The South American area manages the BBVA Group's banking, pension and insurance businesses in the region. 2011 saw the incorporation of Crédit Uruguay (purchased in January 2011 and merged with BBVA Uruguay in May 2011) and the sale of the Group’s holding in the insurance company Consolidar Retiro of Argentina. An additional 24.5% stake in the company Forum Chile has also been purchased in September 2011.
The year-on-year comparison of the financial statements for this area is affected by the change in the exchange rates of the region’s currencies against the euro. In terms of the exchange rate at the close of the year, only the Argentinean and Chilean pesos have weakened. In average terms all the currencies except for the Chilean peso have weakened. Overall, the impact of exchange rates on activity last year is positive, while in terms of earnings it is negative. For this reason, the most relevant figures include a reference to the change at constant exchange rate.
| South America |
Millions of Euros | ||
|---|---|---|---|
| 2011 | 2010 | % Change 2011-2010 |
|
| NET INTEREST INCOME | 3,164 | 2,495 | 26.8 |
| Net fees and commissions | 1,077 | 957 | 12.6 |
| Net gains (losses) on financial assets and liabilities and net exchange differences | 477 | 514 | (7.2) |
| Other operating income and expenses | (261) | (168) | 55.3 |
| GROSS INCOME | 4,457 | 3,797 | 17.4 |
| Operating expenses | (2,042) | (1,668) | 22.4 |
| Administration costs | (1,884) | (1,537) | 22.6 |
| Personnel expenses | (1,040) | (854) | 21.9 |
| General and administrative expenses | (844) | (684) | 23.4 |
| Depreciation and amortization | (158) | (131) | 20.5 |
| OPERATING INCOME | 2,415 | 2,129 | 13.4 |
| Impairment losses on financial assets (net) | (449) | (419) | 7.2 |
| Provisions (net) and other gains (losses) | (89) | (40) | 120.0 |
| INCOME BEFORE TAX | 1,877 | 1,670 | 12.4 |
| Income tax | (390) | (397) | (1.7) |
| NET INCOME | 1,487 | 1,273 | 16.8 |
| Net income attributed to non-controlling interests | (480) | (383) | 25.3 |
| NET INCOME ATTRIBUTED TO PARENT COMPANY | 1,007 | 889 | 13.2 |
The changes in the principal headings of the income statement of this business area are:
“Net interest income" in 2011 stood at €3,164 million, an increase of 26.8% on the €2,495 million posted in 2010 (31.6% at constant exchange rates). This has been the result of steady growth in business, combined with good handling of spreads, despite increasing competitive pressure.
The balance of “Net fees and commissions” in 2011 is €1,077 million, an increase of 12.6% (15.7% ce) on the €957 million recorded in 2010, also due basically to the increasing pace of business in most of the countries in the region.
The balance of “Net gains (losses) on financial assets and liabilities” and “Exchange differences (net)” in 2011 is €477 million, a 3.4% (ce) reduction on the €514 million posted in 2010. The balance is affected by the value of US dollar positions held by the Venezuelan subsidiary and by turmoil in the markets.
The balance of “Other operating income and expenses” in 2011 is a loss of €261 million, compared with a loss of €168 million in 2010. This line mainly includes the adjustment for hyperinflation in Venezuela.
As a result of the above, “Gross income” for 2011 stood at €4,457 million, an increase of 17.4% (21.4% ce) on the €3,797 million in 2010.
The balance of "Operating expenses” in 2011 totaled €2,042 million, an increase of 22.4% (27.1% ce) on the €1,668 million in 2010, due to expansion and positioning projects undertaken by most of the units. Despite this, the area’s efficiency ratio stands at 45.8% thanks to the positive trend in revenues.
Based on the above, the “Operating income” for 2011 amounted to €2,415 million, with an increase of 13.4% on the €2,129 million in 2010. The increase at constant exchange rates is 17%.
