The BBVA Group obtained a net attributable profit of €3,004 million in 2011, which includes a one-off loss of €1,011 million net of taxes, due to the impairment of goodwill recorded in the fourth quarter in the United States, reflecting the lower growth prospects of the economy and banking business in the country. Not including this impact, the net attributable profit amounted to €4,015 million. This figure reflects the recurrence, stability and resilience of the Bank's earnings despite the extremely difficult current environment.
The Group’s summarized consolidated income statements for 2011 and 2010 are as follows:
| BBVA Group Consolidated Income Statements | Millions of Euros | ||
|---|---|---|---|
| 2011 | 2010 | % Change 2011-2010 |
|
| NET INTEREST INCOME | 13,160 | 13,320 | (1.2) |
| Dividend income | 562 | 529 | 6.3 |
| Share of profit or loss of entities accounted for using the equity method | 600 | 335 | 79.2 |
| Net fees and commissions | 4,560 | 4,537 | 0.5 |
| Net gains (losses) on financial assets and liabilities and net exchange differences | 1,479 | 1,894 | (21.9) |
| Other operating income and expenses | 205 | 295 | (30.6) |
| GROSS INCOME | 20,566 | 20,910 | (1.6) |
| Operating expenses | (9,951) | (8,967) | 11.0 |
| Administratiion costs | (9,104) | (8,207) | 10.9 |
| Depreciation and amortization | (847) | (761) | 11.3 |
| OPERATING INCOME | 10,615 | 11,942 | (11.1) |
| Impairment losses on financial assets (net) | (4,226) | (4,718) | (10.4) |
| Provisions (net) | (510) | (482) | 5.7 |
| NET OPERATING INCOME | 5,879 | 6,742 | (12.8) |
| Other gains (losses) | (2,109) | (320) | n.a |
| INCOME BEFORE TAX | 3,770 | 6,422 | (41.3) |
| Income tax | (285) | (1,427) | (80.1) |
| NET INCOME | 3,485 | 4,995 | (30.2) |
| Net income attributed to non-controlling interests | (481) | (389) | 23.8 |
| NET INCOME ATTRIBUTED TO PARENT COMPANY | 3,004 | 4,606 | (34.8) |
The explanations of the changes in the principal items of the summarized consolidated income statements are as follows:
“Net interest income” for 2011 stood at €13,160 million, a 1.2% decrease on the €13,320 million recorded in 2010, but a 1% increase when the exchange-rate effect is excluded.
The net interest income figure in 2011 grew. The result has been boosted by a number of factors: the increased volume of business in emerging countries, the contribution from Garanti and appropriate spread management in all geographical areas. Moreover, this upward trend is the result of a portfolio that is balanced by geographical areas, businesses, customer segments and products, in what is an extremely complex environment, with a contained credit activity in Spain, renewed reduction in the weight of greater-risk portfolios, and growing competitive pressure in emerging countries.
The balance of the “Income from equity instruments (dividends)” heading for 2011 stood at €562 million, a 6.3% increase over the €529 million recorded in 2010. Its main component, as in the previous year, is the dividends from BBVA’s investment in Telefónica.
The balance of the “Share of profit or loss of entities accounted for using the equity method” item for 2011 amounts to €600 million, a 79.2% increase on the €335 million recorded in 2010, mainly coming from the increase in the contribution from China National Citic Bank (CNCB) to the Group's income statement, due to the growth of the banking business and to the significant improvement of its earnings on the same period last year. To a lesser degree, it is also the result of the additional 5% holding in CNCB. The increase in the holding in CNCB took place in the second quarter of 2010 through the exercise of a purchase option.
The balance of the “Net fees and commissions” heading for 2011 amounted to €4,560 million, and shows a slight 0.5% increase on the €4,537 million recorded in 2010. This sign of stability is very relevant, considering the context in which it has been achieved: the regulatory limitations that took effect in some areas, lower activity in Spain and the reduction of some fees to ensure greater customer loyalty. It is worth pointing out that fees related to banking services improved most (up 1.3% year-on-year), while those from the asset management business fell by 1.5% over the same period due to the impact of the turmoil in the markets on the assets managed by funds and the preference shown by customers for other products such as time deposits and promissory notes.
The balance of the “Net gains (losses) on financial assets and liabilities” and “Exchange differences (net)” in 2011 amounted to €1,479 million, a 21.9% decrease on the €1,894 million posted the previous year. This drop is due to the negative results for the third quarter of 2011 as a result of the loss of value of the assets, decreased customer activity and the absence of earnings for portfolio sales.
The balance of the “Other operating income and expenses” heading in 2011 reached €205 million, a fall of 30.6% on the €295 million in earnings posted in 2010. This drop is due to the effect of hyperinflation in Venezuela and to the greater contribution to the deposit guarantee fund. Income from the insurance activity rose by 12.7%, but failed to offset the above factors.
