This section presents and analyzes the most relevant aspects of the Group’s different areas. Specifically, it shows a summary of the income statement and balance sheet, the business activity figures and the most significant ratios in each of them.
In 2015 changes were made to the reporting structure of BBVA Group’s business areas with respect to the structure in force in 2014. Because the stake in Turkiye Garanti Bankasi, A.S. (Garanti Bank) increased to 39.9%, its balance sheet and earnings are presented separately from those of the rest of Eurasia. Thus the business areas are now as follows:
- Banking activity in Spain includes, as in previous years, the Retail Network, Corporate and Business Banking (CBB), Corporate & Investment Banking (CIB), BBVA Seguros and Asset Management. It also includes the portfolios, finance and structural interest-rate positions of the euro balance sheet. Since April 24 it also includes the activity, balance sheet and earnings of the banking business of Catalunya Banc (hereinafter, CX).
- Real-estate activity in Spain basically covers lending to real-estate developers and foreclosed real-estate assets in the country (including those from CX). The United States includes the Bank’s business activity in the country through BBVA Compass, the New York branch and the US companies Simple and Spring Studio, which were bought in February 2014 and April 2015, respectively, as part of BBVA’s strategy to head up the technological transformation of the financial industry.
- The United States includes the Bank’s business activity in the country through BBVA Compass, the New York branch and the US companies Simple and Spring Studio, which were bought in February 2014 and April 2015, respectively, as part of BBVA’s strategy to head up the technological transformation of the financial industry.
- Turkey includes BBVA’s stake in Garanti Bank (39.9% since the third quarter of 2015), which has been incorporated into the Group’s financial statements by the full integration method.
- Mexico includes the banking and insurance businesses in the country. South America includes BBVA’s banking and insurance businesses in the region.
- South America includes BBVA’s banking and insurance businesses in the region.
- The rest of Eurasia includes business activity in the rest of Europe and Asia, i.e. the Group’s retail and wholesale businesses in the area.
In addition to the above, all the areas include a remainder made up of other businesses and a supplement that includes deletions and allocations not assigned to the units making up the above areas.
Lastly, the Corporate Center is an aggregate that contains the rest of the items that have not been allocated to the business areas, as it basically corresponds to the Group’s holding function. It includes: the costs of the head offices that have a corporate function; management of structural exchange-rate positions; 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 employees; goodwill and other intangibles. It also comprises the result from certain corporate operations carried out by the Group that are commented at various points in this report.
In addition to this geographical breakdown, supplementary information is provided for all the wholesale businesses carried out by BBVA, i.e. Corporate & Investment Banking (CIB). This aggregate business is considered relevant to better understand the Group because of the characteristics of the customers served, the type of products offered and the risks assumed.
Lastly, as usual, in the case of the Americas and Turkey the results of applying constant exchange rates are given in addition to the year-on-year variations at current exchange rates.
The Group compiles information by areas based on units at the lowest level, and all the data related to the business they manage is recorded in full. These basic units are then aggregated in accordance with the organizational structure established by the Group for higher-level units and, finally, the business areas themselves. Similarly, all the companies making up the Group are also assigned to the different units according to the geographical area in which they carry out their activity.
Once the composition of each business area has been defined, certain management criteria are applied, of which the following are particularly important:
- Capital. Capital is allocated to each business according to economic risk capital (ERC) criteria. This is based on the concept of unexpected loss at a specific confidence level, depending on the Group’s capital adequacy targets. The calculation of the ERC combines credit risk, market risk, structural balance-sheet risk, equity positions, operational risk, fixed-asset risk and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel III capital accord, with economic criteria taking precedence over regulatory ones.
ERC is risk-sensitive and thus linked to the management policies of the businesses themselves. It standardizes capital allocation among them in accordance with the risks incurred. In other words, it is calculated in a way that is standard and integrated for all kinds of risks and for each operation, balance or risk position, allowing its risk-adjusted return to be assessed and an aggregate to be calculated for profitability by client, product, segment, unit or business area.
- Internal transfer prices. BBVA Group has a transfer prices system whose general principles apply in the Bank’s different entities, business areas and units. Within each geographical area, internal transfer rates are established to calculate the net interest income of its businesses, under both the asset and liability headings. These rates consist of a reference rate (an index whose use is generally accepted on the market) that is applied based on the transaction’s revision period or maturity, and a liquidity premium, i.e. a spread that is established based on the conditions and outlook of the financial markets in this respect. There are also agreements for the allocation of earnings between the product-generating units and the distribution units.
- Allocation of operating expenses. Both direct and indirect costs are allocated to the business areas, except where there is no clearly defined relationship with the businesses, i.e. when they are of a clearly corporate or institutional nature for the Group as a whole.
- Cross-selling. In some cases, consolidation adjustments are required to eliminate shadow accounting entries that are registered in the earnings of two or more units as a result of cross-selling incentives.
To ensure an adequate understanding of the figures appearing in the graphics on activity and the tables on the relevant business data in each of the business areas, the criteria used are given below:
- Loans and advances to customers (gross) do not include repurchase agreements (repos).
- Customer deposits under management exclude repos.
- Off-balance sheet funds cover mutual funds, pension funds and other off-balance sheet funds.
- Total funds under management are made up of the sum of customer deposits under management plus off-balance sheet funds.
