The United States

Highlights

• Moderation in lending growth, focused on profitability.
• Superior performance of net interest income.
• Cost control.
• Risk indicators continue at very low levels.

Financial statements and relevant business indicators

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		Million euros and percentage
Income statement	2015	Δ%	Δ% (1)	2014
Net interest income	1,811	25.5	4.9	1,443
Net fees and commissions	616	11.2	(6.9)	553
Net trading income	207	43.0	21.0	145
Other income/expenses	18	n.s.	n.m.	(4)
Gross income	2,652	24.1	3.8	2,137
Operating expenses	(1,806)	20.6	1.0	(1,497)
Personnel expenses	(1,039)	20.6	1.0	(861)
General and administrative expenses	(564)	23.2	3.2	(457)
Depreciation and amortization	(204)	13.9	(4.8)	(179)
Operating income	846	32.2	10.6	640
Impairment on financial assets (net)	(142)	107.5	72.6	(68)
Provisions (net) and other gains (losses)	1	n.s.	n.m.	(10)
Income before tax	705	25.7	5.2	561
Income tax	(168)	26.4	5.4	(133)
Net incomes	537	25.4	5.2	428
Non-controlling interests	(0)	25.0	4.4	-
Net attributable profit	537	25.4	5.2	428

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		Million euros and percentage
Balance sheet	31-12-15	Δ%	Δ% (1)	31-12-14
Cash and balances with central banks	6,859	80.1	61.5	3,808
Financial assets	14,468	21.7	9.1	11,892
Loans and receivables	61,890	21.4	8.9	50,970
Loans and advances to customers	59,796	22.1	9.5	48,976
Loans and advances to credit institutions and other	2,094	5.0	(5.8)	1,994
Inter-area positions	-	-	-	-
Tangible assets	780	7.6	(3.5)	725
Other assets	2,457	31.7	18.1	1,866
Total assets/liabilities and equity	86,454	24.8	11.9	69,261
Deposits from central banks and credit institutions	6,100	5.8	(5.1)	5,765
Deposits from customers	63,715	24.0	11.2	51,394
Debt certificates	921	12.1	0.5	822
Subordinated liabilities	1,459	96.7	76.4	742
Inter-area positions	1,508	n.m.	292.3	345
Financial liabilities held for trading	3,844	64.2	47.2	2,341
Other liabilities	5,739	8.3	(2.9)	5,300
Economic capital allocated	3,167	24.1	11.3	2,552

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		Million euros and percentage
Relevant business indicators	31-12-15	Δ%	Δ% (1)	31-12-14
Loans and advances to customers (gross) (2)	60,599	22.0	9.4	49,667
Customer deposits under management (2)	60,173	20.1	7.7	50,093
Off-balance sheet funds (3)	-	-	-	-
Efficiency ratio (%)	68.1			70.1
NPL ratio (%)	0.9			0.9
NPL coverage ratio (%)	151			167
Cost of risk (%)	0.25			0.16

(1) Figures at constant exchange rate. (2) Excluding repos. (3) Includes mutual funds, pension funds and other off-balance sheet funds.

Macro and industry trends

Economic growth in the United States, which is estimated at 2.5% for 2015, continues to be supported by the recovery of private consumption, in a context of sustained gains in employment (the unemployment rate at the end of 2015 stands at 5%) and low inflation (the year-on-year rate of change of inflation in December 2015 is 0.7%). With this improvement in the disposable income of households, the appreciation of the dollar, in a difficult external setting, is holding back manufacturing activity and exports, while the fall in oil prices is reducing investment in the energy sector. In view of the absence of inflationary pressures, the Federal Reserve has opted to implement a cycle of interest rate hikes which, however, will be much more gradual than the one seen in other phases of monetary tightening, given the recent deterioration of the international economic situation. On December 16 it approved an increase of 25 basis points in the interest rate, the first since June 2006.

With respect to the exchange rate, the divergence between the monetary-policy approach of the United States and the Eurozone (approval of new ECB stimulus package), together with the difference in growth, currently favorable for the United States, have led to the euro losing 11.5% against the dollar in year-end exchange rates and 19.7% in average rates.

The financial sector continues in good shape, despite the environment of low interest rates and a slight increase in loan-loss provisions. Lending in 2015 grew in year-on-year terms at 7.6%, led by better performance of loans to the commercial real-estate sector: +10%. On the liabilities side, there has been a reduction in the weighting of time deposits due to low interest rates.

Activity

All the comments relating to rates of change in activity or earnings for the area refer to constant exchange rates, unless expressly stated otherwise.

On the lending side, the rate of growth moderated over 2015, particularly in the second half of the year, to a year-on-year rate of 9.4% at the close of December. This is due to the strategic decision taken in the area to focus on more profitable operations. As a result, customer spreads have remained stable.

Asset quality indicators are still at minimum levels for the cycle, with an NPL ratio of 0.9% and a coverage ratio of 151%.

Customer deposits under management at the end of 2015 remain practically at the same year-on-year growth level as in the first nine months of the year (up 7.7%). BBVA Compass continues to strengthen its position in the Sun Belt, growing faster than its peers and gaining market share in deposits in all the states where it operates, according to the latest data published by the Federal Deposit Insurance Corporation. By products, current and savings accounts have increased by 5.5% since the close of 2014 and time deposits by 15.4%

Earnings

The area ended 2015 with a net attributable profit of €537m, an increase of 5.2% on 2014. Of this total, €126m corresponds to the last quarter of the year.

The main features of the income statement over 2015 have been:

• Outstanding net interest income, which increased its contribution to the income statement every quarter in 2015, offsetting the more sluggish performance of income from fees and commissions. This has been possible thanks to the positive performance of business activity and the maintenance of spreads in the area.
• Very good performance of NTI resulting from the capital gains from the sale of ALCO portfolios and the good performance of the Global Markets unit over the period.
• Operating costs kept in check, with a rise of only 1.0% in the last 12 months.
• Lastly, an increase in impairment losses on financial assets. Despite this, the cumulative cost of risk through December 2015 continues to be very low, at 0.25%.