Liquidity and funding management of the BBVA Group’s balance sheet helps to fund the recurrent growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of funding. A core principle of the BBVA Group’s liquidity and funding management is the financial independence of its banking subsidiaries. This aims to ensure that the cost of liquidity is correctly reflected in price formation and that there is sustainable growth in the lending business.
Throughout 2012 the wholesale short and long-term funding markets were affected by a high level of uncertainty and their performance varied widely. They were positive in the first quarter of the year as a result of the extraordinary actions taken by the European Central Bank (ECB), with two long-term liquidity auctions, combined with the improved risk perception of European countries. However, from April until the summer the situation was less favorable, due to doubts about the viability of the Spanish economy and the downgrades of both the sovereign debt and financial institutions. Finally, since the end of August, as a result of renewed action by the ECB, with its Outright Monetary Transactions (OMT), the long-term funding markets have been more positive and allowed major banks such as BBVA to access the markets repeatedly, with both senior debt and mortgage-covered bonds. The short-term markets have been conditioned by a lack of appetite on the part of investors, due to rating downgrades, and this situation only improved in the last quarter of 2012.
In this difficult context BBVA has been able to maintain the access to the markets, as can be seen by its successful issuances in 2012. In the first quarter, BBVA operated completely normally, with a senior debt issue of €2 billion. In the last quarter, the Bank also accessed the European and US markets, with senior issues of €2.5 billion and USD 2 billion, respectively. Taking advantage of the improvement at the end of the year a further €2 billion were issued in 5-year covered bonds. In this environment of contributing liquidity to the balance sheet and a normal situation in wholesale issuance, BBVA has maintained a steady excess of liquidity over recent months, which will allowe it to reduce the funds received from the ECB.
In conclusion, the BBVA Group's proactive policy in liquidity management, its retail business model with an ample contribution of liquidity in 2012 and the reduced size of its assets, all give it a comparative advantage with respect to its European peers. Moreover, the continued positive proportion of retail deposits on the balance sheet in all its geographical areas means the Group can continue to improve its liquidity position, while at the same time improving its funding structure.
The following is a breakdown of maturities of wholesale issues by the nature of the issues:
(Million euros)
| Maturities of wholesale issues | 2013 | 2014 | 2015 | After 2015 | Total |
|---|---|---|---|---|---|
| Senior debt | 7.104 | 4.737 | 5.475 | 1.957 | 19.273 |
| Covered bonds | 7.550 | 6.843 | 4.244 | 19.904 | 38.541 |
| Public-covered bonds | 2.355 | 1.300 |
|
1.151 | 4.806 |
| Regulatory capital instruments (1) | 1.238 |
|
148 | 3.940 | 5.326 |
| Other long-term financial instruments | 67 | 2 | 1 | 877 | 947 |
| Total | 18.314 | 12.882 | 9.868 | 27.829 | 68.893 |
In addition, within the framework of the policy implemented in recent years to strengthen its net worth position, the BBVA Group will at all times adopt the decisions it deems advisable to maintain its high degree of capital solvency, using the established mechanisms, and specifically the issues of fixed-income securities and convertible bonds, authorized by the AGM´s of the recent years