Industry Trends

In Mexico the financial sector has continued to show a high degree of strength, with a capital ratio that is far above the minimum required (10%). This has allowed the system to be among one of the first to adopt the Basel III regulation.

With respect to banking activity, the loan book is robust and has recorded 20 consecutive months of growth. All the portfolios have grown, and this dynamic mood is expected to continue due to the favorable macroeconomic environment. Customer fund gathering is also positive, so there are no liquidity tensions.

With respect to the exchange rate, the peso has appreciated over the year, but depreciated in the quarter, both in terms of the fixing and average rate. This means its impact on the balance sheet, activity and earnings in the area has been positive year-on-year, but negative over the quarter. Unless otherwise indicated, all comments below on percentage changes refer to constant exchange rates with the aim of providing a better understanding of the performance of the business.

Income statement

(Million euros)

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	Mexico
	2012	Δ %	Δ % (1)	2011
Net interest income	4,164	10.3	7.8	3,776
Net fees and commissions	1,087	6.4	4.0	1,022
Net trading income	218	(26.3)	(27.9)	296
Other income/expenses	288	27.0	24.2	227
Gross income	5,758	8.2	5.8	5,321
Operating costs	(2,172)	12.2	9.7	(1,936)
Personnel expenses	(912)	11.0	8.5	(822)
General and administrative expenses	(1,126)	11.6	9.1	(1,009)
Deprecation and amortization	(133)	27.0	24.1	(105)
Operating income	3,586	5.9	3.6	3,385
Impairment on financial assets (net)	(1,320)	11.9	9.4	(1,180)
Provisions (net) and other gains (losses)	(41)	(30.5)	(32.1)	(59)
Income before tax	2,225	3.7	1.4	2,146
Income tax	(538)	4.7	2.4	(513)
Net income from ongoing operations	1,688	3.4	1.0	1,633
Net income from discontinued operations	136	69.1	65.4	81
Net income	1,824	6.4	4.1	1,714
Non-controlling interests	(3)	20.6	17.9	(3)
Net attributable profit	1,821	6.4	4.0	1,711

(1) At constant exchange rates

Balance sheet

(Million euros)

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	31-12-12	Δ %	Δ % (1)	31-12-11
Cash and balances with central banks	5,968	8.5	3.2	5,503
Financial assets	29,463	12.7	7.3	26,138
Loans and receivables	42,058	12.1	6.7	37,522
Loans and advances to customers	37,249	14.4	8.9	32,560
Loans and advances to credit institutions and other	4,809	(3.1)	(7.7)	4,961
Tangible assets	1,168	18.5	12.8	986
Other assets	3,774	61.4	53.6	2,339
Total assets/Liabilities and equity	82,432	13.7	8.3	72,488
Deposits from central banks and credit institutions	13,927	33.9	27.4	10,403
Deposits from customers	36,602	3.0	(1.9)	35,524
Debt certificates	3,952	1.6	(3.3)	3,889
Subordinated liabilities	4,249	77.1	68.6	2,399
Financial liabilities held for trading	5,830	7.2	2.1	5,438
Other liabilities	12,882	21.5	15.7	10,599
Economic capital allocated	4,991	17.8	12.2	4,236

(1) At constant exchange rates

Significant ratios

(Percentage)

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	Mexico
	31-12-12	30-09-12	31-12-11
Efficency ratio	37,7	38,0	36,4
NPA ratio	3,8	4,1	3,7
NPA coverage ratio	114	107	120
Risk premium	3,49	3,46	3,49

Mexico. Operating income

(Million euros at constant exchange rate)

(1) At current exchange rate: +5.9%.

Mexico. Net attributable profit

(Million euros at constant exchange rate)

(1) At current exchange rate: +6.4%.