Business areas

This section presents and analyzes the most relevant aspects of the Group's different business areas. Specifically, it shows a summary of the income statement and balance sheet, the business activity figures and the most significant ratios in each of them.

(Click on each country to see information)

SPAIN

Highlights

  • Deleveraging and increase in more liquid resources and off -balance-sheet continue.
  • Good performance of net fees and commissions.
  • Reduction of operating expenses.
  • Solid asset-quality indicators.

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THE UNITED STATES

Highlights

  • Lending remained stable over the year.
  • Increase in deposits from customers.
  • Positive performance of net interest income and net fees and commissions.
  • Solid risk indicators.
  • Higher income tax charge due to the tax reform approved at the end of 2017.
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MEXICO

Highlights

  • Good performance in activity.
  • Positive trend in gross income.
  • Costs continue to increase below gross income, and double-digit year-on-year growth in net attributable profit.
  • Stable asset quality indicators.

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TURKEY

Highlights

  • Solid growth in activity.
  • Very positive growth in more recurring revenue items.
  • Operating expenses increase below the level of inflation and the rate of increase in gross income.
  • Risk indicators affected by more additions to NPL from certain wholesale loans that are practically fully provisioned.

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SOUTH AMERICA

Highlights

  • Activity continues to grow at a good pace.
  • More recurring revenue items performing very well.
  • Expenses grow below gross income.
  • Stable risk indicators.

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REST OF EURASIA

Highlights

  • Positive trend in lending in Europe.
  • Trend in deposits strongly influenced by the negative interest-rate environment.
  • Earnings down due to lower revenues, despite the good performance of expenses and loan-loss provisions.
  • Good performance of asset quality indicators.

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In 2017 the reporting structure of BBVA Group's business areas remained basically the same as in 2016. It is worth noting that BBVA announced the signing of two agreements, one for the sale of BBVA Chile to The Bank of Nova Scotia (Scotiabank) and another for the creation of a joint venture to which BBVA's real-estate business in Spain will be transferred for the subsequent sale of 80% of the company created to a subsidiary of Cerberus Capital Management, L.P. (Cerberus). For the purpose of the explanations given in this report, the figures for Non Core Real Estate and South America are shown on a comparable basis with previous periods, even though within the Group the operations underway that are mentioned above have been reclassified as non-current assets and liabilities held for sale. The Group's business areas are summarized below:

  • Banking activity in Spain includes, as in previous years, the Retail Network in Spain, Corporate and Business Banking (CBB), Corporate & Investment Banking (CIB), BBVA Seguros and Asset Management units in Spain. It also includes the portfolios, finance and structural interest-rate positions of the euro balance sheet.
  • Non Core Real Estate covers specialist management in Spain of loans to developers in difficulties and real-estate assets mainly coming from foreclosed assets, originated from both, residential mortgages, as well as loans to developers. New loan production to developers or loans that are not in difficulties are managed by Banking activity in Spain.
  • The United States includes the Group's business activity in the country through the BBVA Compass group and the BBVA New York branch.
  • Mexico basically includes all the banking and insurance businesses carried out by the Group in the country.
  • Turkey includes the activity of the Garanti group.
  • South America basically includes BBVA's banking and insurance businesses in the region.
  • Rest of Eurasia includes business activity in the rest of Europe and Asia, i.e. the Group's retail and wholesale businesses in the area.

In addition to the above, all the areas include a remainder made up basically of other businesses and a supplement that includes deletions and allocations not assigned to the units making up the above areas.

Lastly, the Corporate Center is an aggregate that contains the rest of the items that have not been allocated to the business areas, as it corresponds to the Group's holding function. It includes: the costs of the head offices that have a corporate function; management of structural exchange-rate positions; specific issues of equity instruments to ensure adequate management of the Group’s global solvency; portfolios and their corresponding results, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with employees; goodwill and other intangibles.

In addition to this geographical breakdown, supplementary information is provided for all the wholesale businesses carried out by BBVA, i.e. Corporate & Investment Banking (CIB), in the geographical areas where it operates. This aggregate business is considered relevant to better understand the Group because of the characteristics of the customers served, the type of products offered and the risks assumed.

Lastly, as usual, in the case of the Americas, Turkey and CIB areas, the results of applying constant exchange rates are given in addition to the year-on-year variations at current exchange rates.

The information by areas is based on units at the lowest level and/or companies making up the Group, which are assigned to the different areas according to the main geographical area in which they carry out their activity.

