January-December 2012

Credit risk

The most significant aspects in the fourth quarter of 2012 as regards risk management are summarized below:

  • The Group’s NPA ratio rose due to the macroeconomic situation mentioned earlier and the reduction in lending.
  • There was a new increase in provisions in Spain to cover the gradual impairment of real estate portfolios and assets within the scope of the Royal Decree-Laws 02/2012 and 18/2012, in order to fully comply with the provisions of these two laws. In the rest of the geographical areas, asset quality was stable or improved.

As a result, the Group ended 2012 with its main risk indicators as expected and comparing positively with those of most of its peers. As of 31-Dec-2012, the NPA ratio stood at 5.1%, the coverage ratio at 72% and the cumulative risk premium at 2.16%.

The evolution of total risks with BBVA Group customers (also taking into account contingent liabilities) amounted to €407,126m as of 31-Dec-2012, a 2.5% decline over the quarter, due to the deleveraging process underway in Spain, the reduction in the CIB loan book and the unfavorable impact of the dollar and the Mexican peso on the portfolios in the U.S. and Mexico. Strong activity in emerging countries has not counterbalanced these reductions in risk. However, it has risen 1.6% over the year due mainly to the incorporation of Unnim.

Non-performing assets ended the year at €20,603m, up 2.4% on the figure posted at the close of September, when it already included the amounts from Unnim. The NPA ratio continued to worsen in Spain, in line with existing forecasts.

In terms of variations in NPA over the fourth quarter of 2012, both additions and recoveries increased, although additions have grown at a slower pace than recoveries, resulting in an improvement in the ratio of recoveries to additions to NPA to 59.4% (as of the fourth quarter of 2012). Most additions to NPA have been subjective in nature.

The Group’s NPA ratio at the end of December 2012 stood at 5.1%, up 24 basis points over the quarter and 110 points over the year. Of this rise, 56 basis points are the result of the aforementioned integration of Unnim; the rest is mainly due to the worsening economic situation in Spain, combined with the financial deleveraging process in the country. As a result, the ratio stood at 6.9% as of 31-Dec-2012. In Mexico the NPA ratio fell to 3.8%. In Eurasia it stands at 2.8%. In the United States it fell once again to 2.4% thanks to the ongoing improvement in the area’s asset quality (3.5% as of 31-Dec-2011). Finally, the ratio dropped slightly in South America from 2.2% at the end of September to 2.1%, according to data at the close of 2012.

Coverage provisions for customer risk increased to €14,804m, up 6.7% on the figure at the close of September and 52.8% on December 31, 2011. The rise is mainly due to a significant increase in provisions in Spain and, in the year-on-year figure, also to the incorporation of Unnim. As a result, the Group’s coverage ratio has improved by 3 percentage points over the quarter and 11 points over the year, to 72%. By business areas, Spain and South America increased their ratios to 67% and 146%, respectively, while United States closed at 90%, Mexico at 114% and Eurasia at 87%.

Credit risk management (1)

(Million euros)

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31-12-12 30-09-12 30-06-12 31-03-12 31-12-11
Non-performing assets 20,603 20,114 16,481 16,096 15,866
Total risks 406,955 417,405 409,145 400,553 400,709
Provisions 14,805 13,877 10,822 9,726 9,688
Specific 9,752 9,687 7,744 6,666 6,471
Generic and country-risk 5,053 4,190 3,078 3,061 3,218
NPA ratio (%) 5.1 4.8 4.0 4.0 4.0
NPA coverage ratio (%) 72 69 66 60 61
(1) Including contingent liabilities

Variations in non-performing assets

(Million euros)

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4Q12 3Q12 2Q12 1Q12 4Q11
Beginning balance 20,114 16,481 16,096 15,866 15,970
Entries 4,041 3,674 3,717 3,092 3,610
Recoveries (2,400) (1,919) (2,090) (1,882) (2,752)
Net variation 1,642 1,755 1,627 1,210 858
Write-offs (1,172) (1,096) (1,121) (1,006) (1,138)
Exchange rate differences and other 19 2,974 (121) 26 176
Period-end balance 20,603 20,114 16,481 16,096 15,866
Memorandum item:

Non-performing loans 20,287 19,834 16,243 15,880 15,647
Non-performing contingent liabilities 317 280 238 216 219

Non-performing assets

(Million euros)

Recoveries over entries to NPA


NPA and coverage ratios