As a result of the above, “Gross income” in 2011 reached €20,566 million, which represents a 1.6% decrease compared with the €20,910 million posted in 2010. Not including NTI and dividends, this figure shows flat performance with a slight increase, reflecting the resilience of recurring revenues in an extremely complex economic and financial environment.
The balance of the “Operating expenses” heading in 2011 amounted to €9,951 million, with an increase of 11% on the €8,967 million recorded in 2010. This is due to the incorporation of Garanti, the investment process underway in BBVA and the effort made to train our staff and promote the Bank’s talent. Nevertheless, the efficiency ratio closed December at an outstanding level of 48.4%, one of the lowest in the banking industry worldwide.
As of December 31, 2011, the number of employees amounted to 110,645, a 3.4% increase on the figure recorded in December de 2010. The branch network numbered 7,457 units, with 96 more branches than at the close of 2010. The total number of branches continues stable in Spain at a time when the sector has just begun a process of reducing branch numbers. BBVA began the same process in 2006 and completed it over 2009. In contrast, the branches in emerging countries are increasing (basically in Mexico and South America) as a result of the expansion processes underway in these countries, aimed at taking advantage of the growth opportunities offered by their markets. Finally, the number of ATMs continues to grow. It closed December 2011 at 18,794, 1,739 above the figure at the close of 2010. As is the case with branches, the increase is focused mainly on emerging countries, while developed countries continue with no significant changes, although in this case investment is focused on their renewal and modernization.
The balance of the “Depreciation and amortization” heading in 2011 reached €847 million, an increase of 11.3% on the €761 million posted in 2010, mainly due to the depreciation of Garanti’s intangible assets.
As a result of the above, “Operating income” for 2011 totaled €10,615 million, a decrease of 11.1% on the €11,942 million recorded in 2010.
The balance of the “Impairment losses on financial assets (net)” heading in 2011 is €4,226 million, a drop of 10.4% on the €4,718 million recorded in 2010. The Group’s risk premium improved by 14 basis points reaching 1.2%, without the coverage ratio being affected, since as of December 31, 2011 it reached 61%, practically the same level recorded at the close of the previous year (62%).
The balance of the “Provisions expense (net)” heading in 2011 reached €510 million, a 5.7% increase on the €482 million recorded in 2010, and basically includes early retirements, other contributions to pension funds and provisions for contingent liabilities.
The balance of “Other gains (losses)” in 2011 is a loss of €2,109 million, compared with losses of €320 million in 2010. This heading includes the impairment of goodwill in the United States, amounting to €1,444 million, and €665 million for loan-loss provisions for real estate and asset recoveries in order to maintain the coverage at levels above 30%. The 2010 figure is due mainly to the adjustment of the value of foreclosed or acquired assets in Spain.
As a result of the above, “Income before tax” for 2011 stood at €3,770 million, a 41.3% decrease on the €6,422 million recorded in 2010.
The balance of “Income tax” in 2011 is €285 million, an 80.1% decrease on the €1,427 million posted in 2010. This is due to increased income with a low or zero tax rates (especially dividends and CNCB earnings) and the growing weight of earnings from America and Garanti, where effective tax rates are low.
As a result of the above, “Net income” for 2011 totaled €3,485 million, a 30.2% decrease on the €4,995 million in 2010.
“Net income attributed to non-controlling interests” for 2011 is €481 million, an increase of 23.8% on the €389 million in 2010, due to the growth in earnings from Venezuela, Argentina and Chile.
Finally, “Net income attributed to parent company” in 2011 reached €3,004 million, a 34.8% decrease on the €4,606 million posted in 2010. Not including the one-off loss from impairment of goodwill in the United States, the attributed income totaled €4,015 million.
| BBVA Group | Millions of Euros | |
|---|---|---|
| 2011 | 2010 | |
| EPS (Earnings per Share) | 0.64 | 1.14 |
| ROE (Return on Equity) | 8.0 | 15.8 |
| ROA (Return on Asset) | 0.61 | 0.89 |
| Efficiency ratio (%) | 48.4 | 42.9 |
| NPL Ratio (%) | 4.0 | 4.1 |
| NPL Coverage Ratio (%) | 61 | 62 |
| Risk premium (%) | 1.2 | 1.3 |
Earnings per share (EPS) in 2011 stood at €0.64 (€0.85 excluding one-offs), compared with €1.14 in 2010 (after correcting for the effects of the capital increases completed in November 2010, April 2011 and October 2011).
The increase in the Group’s equity has increased the book value per share by 2.2% year-on-year to €8.35. Return on equity (ROE) in 2011 stood at 8% (10.6% excluding one-offs), compared with 15.8% in 2010.
Return on total average assets (ROA) in 2011 amounted to 0.61% (0.79% excluding one-offs), compared with 0.89% in 2010.
The efficiency ratio in 2011 stood at 48.4%, compared with 42.9% in 2010.