This area comprises the banking, pensions and insurance business conducted in Mexico by the BBVA Bancomer financial group.
Industry Trends
In 2012 the Mexican banking system continued to maintain high capitalization and liquidity levels. This has enabled lending expansion in all portfolios, and the buoyant mood is expected to continue due to the favorable macroeconomic environment. Fund gathering is also positive, so there are no liquidity tensions.
The year-on-year comparison of this area’s financial statements is positively affected by the appreciation of the Mexican peso against the euro, although in the income statement the impact is less relevant than on the balance sheet, since the average exchange rate appreciated by 2.29%, while the appreciation in the fixing price over the period amounts to 5.04%. The most important figures include a reference to the percentage change at constant exchange rates.
Activity and Earnings
2012 was a year of change for Mexico. Investment continued to take advantage of market opportunities and thus maintain a sound financial position.
An agreement for the sale of the pension business in Mexico was signed in the second half of the year. The earnings from this activity are therefore classified under discontinued operations in the income statement for 2012 and also for 2011, for comparison purposes.
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| México | Millions of Euros | ||
|---|---|---|---|
| 2012 | 2011 | % Variación | |
| NET INTEREST INCOME | 4,164 | 3,776 | 10.3 |
| Net fees and commissions | 1,087 | 1,022 | 6.4 |
| Net gains (losses) on financial assets and liabilities and net exchange differences | 218 | 296 | (26.3) |
| Other operating income and expenses | 288 | 227 | 27.0 |
| GROSS INCOME | 5,758 | 5,321 | 8.2 |
| Operating expenses | (2,172) | (1,936) | 12.2 |
| Administration costs | (2,038) | (1,831) | 11.3 |
| Personnel expenses | (912) | (822) | 11.0 |
| General and administrative expenses | (1,126) | (1,009) | 11.6 |
| Depreciation and amortization | (133) | (105) | 27.0 |
| OPERATING INCOME | 3,586 | 3,385 | 5.9 |
| Impairment losses on financial assets (net) | (1,320) | (1,180) | 11.9 |
| Provisions (net) and other gains (losses) | (41) | (59) | (30.5) |
| INCOME BEFORE TAX | 2,225 | 2,146 | 3.7 |
| Income tax | (538) | (513) | 4.7 |
| INCOME FROM CONTINUING TRANSACTIONS | 1,688 | 1,633 | 3.4 |
| Income from discontinued transactions (net) | 136 | 81 | 69.1 |
| NET INCOME | 1,824 | 1,714 | 6.4 |
| Net income attributed to non-controlling interests | (3) | (3) | 20.6 |
| NET INCOME ATTRIBUTED TO PARENT COMPANY | 1,821 | 1,711 | 6.4 |
The changes in the main headings of the income statement of this business area are:
“Net interest income” for 2012 amounted to €4,164 million, with an increase of 10.3% on the €3,776 million in 2011. The increase at constant exchange rates is 7.8%. The volume of activity, combined with good price management, have offset the impact of low interest rates throughout the year. As a result, despite the economic situation, profitability, calculated as the net interest income over average total assets, remains stable.
The balance under the heading “Net fees and commissions” in 2012 totaled €1,087 million, up 6.4% (4% at constant exchange rates) on the €1,022 million posted the previous year, due to increased transactions by customers with credit and debit cards, and a higher volume of assets under management in mutual funds.
The balance under the headings “Net gains (losses) on financial assets and liabilities” and “Exchange differences (net)” for 2012 totaled €218 million, down 26.3% on the €296 million in 2011, when exceptionally high brokerage revenues were posted.
The balance of “Other operating income and expenses” for 2012 amounted to €288 million, a 27% increase on the €227 million registered the previous year, as a result of the strength of the insurance business.
As a result of the above, “Gross income” for 2012 amounted to €5,758 million, with an increase of 8.2% (5.8% at constant exchange rates) on the €5,321 million registered in 2011.
The balance of “Operating expenses” in 2012 was €2,172 million, an increase of 12.2% (9.7% at constant exchange rates) on the €1,936 million posted in 2011, as a result of the investments undertaken in technology and infrastructure in recent years. The number of ATMs continued to grow over the year to 7,733 units, while POS terminals increased by 9,176 units. With these figures for income and expenses, the efficiency ratio remains one of the best in the Mexican system, at 37.7%.
“Operating income” for 2012 stood at €3,586 million, compared with €3,385 million in 2011, with a decrease of 5.9%, or 3.6% excluding the exchange-rate effect; the latter increases to 6.6% excluding the more volatile revenues from NTI.
The balance under the heading “Impairment losses on financial assets (net)” for 2012 stood at €1,320 million, up 11.9% (or 9.4% at constant exchange rates) on the €1,180 million in the previous year. This increase is in line with the growth in activity in the area, since the accumulated risk premium remains at 3.49%, the same figure posted the previous year, and the NPA and coverage ratios have barely changed, ending the year at 3.8% and 114%, respectively.
The balance under the headings “Provisions expense (net)” and “Other gains (losses)” in 2012 stood at €41 million, compared with €59 million in 2011.
As a result, “Income before tax” stood at €2,225 million, up 3.7% on the €2,146 million in 2011. “Income tax” stood at €538 million, increasing in line with earnings on the €513 million posted the previous year.
As already mentioned, due to the agreement for the sale of the mandatory pension business managed by the Bancomer Afore, the earnings in 2012 (and likewise in 2011 for comparison purposes) have been reclassified in “Income from discontinued transactions” for the amount of €136 million, up 69.1% on the figure for 2011.
As a result of the above, in 2012 Mexico generated “Net income attributed to parent company” of €1,821 million, up 6.4% on the €1,711 million posted in 2011. Excluding the impact of the peso’s appreciation, the increase was 4.7%.
