Capital base

As of 30-Sep-2011, the BBVA Group’s capital base, calculated according to the BIS II regulation, totaled €41,120m, a very similar figure to 30-June-2011 (down 0.3%). The most significant differences in the quarter include: an increase in core capital of €855m, explained by the generation of earnings in the period, and the higher deduction from the investment made in CNCB. In addition, there was significant movement in currencies in the quarter, specifically the depreciation of the Mexican peso, which has had a negative impact on the capital base.

Risk-weighted assets (RWAs) were up 1.3% in the quarter to €325,458m. This growth is fundamentally explained by the strong performance of activity in Latin America and by the appreciation of the dollar and other currencies in South America. Another differentiating key quality aspect of BBVA versus its European peers is the high RWA density and its stability through time.

RWA’s / Total assets ⁽¹⁾

(Percentage)

The minimum capital requirements (8% of RWA) totaled €26,037m, making the capital base surplus at the close of September reach €15,083m, that is, 57.9% above the minimum required levels.

As of 30-Sep-2011, core capital was up 3.0% with respect to the June 2011 figure and amounted to €29,628m, and a core ratio of 9.1%. The organic generation of capital in the quarter was 15 basis points, net of the impact of the currency evolution and other factors.

Capital base (BIS II Regulation) (Million euros)
	30-09-11	30-06-11	31-03-11	31-12-10	30-09-10
Shareholders' funds	41,552	38,677	38,107	36,689	31,610
Adjustments and deductions	(11,923)	(11,904)	(11,654)	(8,592)	(8,642)
Mandatory convertible bonds	-	2,000	2,000	2,000	2,000
Core capital	29,628	28,773	28,452	30,097	24,969
Preference shares	5,157	5,114	5,128	5,164	5,165
Deductions	(2,733)	(2,452)	(2,367)	(2,239)	(1,900)
Capital (Tier I)	32,053	31,435	31,214	33,023	28,234
Subordinated debt and other	11,800	12,266	12,613	12,140	12,955
Deductions	(2,733)	(2,452)	(2,367)	(2,239)	(1,900)
Other eligible capital (Tier II)	9,067	9,814	10,246	9,901	11,055
Capital base	41,120	41,249	41,460	42,924	39,289
Minimum capital requirement (BIS II Regulation)	26,037	25,703	25,523	25,066	24,506
Capital surplus	15,083	15,547	15,937	17,858	14,783
Risk-weighted assets	325,458	321,282	319,044	313,327	306,319
BIS ratio (%)	12.6	12.8	13.0	13.7	12.8
Core capital (%)	9.1	9.0	8.9	9.6	8.2
Tier I (%)	9.8	9.8	9.8	10.5	9.2
Tier II (%)	2.8	3.1	3.2	3.2	3.6

The Tier I ratio, 9.8%, fell with respect to 30-Jun-2011 by 6 basis points. The level of preference shares is similar to that in the previous quarter, at €5,157m, or 16.0% of total bank capital.

The rest of the eligible capital, Tier II, which mainly consists of subordinated debt, surplus generic provisions, eligible unrealized capital gains and the deduction for holdings in financial and insurance entities, stands at €9,067m. This represents a 7.6% decrease in the quarter due to the investment in CNCB and to the fall in unrealized capital gains.

To sum up, the BIS ratio as of 30-September-2011 was 12.6% with a clear positive evolution in the quality of its components since the start of the crisis.