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Million euros | |||||||||
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Business areas | |||||||||
| Mayor income statement items by business area | BBVA Gruop (1) | Banking activity in Spain | Real-estate in Spain | The United States | Turkey (1) | Mexico | South America | Rest of Eurasia | ∑ Business areas | Corporate Center |
| 2015 |
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| Net interest income | 16,426 | 4,000 | 66 | 1,811 | 2,194 | 5,393 | 3,202 | 183 | 16,850 | (424) |
| Gross income | 23,680 | 6,804 | (16) | 2,652 | 2,434 | 7,069 | 4,477 | 473 | 23,892 | (212) |
| Operating income | 11,363 | 3,302 | (150) | 846 | 1,273 | 4,456 | 2,498 | 121 | 12,345 | (982) |
| Income before tax | 5,879 | 1,492 | (713) | 705 | 853 | 2,769 | 1,814 | 111 | 7,031 | (1,152) |
| Net attributable profit | 2,642 | 1,046 | (492) | 537 | 371 | 2,090 | 905 | 76 | 4,533 | (1,891) |
| 2014 |
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| Net interest income | 15,116 | 3,830 | (38) | 1,443 | 735 | 4,910 | 4,699 | 189 | 15,767 | (651) |
| Gross income | 21,357 | 6,621 | (220) | 2,137 | 944 | 6,522 | 5,191 | 736 | 21,931 | (575) |
| Operating income | 10,406 | 3,534 | (373) | 640 | 550 | 4,115 | 2,875 | 393 | 11,734 | (1,328) |
| Income before tax | 4,063 | 1,220 | (1,287) | 561 | 392 | 2,519 | 1,951 | 320 | 5,678 | (1,615) |
| Net attributable profit | 2,618 | 858 | (901) | 428 | 310 | 1,915 | 1,001 | 255 | 3,867 | (1,249) |
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Percentage | ||||||
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| Breakdown of gross income, operating income and net attributable profit by geography (1) 2015 |
Banking activity in Spain | Spain (2) | The United States |
Turkey | Mexico | South America | Rest of Eurasia |
| Gross income | 28.5 | 28.4 | 11.1 | 10.2 | 29.6 | 18.7 | 2.0 |
| Operating income | 26.7 | 25.5 | 6.9 | 10.3 | 36.1 | 20.2 | 1.0 |
| Net attributable profit | 23.1 | 12.2 | 11.9 | 8.2 | 46.1 | 20.0 | 1.7 |
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Quarterly averages | |||||||
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2015 | 2014 | ||||||
| Interest rates | 4Q | 3Q | 2Q | 1Q | 4Q | 3Q | 2Q | 1Q |
| Official ECB rate | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | 0.12 | 0.22 | 0.25 |
| Euribor 3 months | (0.09) | (0.03) | (0.01) | 0.05 | 0.08 | 0.16 | 0.30 | 0.30 |
| Euribor 1 year | 0.09 | 0.16 | 0.17 | 0.25 | 0.33 | 0.44 | 0.57 | 0.56 |
| USA Federal rates | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 |
| TIIE (Mexico) | 3.35 | 3.32 | 3.30 | 3.30 | 3.29 | 3.29 | 3.67 | 3.79 |
| CBRT (Turkey) | 8.78 | 8.66 | 8.26 | 7.99 | 8.40 | 8.40 | 9.79 | 9.22 |
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Expressed in currency/euro | ||||
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Year-end exchange rates | Average exchange rates | |||
| Exchange rates | 31-12-15 | Δ% on 31-12-14 |
Δ% on 30-09-15 |
2015 | Δ% on 2014 |
| Mexican peso | 18.9147 | (5.5) | 0.3 | 17.6109 | 0.3 |
| U.S. dollar | 1.0887 | 11.5 | 2.9 | 1.1094 | 19.7 |
| Argentinean peso | 14.1267 | (26.5) | (25.3) | 10.2526 | 5.0 |
| Chilean peso | 769.82 | (4.3) | 2.5 | 725.69 | 4.2 |
| Colombian peso | 3,424.66 | (15.1) | 2.1 | 3,048.78 | (13.0) |
| Peruvian new sol | 3.7092 | (2.6) | (2.8) | 3.5314 | 6.7 |
| Venezuelan bolivar fuerte | 469.4836 | (96.9) | (52.4) | 469.4836 | (96.9) |
| Turkish lira | 3.1765 | (10.8) | 6.7 | 3.0246 | (3.9) |
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Million euros | |
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CRD IV phased-in | |
| Risk-weighted assets. Breakdown by business areas and main countries | 31-12-15 | 31-12-14 |
| BBVA Group | 401,346 | 350,803 |
| Banking activity in Spain | 122,226 | 108,375 |
| Real-estate activity in Spain | 14,912 | 15,724 |
| The United States | 59,433 | 49,371 |
| Turkey | 72,778 | 16,449 |
| Mexico | 50,594 | 47,246 |
| South America | 56,164 | 74,988 |
| Argentina | 9,115 | 8,555 |
| Chile | 13,431 | 12,312 |
| Colombia | 10,967 | 10,389 |
| Peru | 17,453 | 13,628 |
| Venezuela | 1,788 | 26,819 |
| Rest of South America | 3,410 | 3,284 |
| Rest of Eurasia | 15,375 | 20,379 |
| Corporate Center | 9,865 | 18,270 |