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| Mexico | Millions of Euros | ||
|---|---|---|---|
| 2012 | 2011 | % Change 2012-2011 |
|
| Total Assets | 82,432 | 72,488 | 13.7 |
| Loans and advances to customers | 38,937 | 34,084 | 14.2 |
| Total customer funds | 34,071 | 31,097 | 9.6 |
| Off-balance-sheet funds | 40,805 | 35,317 | 15.5 |
| Economic capital allocated | 4,991 | 4,236 | 17.8 |
| Efficiency ratio (%) | 37.7 | 36.4 |
|
| NPA Ratio (%) | 3.8 | 3.7 |
|
| NPA Coverage Ratio (%) | 114 | 120 |
|
| Risk premium (%) | 3.49 | 3.49 |
|
The changes in the main headings of activity in this business area are as follows:
As of December 31, 2012, loans and advances to customers (gross) stood at €38,937 million, up 14.2% on the €34,084 million as of December 31, 2011. Without the impact of exchange rates, there would have been growth of 8.8%.
The retail portfolio, which includes consumer finance, credit cards, mortgages to individuals and loans to small businesses, performed well, with a balance of €20,481 million, an increase of 9.6% compared with the figure for the close of 2011. Outstanding in this portfolio was lending to small businesses, which increased 27.1% on the figure for 2011 to €1,895 million. Consumer finance and credit cards rose by 13.3% to €9,675 million. It is worth highlighting that over a million consumer loans were issued during the year, including payroll, auto and personal loans. Credit card lending has continued to perform well, with a year-on-year increase of 14.1%. Residential mortgage lending increased by 3% to €8,911 million. With 28,300 new mortgages granted in 2012, BBVA Bancomer has maintained its leadership in the private sector, at one third of the new mortgages granted by banks and Sofoles. (All the variation percentages shown in this and the following paragraphs exclude the impact of exchange rates.)
The wholesale portfolio, which includes loans to corporations, SMEs, financial institutions and the public sector, also performed well and is up 7.4% year-on-year to €16,084 million. There was a particularly good performance in lending to the private sector, which has continued to grow year-on-year at double-digit rates throughout 2012, closing December at 12.2%. Loans to the public sector amounted to €3,590 million, 3.2% higher than at the close of 2011. Lending to corporates through the CIB global area continued to increase. This is reflected in the bank’s active participation in debt issues on capital markets, where BBVA has maintained its lead in Mexico, with a market share of 25.1% at the close of December 2012, according to Dealogic.
On-balance-sheet customer funds closed as of December 31, 2012 at €34,071 million, up 9.6% on the close of December 2011, or 4.3% excluding the impact of the peso’s appreciation. Demand deposits increased by 6.9%, with a notable performance by customer funds from the retail network, which increased by 7.3% compared with the close of 2011. BBVA continues to lead the demand deposit segment, with a third of the market share in funds managed in current and savings accounts, making it the favorite bank for savers in the country. Throughout the year, the BBVA Group in Mexico maintained its strategy of ensuring a profitable mix of liabilities, resulting in a year-on-year fall in higher-cost time deposits of 7.9%. This fall has been offset by the increase in the assets under management in mutual funds (up 6.7% with constant exchange rates) and other more sophisticated products such as repos and other fixed-income products.
Thus, as of December 31, 2012, off-balance-sheet funds, which include mutual funds, pension funds and managed customer portfolios, totaled €40,805 million, up 15.5% (10% at constant exchange rates), due not only to the aforementioned funds under management in mutual funds, but also to pension funds, where growth amounted to 18.8% excluding the impact of exchange rates.
As regards insurance activity, the broad product catalog (including "Inversión Libre Patrimonial", "VidaSegura", "HogarSeguro", "Auto" and "Transacción Segura"), as well as the low level of claims over the year, have helped maintain this business strong.
Products and Services
The main products and services launched by the area in 2012 are as follows:
In the wholesale segment, the BBVA Group in Mexico continues to help its corporate clients in their growth and expansion plans. The bank’s active participation in clients’ bond issues on the capital markets, amounting to over USD 4,100 million in 2012, has enabled BBVA to maintain its lead in this segment. It is also top of the ranking in syndicated loans, project finance and structured notes.
For retail customers, as part of the bank’s strategy of deeper segmentation in the customer base, various products and services have been launched targeting each one of the different groups making up this set of customers.
In the commercial banking segment, the broadest within the customer structure, the bank has focused on improving service quality through self-service areas and use of “second generation” ATMs (known as “practicajas” and “recicladoras”) enabling customers to make payments on loans, credit cards and services, and also to deposit cash in BBVA Bancomer accounts.
For the “express” customer segment, the “Dinero Móvil BBVA Bancomer” campaign was launched in 2012 with the aim of increasing the penetration of financial services amongst the population. With this innovative service, customers can send money to anywhere in Mexico over the Internet, using an ATM or a cell phone. The recipient receives a message with a code so as to be able to draw the cash via the ATMs of the BBVA Bancomer network without needing to have a debit card or a bank account. This year the number of express accounts has risen substantially to reach a total of 1.8 million accounts at 2012 year end. The number of points of sale terminals via the network of banking correspondents has expanded significantly, with over 20,000 additional points of sale at the end of 2012.
Subsequent events
Following the negotiations held in the second half of the year, the sale of the stake in the Mexican company Administradora de Fondos para el Retiro Bancomer, S.A. de C.V. to Afore XXI Banorte, S.A. de C.V. was signed on January 9, 2013 for a total sale price of USD 1,735 million, with a profit, net of tax, of around €800 million.