The balance of “Impairment losses on financial assets (net)” for 2011 stood at €449 million, up 7.2% on the figure of €419 million in 2010, due to the greater generic provisions linked to increased lending. The surge in business activity has not led to a worsening of asset quality in the area, and the NPA ratio fell by 30 basis points to 2.2% as of December 31, 2011, reaching an all-time low thanks to a rigorous policy of risk acceptance and recovery management. The coverage ratio rose by 16 percentage points to 146%.
The balance of “Provisions (net)” and “Other gains (losses)” in 2011 is €89 million, compared with €40 million in 2010.
As a result of the above, “Income before tax” for 2011 totaled €1,877 million, an increase of 12.4% on the €1,670 million in 2010.
The balance of “Income tax” in 2011 is €390 million, a decrease of 1.7% on the €397 million posted in 2010.
As a result of the above, “Net income” for 2011 is €1,487 million, an increase of 16.8% on the €1,273 million in 2010.
“Net income attributed to non-controlling interests” for 2011 is €480 million, an increase of 25.3% on the €383 million in 2010. Most of this increase corresponds to Venezuela.
“Net income attributed to parent company” in 2011 stood at €1,007 million, up 13.2% on the €889 million posted in 2010. At constant exchange rates it rises to 16.2% thanks to strong income growth due to thriving activity and good price management, which made it possible to continue with the investment effort started in the area and increase loan-loss provisions as a result of positive lending performance.
| South America | Millions of Euros | ||
|---|---|---|---|
| 2011 | 2010 | % Change 2011-2010 |
|
| Total Assets | 63,444 | 51,671 | 22.8 |
| Loans and advances to customers | 40,219 | 31,512 | 27.6 |
| Of which: |
|
|
|
| Residential mortgages | 7,124 | 5,932 | 20.1 |
| Consumer finance | 10,087 | 6,741 | 49.6 |
| Loans | 7,594 | 5,129 | 48.1 |
| Credit cards | 2,493 | 1,611 | 54.7 |
| Loans to enterprises | 20,829 | 16,862 | 23.5 |
| Loans to public sector | 914 | 830 | 10.2 |
| Total customer funds | 45,776 | 36,085 | 26.9 |
| Current and savings accounts | 26,140 | 19,326 | 35.3 |
| Time deposits | 15,094 | 12,964 | 16.4 |
| Other custumer funds | 4,542 | 3,795 | 19.7 |
| Off-balance-sheet funds | 50,668 | 51,862 | (2.3) |
| Mutual funds | 2,850 | 3,063 | (6.9) |
| Pension funds | 47,818 | 48,800 | (2.0) |
| Economic capital allocated | 2,912 | 2,519 | 15.6 |
| Efficiency ratio (%) | 45.8 | 43.9 | |
| NPA Ratio (%) | 2.2 | 2.5 | |
| NPA Coverage Ratio (%) | 146 | 130 | |
| Risk premium (%) | 1.31 | 1.52 | |
The changes in the principal headings of activity in this area of the business are as follows:
As of December 31, 2011, the loans and advances to customers (gross) balance stood at €40,219 million, up 27.6% on the €31,512 million as of December 31, 2010. All the countries have seen growth, with significant increases in consumer finance, cards and businesses.
As of December 31, 2011, the balance of on-balance sheet customer funds amounted to €45,776 million, up 26.9% on the €36,085 million recorded at the close of 2010. Lower-cost transactional deposits such as current and savings accounts increased by 35.3%, which explains part of the improvement in net interest income.
Off-balance sheet funds, however, fell by 2.3% as a result of turmoil in the markets.
New products and services in South America
Below are the main products and services launched by the units in the area in 2011:
Argentina
BBVA Francés has focused its commercial activity on credit growth in the various businesses. In the consumer finance business, the highest levels of turnover have been reached in 2011 through “Préstamo Simple”, an agile and accessible product that enabled a significant year-on-year increase in market share for this type of loans.
In the business segment, BBVA Francés contributed to the development of the farming sector with a wide range of financial products and services designed for the agricultural segment, offering special finance lines for the purchase of agricultural machinery at very competitive rates and under unrivalled market conditions. Its strategic priority for supporting the productive sector resulted in the launch of new loan and leasing lines at fixed and variable interest rates for small and medium-sized companies intended for investment projects, capital good acquisition and export prefinancing.
