Letter from the Chairman and CEO

Dear Shareholder,

2014 was a difficult year, although it was positive from the economic point of view. Global GDP grew by 3.3%, slightly above the figure for 2013. The stronger growth in the developed economies offset a certain slowdown in emerging economies as a whole, where the performance of individual countries varied greatly.

For BBVA it was a productive year because we achieved good earnings, took important decisions that improve the Group’s growth potential and made notable progress in our digital transformation strategy to become the best Bank in the world.

The net attributable profit in 2014 was €2,618m, an increase of 25.7% in current euros. In constant euros, i.e. not taking into account the exchange-rate effect, the net attributable profit increased by 54.6% from a year earlier. These results have been characterized by increased revenue, cost control, improved risk indicators and a strengthening of the capital base.

Gross income totaled €21,357m, slightly above the figure in 2013, and an increase of 9.6% in constant euros. Overall, expenses fell by 2.2% as a result of management actions adapted to each market. The trend in risk indicators has been positive. The NPA ratio has improved to 5.8%, the coverage ratio has increased to 64%, loan-loss and real-estate provisions have dropped by 25% and the cost of risk is down 34 basis points to 1.25%.

As regards capital, we have increased the phased-in core capital ratio to 11.9%, well above the minimum levels required by the new regulation, while fully-loaded core capital closed the year at 10.4%, 70 basis points higher than in 2013. The stress tests carried out on European banks confirmed the extraordinary solvency of BBVA, which under the most adverse scenario would reach a fully-loaded core capital ratio of 8.2% in 2016. It is one of only three large European banks to exceed the 8% threshold.

In short, the strength of BBVA’s capital base enables us to fund our growth, comfortably comply with the regulator’s requirements and, at the same time, offer our shareholders a sound and predictable remuneration model linked to profit growth.

In recent months we have also taken important steps to improve future growth prospects. First, the acquisition of Catalunya Banc enables us to grow significantly in Catalonia, a market with great economic potential, and become Spain’s number one financial institution in terms of loans and customer funds. Second, the increase in our stake in Garanti to 39.9% makes us the largest shareholder in what is the best bank in Turkey and possibly the most technologically advanced bank in the world. Lastly, the divestments announced in Citic International Financial Holdings Limited and in China CITIC Bank Corporation Limited will have a very positive impact on our capital base.

In 2014 we made notable progress in our digital transformation strategy to become the best Bank in the world. Technology is changing the banking business. New generations of customers demand a new standard of service, and new competitors emerging from the digital world are beginning to provide it. Banks need to change fast, and that is what we are doing.

After completing the initial construction stage of the new, highly innovative and world-class technological platform which we initiated eight years ago, we are now working hard on the next stage, creating new distribution models, processes and products and a new organization, while we explore new digital businesses. To accelerate the process, in 2014 we created the Digital Banking area, made up of more than 3,000 people from the Group’s different geographical areas and to which we are adding external talent from top-level digital companies.

Apart from transforming our business internally, in 2014 we have followed very closely the emergence and development of new digital businesses, in some cases as investors and in others as new owners.

BBVA Ventures, the corporate venture arm of BBVA Group that studies disruptive initiatives in Silicon Valley, has made some very interesting investments in 2014 in companies with a great disruptive potential for the world of finance. They operate in fields such as e-signature (Docusign), cloud-based invoice payments (Taulia), software for financial management of assets (Personal Capital) and bitcoin wallets (Coinbase).

We have also acquired startups with potential, such as Simple in the United States, which has developed a highly innovative online and cell-phone alternative to the traditional banking experience, and Madiva Soluciones, a Spanish startup specializing in services based on big data and cloud computing, which will help us generate a more valuable product offering for our customers.

In 2014 we continued to “work for a better future for people”. For its part, the Board of Directors approved the Group’s renewed Corporate Social Responsibility Policy. In addition, significant progress was made in responsible banking. Examples include: the partnership with the OECD to prepare the PISA report on financial literacy for the first time; the Group’s progress in transparent, clear and responsible communication; and the development of products with a high social impact.

In 2014, BBVA also continued to develop numerous initiatives in the social, economic, cultural, artistic, environmental, scientific and research areas worldwide through the BBVA Foundation, the Microfinance Foundation and the Bank itself.

2015 will again be a year of challenges and opportunities and I am sure that BBVA’s response to them will be outstanding, thanks to the nearly 110,000 men and women who work in this Group around the world to make BBVA a different Bank. I want to take this opportunity to thank them all and encourage them to continue working with the same enthusiasm and dedication.

Ladies and gentlemen, shareholders, I want to thank you for your support. Your trust is what motivates us to continue working with the greatest enthusiasm and effort to consolidate our current leading position and build the next generation BBVA, the best Bank in the world.

March 1, 2015

Francisco González Rodríguez