Major income statement items by business area (Million euros)

Business areas
BBVA Group Banking activity in Spain Non Core Real Estate The United States Mexico Turkey South America Rest of Eurasia ∑ Business areas Corporate Center
2017
Net interest income 17,758 3,738 71 2,158 5,437 3,331 3,200 180 18,115 (357)
Gross income 25,270 6,180 (17) 2,919 7,080 4,115 4,451 468 25,196 73
Operating income 12,770 2,802 (132) 1,061 4,635 2,612 2,444 160 13,580 (811)
Profit/(loss) before tax 6,931 1,866 (673) 784 2,948 2,147 1,691 177 8,940 (2,009)
Net attributable profit 3,519 1,381 (501) 511 2,162 826 861 125 5,363 (1,844)
2016
Net interest income 17,059 3,877 60 1,953 5,126 3,404 2,930 166 17,514 (455)
Gross income 24,653 6,416 (6) 2,706 6,766 4,257 4,054 491 24,684 (31)
Operating income 11,862 2,837 (130) 863 4.371 2,519 2,160 149 12,769 (907)
Profit/(loss) before tax 6,392 1,268 (743) 612 2,678 1,906 1,552 203 7,475 (1,084)
Net attributable profit 3,475 905 (595) 459 1,980 599 771 151 4,269 (794)

Gross income (1), operating income (1) and net attributable profit breakdown (1) (Percentage. 2017)

(1) Excludes the Corporate Center.

(2) Includes the areas Banking activity in Spain and Non Core Real Estate.

Major balance sheet items and risk-weighted assets by business area (Million euros)

Business areas
BBVA Group Banking activity in Spain Non Core Real Estate The United States Mexico Turkey South America Rest of Eurasia ∑ Business areas Corp. Center NCA&L variation(1)
31-12-17
Loans and advances to customers 387,621 183,172 3,521 54,406 45,080 51,378 48,272 14,864 400,693 - (13,072)
Deposits from customers 376,379 177,763 13 61,357 49,414 44,691 45,666 6,700 385,604 - (9,225)
Off-balance sheet funds 98,005 62,054 4 - 19,472 3,902 12,197 376 98,005 -
Total assets/liabilities and equity 690,059 319,417 9,714 80,493 89,344 78,694 74,636 17,265 669,562 20,496
Risk-weighted assets 361,686 111,825 9,691 58,682 43,715 62,768 55,665 12,916 355,260 6,426
31-12-16
Loans and advances to customers 414,500 181,137 5,946 61,159 46,474 55,612 48,718 15,325 414,370 130
Deposits from customers 401,465 180,544 24 65,760 50,571 47,244 47,927 9,396 401,465 -
Off-balance sheet funds 91,287 56,147 8 - 19,111 3.753 11,902 366 91,287 -
Total assets/liabilities and equity 731,856 335,847 13,713 88,902 93,318 84,866 77,918 19,106 713,670 18,186
Risk-weighted assets 388,951 113,194 10,870 65,492 47,863 70,337 57,443 15,637 380,836 8,115
  • (1) Non-current assets and liabilities held for sale (NCA&L) from the BBVA Chile and real estate operations.

Once the composition of each business area has been defined, certain management criteria are applied, of which the following are particularly important:

  • Risk adjusted return. Calculation of risk adjusted return per transaction, customer, product, segment, unit and/or business area is sustained on ERC, which is based on the concept of unexpected loss at a specific confidence level, depending on the Group’s capital adequacy targets. The calculation of the ERC combines credit risk, market risk, structural balance-sheet risk, equity positions, operational risk, fixed-asset risk and technical risks in the case of insurance companies. These calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel III capital accord.
  • Internal transfer prices. BBVA Group has a transfer prices system whose general principles apply in the Bank's different entities, business areas and units.
  • Allocation of operating expenses. Both direct and indirect costs are allocated to the business areas, except where there is no clearly defined relationship with the businesses, i.e. when they are of a clearly corporate or institutional nature for the Group as a whole.
  • Cross-selling. In some cases, adjustments are required to eliminate shadow accounting entries that are registered in the earnings of two or more units as a result of cross-selling incentives.

Interest rates (Quarterly averages. Percentage)

2017 2016
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
Official ECB rate 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04
Euribor 3 months (0.33) (0.33) (0.33) (0.33) (0.31) (0.30) (0.26) (0.19)
Euribor 1 year (0.19) (0.16) (0.13) (0.10) (0.07) (0.05) (0.02) 0.01
USA Federal rates 1.30 1.25 1.05 0.80 0.55 0.50 0.50 0.50
TIIE (Mexico) 7.42 7.37 7.04 6.41 5.45 4.60 4.08 3.80
CBRT (Turkey) 12.17 11.97 11.80 10.10 7.98 7.99 8.50 8.98

Exchange rates (Expressed in currency/euro)

Year-end exchange rates Average exchange rates

31-12-17		 ∆% on
31-12-16		 ∆% on
30-09-17
2017		 ∆% on
2016
Mexican peso 23.6614 (8.0) (9.3) 21.3297 (3.1)
U.S. dollar 1.1993 (12.1) (1.6) 1.1296 (2.0)
Argentine peso 22.5830 (26.6) (8.2) 18.7375 (12.8)
Chilean peso 738.01 (4.7) 1.9 732,60 2.2
Colombian peso 3.584,23 (11.7) (3.1) 3.333,33 1.4
Peruvian sol 3,8813 (9.0) (0.7) 3,6813 1.4
Venezuelan bolivar 18.181,82 (89.6) (66.7) 18.181,82 (89.6)
Turkish lira 4,5464 (18.5) (7.6) 4,1213 (18.9)