The Group’s summarized consolidated income statements for 2013 and 2012 are given below. Because of the agreements for the sale of the pension business in Latin America (mentioned above), earnings from this activity are classified under discontinued operations in the income statements for 2013 and also for 2012, for comparison purposes.
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| BBVA Group Interim Consolidated Income Statements | Millions of Euros | ||
|---|---|---|---|
| 2013 | 2012 | % Change | |
| NET INTEREST INCOME | 13,900 | 14,474 | (4.0) |
| Dividend income | 235 | 390 | (39.7) |
| Share of profit or loss of entities accounted for using the equity method | 694 | 1,039 | (33.2) |
| Net fees and commissions | 4,250 | 4,156 | 2.3 |
| Net gains (losses) on financial assets and liabilities and net exchange differences | 2,511 | 1,705 | 47.3 |
| Other operating income and expenses | (632) | 60 | n.m. |
| GROSS INCOME | 20,958 | 21,824 | (4.0) |
| Operating expenses | (10,796) | (10,374) | 4.1 |
| Administration costs | (9,701) | (9,396) | 3.2 |
| Personnel expenses | (5,588) | (5,467) | 2.2 |
| General and administrative expenses | (4,113) | (3,929) | 4.7 |
| Depreciation and amortization | (1,095) | (978) | 12.0 |
| OPERATING INCOME | 10,162 | 11,450 | (11.2) |
| Impairment losses on financial assets (net) | (5,612) | (7,859) | (28.6) |
| Provisions (net) | (609) | (641) | (5.0) |
| NET OPERATING INCOME | 3,941 | 2,950 | 33.6 |
| Other gains (losses) | (2,781) | (1,368) | 103.3 |
| INCOME BEFORE TAX | 1,160 | 1,582 | (26.7) |
| Income tax | (46) | 352 | n.m. |
| INCOME FROM CONTINUING TRANSACTIONS | 1,114 | 1,934 | (42.4) |
| Income from discontinued transactions (net) | 1,866 | 393 | n.m. |
| NET INCOME | 2,981 | 2,327 | 28.1 |
| Net income attributed to non-controlling interests | 753 | 651 | 15.7 |
| NET INCOME ATTRIBUTED TO PARENT COMPANY | 2,228 | 1,676 | 32.9 |
The explanations of the changes in the main headings of the summarized consolidated income statements are as follows:
"Net interest income" in 2013 stood at €13,900 million, down 4% on the €14,474 million posted in 2012. This heading has been affected by the negative effect of exchange rates and also by the elimination of the so-called “floor clauses”, although this has been offset to a certain extent by the improvement in funding costs, basically on the euro balance sheet, and strong activity in emerging markets. The following information should be noted in the geographical areas:
- Spain generated cumulative net interest income of €3,830 million, down 19.3% on the figure for the same period in the previous year. This negative performance has been affected by the aforementioned elimination of the floor clauses, by reduced lending activity and by an environment of low rates and, consequently, narrow spreads. However, a certain improvement has been seen in the last quarter due to good price management in new asset operations and, particularly, in the renewal of liability operations.
- The analysis of the Eurasia's earnings and activity includes the Garanti Group. Net interest income grew by 7.0% to €911 million in 2013 (€851 million in 2012). This positive trend is due basically to the favorable performance of Garanti, especially in the first half of the year, in terms of both strong activity and positive management of customer spreads.
- In Mexico, net interest income in 2013 totaled €4,484 million, up 7.7% at constant exchange rates on the €4,178 million the previous year, due to higher volumes in lending and fund gathering and good management of customer spreads.
- Net interest income in South America continues to perform strongly, benefiting from buoyant activity and the maintenance of customer spreads, combined with the effect of hyperinflation in Venezuela. In short, accumulated net interest income in the area as of December 2013 stood at €4,703 million, up 33.6% at constant exchange rates.
- In the United States, net interest income has been negatively affected by the scenario of low interest rates, which has overshadowed the positive effect of improved activity over the year. However, the trend has started to reverse in the last quarter of the year. As a result, this heading stood at €1,407 million in 2013, down 6.3% excluding the foreign-currency effect.
In 2013, the balance under the heading “Income from equity instruments” stood at €235 million, down 39.7% on the €390 million in 2012. This decline is mainly due to the suspension of dividend payments by the Telefónica group from May 2012 to November 2013.
The balance under the heading ““Share of profit or loss of entities accounted for using the equity method” in 2013 amounted to €694 million, a decrease of 33.2% on the €1,039 million registered in 2012. This year-on-year decline is due to the reduced contribution from CNCB as a result of the reclassification to “Available-for-sale financial assets” and the partial sale of the stake, as explained in Note 3 to the accompanying consolidated financial statements.
