6. Operating segment reporting

The information about operating segments is provided in accordance with IFRS 8. Operating segment reporting represents a basic tool in the oversight and management of the BBVA Group’s various activities. The BBVA Group compiles reporting information on as disaggregated level as possible, and all data relating to the businesses these units manage is recognized in full. These minimum level units are then aggregated in accordance with the organizational structure determined by the BBVA Group management into higher level units and, ultimately, the reportable segments themselves. Similarly, all the entities that make up the BBVA Group are also assigned to the different operating segments according to the geographical areas where they carry out their activity.

Once the composition of each of the operating segments in the BBVA Group has been defined, certain management criteria are applied, noteworthy among which are the following:

• Internal transfer prices

The calculation of the net interest income of each business is performed by applying the internal transfer rates to both the asset and liability entries. These rates are composed of a market rate that depends on the revision period of the operation, and a liquidity premium that aims to reflect the conditions and outlook of the financial markets. Earnings are distributed across revenue-generating and distribution units (e.g., in asset management products) at market prices.

• Allocation of operating expenses

Both direct and indirect expenses are allocated to the operating segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate or institutional expenses incurred on behalf of the Group as a whole.

• Cross-selling

On certain occasions, adjustments are made to eliminate overlap accounted for in the results of two or more units as a result of encouraging cross-selling between businesses.

During 2014, the operating segment reporting structure is as in 2013, and is as follows:

• Banking activity in Spain which as in previous years includes:
  • The Retail network, with the segments of individual customers, private banking, and small businesses.
  • Corporate and Business Banking (CBB), which handles the SMEs, corporations and public sector in the country.
  • Corporate & Investment Banking (CIB), which includes business with large corporations and multinational groups and the trading floor and distribution business in the same geographical area.
  • Other units, among them BBVA Seguros and Asset Management (management of mutual and pension funds in Spain.
  • In addition, it also includes the portfolios, finance and structural interest-rate positions of the euro balance sheet.
• Real estate activity in Spain

Manage the assets of the real-estate area accumulated by the Group as a result of the crisis in Spain. It therefore mainly combines loans to real-estate developers and foreclosed real estate assets.

• Eurasia

Includes the business carried out in the rest of Europe and Asia, i.e. the retail and wholesale businesses of the BBVA Group in the area. It also includes BBVA’s stakes in the Turkish bank Garanti and the Chinese banks CNCB and CIFH.

• Mexico

Comprising of the banking and insurance businesses. The banking business includes retail business through its Commercial Banking, Consumer Finance and Corporate and Institutional Banking units; and wholesale banking through CIB.

• The United States

Encompasses the Group’s businesses in the United States.

• South America

Includes the banking and insurance businesses that BBVA carries out in the region.

Finally, Corporate Center is an aggregate that contains the remainder of the items that have not been allocated to the operating segments, as it basically corresponds to the Group’s holding function. It groups together the costs of the headquarters that have a corporate function; management of structural exchange-rate positions, carried out by the Financial Planning unit; specific issues of capital instruments to ensure adequate management of the Group’s global solvency; portfolios and their corresponding results, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with pensioners; goodwill and other intangibles; and the results of certain corporate transactions.

The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2014, 2013 and 2012, is as follows:

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	Millions of Euros
	Total Assets by Operating Segments	2014	2013	2012
Spain	318,353	314,902	345,521
Real Estate Activity in Spain	17,934	20,582	22,112
Eurasia (1)	44,667	41,223	48,324
Mexico	93,731	81,801	82,722
South America	84,364	77,874	75,877
United States	69,261	53,046	53,880
Subtotal Assets by Operating Segments	628,310	589,428	628,436
Corporate Center and other adjustments (2)	3,632	(6,731)	(7,304)
Total Assets BBVA Group	631,942	582,697	621,132

(1) The information is presented under management criteria, pursuant to which Garanti’s assets and liabilities have been proportionally integrated based on our 25.01% interest in Garanti. (2) Other adjustments include adjustments made to account for the fact that, in our Consolidated Financial Statements, Garanti is accounted for using the equity method rather than using the management criteria referred above. (*) The figures corresponding to December 2013 and 2012 have been restated in order to allow homogeneous year-on-year comparisons due to immaterial changes in the scope of the operating segments and a change in accounting criteria registered in the Corporate Center (see Note 1.3).

The profit and main earning figures in the consolidated income statements for the year ended December 31, 2014, 2013 and 2012 by operating segments are as follows:

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Main Margins and Profits by Operating Segments			Millions of Euros
			BBVA Group	Operating Segments						Corporate Center	Adjustments (2)
				Spain	Real Estate Activity in Spain	Eurasia	Mexico	South America	United States
2014
Net interest income			14,382	3,830	(38)	924	4,910	4,699	1,443	(651)	(734)
Gross income			20,725	6,622	(132)	1,680	6,522	5,191	2,137	(664)	(632)
Net operating income (1)			10,166	3,777	(291)	942	4,115	2,875	640	(1,653)	(240)
Operating profit /(loss) before tax			3,980	1,463	(1,225)	713	2,519	1,951	561	(1,920)	(83)
Profit			2,618	1,028	(876)	565	1,915	1,001	428	(1,444)	-
2013
Net interest income			13,900	3,838	(3)	909	4,478	4,660	1,402	(671)	(713)
Gross income			20,752	6,103	(38)	1,717	6,194	5,583	2,047	(416)	(439)
Net operating income (1)			9,956	3,088	(188)	981	3,865	3,208	618	(1,584)	(34)
Operating profit /(loss) before tax			954	230	(1,838)	586	2,358	2,354	534	(1,680)	(1,590)
Profit			2,084	589	(1,252)	449	1,802	1,224	390	(1,117)	-
2012
Net interest income			14,474	4,729	(21)	851	4,174	4,236	1,550	(397)	(648)
Gross income			21,824	6,659	(79)	1,665	5,751	5,308	2,198	391	(68)
Net operating income (1)			11,450	3,776	(209)	886	3,590	3,023	722	(681)	344
Operating profit /(loss) before tax			1,582	1,651	(5,705)	508	2,223	2,234	620	(783)	833
Profit			1,676	1,186	(4,068)	404	1,687	1,172	445	850	-

(1) Gross Income less Administrative Cost and Amortization (2) Includes adjustments due to Garanti Group accounted for using the equity method instead of using management criteria as referenced earlier. (*) The figures corresponding to December 2013 and 2012 have been restated in order to allow homogeneous year-on-year comparisons due to immaterial changes in the scope of the operating segments and a change in accounting criteria registered in the Corporate Center (see Note 1.3).

There is further information in the accompanying consolidated Management Report (see Chapter 2) regarding the income statements and the main values of the balance sheet by operating segments 2014.