's attributable profit to
stand at 1,280 million euros (212,955 million pesetas), up 24.1% on the first
half of 2000.
Recurrent business is the basis for the growth in earnings, with increases
exceeding 25% in all relevant margins, placing Business Income (Operating Income
plus income from companies carried by the equity method) above 2.9 billion
euros, or growth of 25%. Excluding gains on financial transactions, the most
volatile line-item among its components, the growth was 44%, thereby
demonstrating the strength in generating recurrent revenues in the Group's
businesses.
BBVA ex-America contributed more than two-thirds of the Group's business income,
although posting a lower annual increase, due to the lower contribution of gains
on financial transactions. BBVA America also improved its contribution to the
Group, despite the difficult macroeconomic situation facing several of the
region's countries.
Notable increase in margins
Net Interest Income grew 44% on the first half of 2000 (18% in homogeneous
figures due to the incorporation of Bancomer). At BBVA ex-America, this margin
rose 15.2%, continuing the positive trend begun in the middle of last year
Furthermore, the pricing defense policy of recent months has improved the
customer spread by 19 basis points.
Fees earned by the Group rose 34% in the period, with noteworthy contributions
both in the domestic business as well as in Latin America, in spite of the fall
in fees on mutual funds in the entire Spanish banking system. The Basic Margin
(Net Interest Income plus fees) grew nearly 41% to 6,269 million euros.
The instability of the financial and currency markets provoked gains on
financial transactions being considerably lower than in the first half of 2000,
to a large extent as a consequence of the hedging, pursuant to corporate
criteria, of certain structural foreign exchange positions. Ordinary Revenue
stood at 6,496 million euros, up 32%.
Together with this proven capacity for the growing generation of recurrent
revenues, BBVA continued its operating cost control policy. The significant
apparent increase in expenses was motivated by the incorporation of Bancomer.
Excluding Bancomer, expenses grew 3%.
The efficiency ratio made further progress to 51.2%, as opposed to 52.6% in the
first quarter of the year and 53.3% for 2000 as a whole. Operating Income grew
30% to 2,655 million euros.
BBVA continued to receive a significant contribution from the industrial
portfolio, both through companies carried by the equity method, as well as
dividends received, which are recorded under Net Interest Income. In the first
half of 2001, these two concepts entailed more than 500 million euros, 10% up on
the same period of 2000. With this contribution of the industrial portfolio,
Business Income stood at 2,916 million euros, up 25%.
Apart from income from companies carried by the equity method, the industrial
portfolio contributed 640 million euros to the Group, as a fruit of the regular
generation of capital gains triggered by portfolio turnover.
Prudent policy on provisions
These earnings have once again been applied towards reinforcing the Group's
provisions and amortizing goodwill, within the traditional policy of prudence as
fare as BBVA'S provisions are concerned.
Total provisions were 1,382 million euros (more than twice the capital gains
generated). One-half of these provisions were earmarked towards reinforcing the
coverage of credit risk, to which the application of the accounting regulations
established by the Bank of Spain from the third quarter of 2000 must be added.
Furthermore, 229 million euros were assigned to the amortization of goodwill,
doubling the figures for the first half of 2000, due to the incorporation of
Bancomer. The sum of 276 million euros was assigned to exchange risk coverage,
applying maximum prudence for reinforcing this coverage under corporate
criteria.
After deducting this significant provisioning effort, pre-tax income for the
half year rose 37% on the same period last year to nearly 2.5 billion euros.
After applying income attributable to minority shareholders (which grew
significantly due to Bancomer joining the Group), the Group's attributable
profit rose 24.1% to 1,280 million euros.
Significant increase in business activity in the second quarter
At June 30, 2001, BBVA Group's total assets were 313,198 million euros, up
nearly 30% on the same period last year. Lending grew 19% and customer funds
managed on-balance-sheet grew 39%. In addition, funds managed off-balance-sheet
(mutual funds, pension plans, and managed portfolios) grew 20%.
This strong increase in business activity, within a context of lower economic
growth worldwide, was possible thanks to Grupo Financiero Bancomer joining
BBVA in July 2000 and the noteworthy commercial effort carried out by the Group
in the second quarter of 2001, maintaining rigorous pricing criteria and
reinforcing risk-control mechanisms.
This adequate management of risk has allowed a further decline in the Group's
NPL ratio to 1.75% at June 30. This improvement in the quality of assets has
been generalized throughout all scopes of the Group, within historic NPL
minimums in the domestic business (0.86%), as well as in Latin America (3.97%).
The coverage ratio also continued to improve, reaching the level of 210.4%.
Net lending at BBVA ex-America exceeded 105.0 billion euros at the end of the
first half, up 4.4% on June 2000, or 6.1% if balances transferred to
securitization funds are taken into account. Therefore, the second quarter
constituted the start of the recovery in business expansion rhythms. Thus, new
mortgage credit transactions exceeded 20% in the second quarter, and consumer
credit 16%. At BBVA America, capture was also dynamic, growing 80%, and 15%
excluding the contribution of BBVA Bancomer.
Customer funds managed on the balance sheet of BBVA ex-America grew nearly 149%
to 125.0 billion euros. Savings accounts grew significantly. BBVA America posted
year-on-year growth of 118%, and 16% excluding BBVA Bancomer.
The Group's market share in mutual funds grew six basis points in the second
quarter. Strong growth continued in Latin America (126%), and 28% excluding the
contribution of BBVA Bancomer. The Group's pension funds reached 42.0 euros,
growing 9% in the domestic market and 42% in Latin America.
Definitely, BBVA has closed the quarter with a clear improvement in business
growth rhythm, both in the domestic market as well as in Latin America, after
concluding the integration. It is also noteworthy to highlight the increased
share in mutual funds.
A solid capital base
At June 30, BBVA Group's capital base stood at 20,186 million euros, as per BIS
regulations. The capital adequacy ratio stood at 11.6%, yielding a surplus of
4,331 million euros. Furthermore, the capital base was reinforced by two
preferred stock issues, one for 340 million euros aimed at the international
market, and another for 240 million dollars aimed at the U.S. retail market.
During the month of July, a subordinated debt issue in the amount of 500 million
euros was carried out and will be computed in the third quarter.
As far as shareholder remuneration is concerned, BBVA'S Board of Directors has
declared the dividend payment schedule for the fiscal year, whereby three
interim dividends and one supplementary dividend will be paid in the months of
July, October, January and April. Within this frame, on July 10, 2001 the first
interim dividend of the current fiscal year was distributed in the amount of
0.085 euros per share gross, up 32.8% on the previous year.
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