Chile
In BBVA Chile, with a differentiated offering of products and services, 2011 saw the launch of Banca Premium, aimed at high-income individuals who are not private banking customers, but do require more personalized and sophisticated products and services.
In consumer finance, a flexible product in terms of term and method of payment has been launched. The loan granting processes have also been improved and made more flexible.
As regards customer funds, the campaigns focused on winning new customers enabled a significant flow of funds to be attracted. Finally, the “Cuenta Simple” has been launched, a new type of current account that enables the customer to choose the account number and personalize it so it can be remembered easily. This product has been widely welcomed by customers.
Colombia
In 2011, BBVA Colombia carried out an intense and dynamic commercial activity that enabled it to increase significantly its business in terms of both lending and winning new customers, with various campaigns complemented with the Portafolio de Servicios Integral (Comprehensive Services Portfolio), a package of products and services for self-employed workers designed to cover short-term liquidity needs.
The “Vivienda sin límites” campaign, focused on mortgage lending and home leasing, has been conducted.
Also, the new credit cards, together with the creation of new services and the online purchase portal, enabled the turnover volume and recurrence to be increased.
There has also been a significant increase in activity in the businesses and companies area.
Peru
In 2011, management by segments has been a key element in customer care. In the individual customer segment, Premium and VIP customer loyalty has been strengthened with the opening of strategically located branches and points of contact.
In the employees segment, BBVA Continental continued to consolidate its position in payroll with the best benefits program available on the market. The most valued attributes are the attractive discounts and the largest ATM network in the country. These and other initiatives enabled the customer base, the business volume and the profitability of the individual customer segment to be increased.
In the business segment, the “China Comex” service has been developed to boost business with the Chinese market; “Post Venta Leasing” management and administration has been implemented for leasing products; the use of electronic payment and collection services has been encouraged; and a specialized telephone customer service team has been set up exclusively for the business segment. In the SME segment, use of the “Capital de Trabajo” card grew by around 350% in 2011, increasing the card market share by 1.31 percentage points (according to information available as of November 2011).
Venezuela
With technology and innovation as the pillars of its comprehensive business plan, BBVA Provincial launched the credit card cash payment service through the multiexpress ATMs, which combines with the functionality offered by this channel for migrating transactions towards higher-quality and faster external channels. Work has also been completed on the adaptations needed to guarantee the operation of the chip technology for both card and point of sale, ATM and cash registers.
The new services include the www.mispagosprovincial.com payment portal, which enables both customers and non-customers to make a wide variety of bill payments. The Group is a pioneer in the provision of this service in the Venezuelan banking sector.
As for mobile banking, a new mobile portal through cell phones has been launched. It enables users to check the balances of accounts, credit cards and trusts, transfers between own and third-party accounts, and make credit card and service payments.
Panama
BBVA Panamá has started the design of a flexible product that adapts to the customer’s needs with the “Hipoteca Diciembre es Tuyo” campaign, which offers a flexible method of payment charged to the customer’s account and applies, among others, to preferential mortgages and first homes.
A deposit product with increasing rates based on the term has been launched in order to win new customers.
Paraguay
In the retail business, several promotions through credit cards have been conducted, including the launch of a credit product for purchasing new or used vehicles.
In the wholesale business, BBVA reasserted its support for one of the country’s main economic activity sectors by renewing its strategic alliance with the agricultural machinery industry, offering advantageous financing conditions for the purchase of machinery.
Uruguay
In 2011, the existing products have been boosted, the commercial offering has been unified and new strategic alliances have been established that enabled business to be increased.
New customer care (customer service within the call center) and mass product marketing (credit cards and consumer loans) channels have also been implemented through pre-approved offer campaigns for bank employees.
Worth mentioning in the HNWI segment is the launch of the “Mastercard Black” card (BBVA Uruguay is the first bank in the country to sell it) and the setting up of a specialized branch for this segment in the World Trade Center Montevideo (the most modern business complex, with the highest residential growth).