The balance under the heading “Net fees and commissions” for 2013 stood at €4,250 million, up 2.3% on the €4,156 million posted in 2012. This increase is significant considering the lower level of activity in developed markets and the coming into force of legal restrictions on the collection of certain types of fees in some geographic areas.
The balance under the headings “Net gains (losses) on financial assets and liabilities” (NTI) and “Exchange differences (net)” for 2013 amounted to €2,511 million, up 47.3% on the €1.705 million in 2012, mainly due to the Group's global markets units and adequate management of structural risks on the balance sheet.
The balance under the heading “Other operating income and expenses” for 2013 is a negative €632 million, compared with the positive €60 million in 2012. Although this heading includes the good performance of the insurance businesses in all geographical regions, it has been negatively affected by the adjustment for hyperinflation in Venezuela, which has been more negative than in previous periods, and the year-on-year increase in the contribution to deposit guarantee funds in the countries where the Group operates.
As a result of the above, “Gross income” for 2013 stood at €20,958 million, a decrease of 4.0% on the €21,824 million in 2012.
The balance of “Operating expenses” in 2013 stood at €10,796 million, up 4.1% on the €10,374 million in 2012. Continuing with the trend seen in recent years, this increase is largely underpinned by investment plans carried out in emerging economies, while in developed countries the Group's policy is still to keep expenses in check. The following are worth highlighting: the recently announced investment plan in Mexico, of around €2,700 million from 2013 to 2016, with the aim of improving customer relations and customer experience and of continuing to offer quality, innovative and specialized products; a business plan being carried out in South America to promote value generation in the region; the technological progress in customer service being made in Chile, and investment in new corporate headquarters in Mexico City and Houston. Lastly, BBVA and the Professional Soccer League have recently announced that they are extending their strategic agreement for another three years.
The following are worth highlighting in terms of number of employees, branches and ATMs:
- Staff reductions in 2013 to 109,305 employees, mainly due to the sale of the pension business in Mexico, Colombia, Peru and Chile, the Unnim integration process and the sale of BBVA Panama.
- Reduction also in the total number of the Group's branch offices in 2013, which stood at 7,512 units at the close of the year. By geographical area, the number increased in the banking business in South America, as a result of the expansion plans underway, remained stable in Mexico and decreased in the United States and in Spain, in the latter case as a result of the integration of Unnim.
- Lastly, the number of ATMs totaled 20,415 units as of December 31, 2013, up 1.2% during 2013.
This brings the Group's efficiency ratio in 2013 to 52% (48% at the close of 2012), while “Operating income” is down 11.2% to €10,162 million as of December 31, 2013.
The balance under the heading “Impairment losses on financial assets (net)” in 2013 is €5,612 million, down 28.6% on the €7,859 million registered in 2012, which included increased loan-loss provisions to address the impairment of the assets related to the real-estate sector in Spain.
The balance under the heading “Provisions expense (net)” for 2013 is €609 million, down 5.0% on the €641 million in 2012. The main components are still early retirements and, to a lesser degree, provisions for contingent liabilities, pension fund contributions and other staff commitments.
The balance of “Other gains (losses)” in 2013 is a loss of €2,718 million compared with a loss of €1,368 million in 2012. In 2013, this heading basically includes the losses on the partial sale and reclassification to the available-for-sale portfolio of the remaining stake in CNCB, the provisions made for real estate and foreclosed or acquired assets in Spain and the capital gain from the operation on the insurance portfolio between BBVA Seguros, S.A. and Scor Global Life.
As a result of the above, “Income before tax” for 2013 stood at €1,160 million, a decrease of 26.7% on the €1.582 million in 2012.
The balance of “Income tax” for 2013 stood at €46 million, compared with €352 million in 2012, due, among other items, to the recording in 2012 of income with a low or no tax rate, particularly dividends and income by the equity method.
Lastly, the balance of “Earnings from discontinued transactions (net)” amounted to €1,866 million, including the capital gains from the sale of Afore Bancomer in Mexico and the Colombia, Peru and Chile pension fund administrators, as well as the earnings posted by these companies up to the date of these sales.
“Net income attributed to non-controlling interests” for 2013 is €753 million, an increase of 15.7% on the €651 million in 2012, due basically to the growth in earnings from Venezuela and Peru.
Lastly, “Net income attributed to parent company” in 2013 totaled €2,228 million, up 32.9% on the €1,676 million in 2012.