ARNS No 0169d
BANCO BILBAO VIZCAYA S.A.
THE BBV GROUP - FIRST HALF 1999
During the first half of 1999, the BBV Group has met all of its ambitious
targets, as has been the case for the past 5 years. Net attributable profit
during 1H99 totalled 560 million euros (93,189 million pesetas), up 25.4% vs.
the first half of 1998, with ROE of more than 23%. First interim dividend has
increased above 20%, and total dividend payments have increased 24%, due to an
increase in the number of shares, outstanding.
One of the most notable events during this semester was the BBV Group's
attainment of the coveted leadership position in the private pension fund
management business of Latin America. The BBV Group's 26% market share in Latin
America is well ahead of its competitors in the same region. This has been
possible due to the acquisition of the controlling interest in Provida (41.17%
capital stake), a company with a prime position in Chile, the most sophisticated
market for this type of business in Latin America. Provida manages approximately
1.7 trillion pesetas worth of assets (aprox. Euro 10.2 bn) and boasts a
subscribers base of 2.4 million people. The BBV Group has also increased its
equity stake from 64% to 100% in Consolidar, Argentina's largest pension fund
management company, with assets under management of 423 billion pesetas (aprox.
Euro 2.5 bn) and 1.3 million subscribers. At the June 30th Extraordinary BBV
Shareholders Meeting, authorization was requested - and approved - for financing
these operations with newly issued shares (1.6% of capital), at an issuing price
of 13.92 euros per share. Once they are incorporated as of July lst, total
funds managed will rise to 2.8 trillion pesetas (aprox. Euro 16.9 bn) and 8.4
million subscribers. In terms of relevant investment operations, it should be
noted the purchase of a 3.75% equity stake in Credit Lyonnais' initial public
offering and 5% of Acesa (Spanish private motorway) during the second quarter of
1999.
The BBV Group's adaptation plan to prepare for the Year 2000 issue concluded in
June 1999, where all internal and external tests (domestic and crossborder
payment systems) were finalized. This process culminated with a global test of
all systems, realized between June 19th and June 27th, yielding satisfactory
results.
During the second quarter of 1999 there hasn't been any significant changes
within the perimeter of consolidation. Comparisons with 1998 numbers should take
into consideration the divestiture of the Group's controlling stake in Gesbanque
(a small subsidiary bank in Belgium), in February 1998, and the integration of,
Poncebank and Chase's business in BBV Puerto Rico, as well as Banco Excel of
Brazil (BBV Brazil), and BHIF of Chile in the second half of 1998.
Net interest income rose 8.6% over 1H98, despite the significant decrease in
dividends received derived from the strategic decision of an important company
in which we have an equity interest to not distribute dividends in 1999;
excluding this effect net interest income grows approximately 11%. The important
increase in business activity, jointly with effective price management (which
has helped to ameliorate the declining of the customer spread) has enhanced the
domestic net interest income to the highest ever historical amount in an
environment of low and declining interest rates.
In Spain, the growth of the resident loan portfolio continues to outpace the
average of its competitors due to the significant gain in mortgage business as
well as consumer lending and loans to businesses, segments which have shown a
remarkable increase in activity in 1999. At the same time, loan quality has
improved with non-performing loans ratio of BBV ex-America at 1.11%. Obviously,
provisioning needs are lower although coverage ratio continues to increase,
ending at 157.8%.
Within the context of a less favourable macroeconomic environment, the BBV
Group's Latin American banks have continued to apply their strict risk control
criteria. Considering the depreciation of local currencies vs. the Euro and the
changes of the perimeter of consolidation, lending in BBV America has decreased
almost 4% compared to June 1998. The over-provisioning effort has permitted the
coverage ratio for BBV America to end at 124.8%, over 100% reserved in each of
the countries in which the Group operates.
Domestically, the resident sector of the BBV Group has gained market share in
transactional funds, due to a 20% rise in current and savings accounts.
Conversely, time deposits and assets sold with repurchase agreement ("repo")
additionally lose relative importance, with a decrease of 34% and 22%,
respectively. In this way, the reduction of the average cost of the deposits in
the balance sheet has intensified in 1999. Additionally, the BBV Group has
increased its activity in mutual and pension funds with an increase in market
share of 0.5% and 0.1%, respectively. Total funds under management rose to
33,323 million of euros (5.5 trillion pesetas) which represent an increase of
13.7%.
The cost control measures implemented through PRACTYCO (Plan to Streamline Tasks
and Costs), continue to be key elements during the quarter. The improvement is
clearly noticeable in BBV ex-America, where operating costs decrease 0.2%,
resulting from reductions in personnel costs and general expenses, in spite of
the increases normally linked to the continous upgrading of the BBV Group's
technological and communications platforms. In BBV America, where execution of
the PRACTYCO plan is more recent, the numbers show an increase in nominal terms
due to the significant effort in technology and the branch expansion plan. The
global efficiency ratio stands at 54.7%, an improvement of 0.5 percentage points
over 1998 figure. At the domestic level the efficiency ratio is 46.2%.
The BBV Group has continued to implement its traditional provisioning policy;
for 1H99 provisions are close to 950 million euros (approx. 160 billion pesetas)
a 20% increase vs. 1H98 out of which 2/3 are extraordinary in nature. In this
manner, the early and voluntary amortization of goodwill from Latin American
investments, specifically in Argentina and Colombia.
The amount of unrealized gains within the industrial portfolio has increased by
600 million euros, since the beginning of the year, totalling 3,429 million
euros, (aprox. 570 billion pesetas).
BBV share price closed on June 30, 1999 at 14.01 euros, up 4.77% for the first
half of the year, outperforming the IBEX 35 for the same period. The market
capitalization for the Group, not accounting for the two right issues effective
July 1st, totalled 29,135 million euros (4.8 trillion pesetas). BBV share price
(as of June 30, Euro 14.01) has increased 42% since January 1, 1998, date when
the strategy plan ProgramaHDOS 1000 came into effect, thus outperforming the
average of its national and European competitors. Again, the BBV Group met the
last of its ambitious objectives outlined in its strategic plan.
On July 12, 1999, the BBV Group paid the first quarterly interim dividend on
1999 profits. Such dividend is 5.56 eurocents (9.25 pesetas) per share, an
increase of 20.14% vs. the same interim a year earlier. On July 14th, a return
of nominal of 0.02 euros per share was paid, as approved at the February 27,
1999 Annual General Shareholders Meeting.
As of June 30, 1999 the BIS capital base of the BBV Group stood at 1,714,201
million pesetas (approx. Euro 10.3 bn). The capital ratio of the Group was at
12.6%, rendering the Group a capital surplus equivalent to 463,348 million
pesetas (approx. Euro 2.8 bn). The main component continues to be basic equity,
situated at 1,281,933 million pesetas, which gives the Group a Tier 1 ratio of
9.4%.
BBV Group Highlights
(Consolidated figures)
JUNE 99 JUNE 98 % Change
Pesetas Euros Euros YOY
Balance sheet (Millions)
Total assets 24,370,416 146,469 131,444 11.4
Total lending 11,028,719 66,284 55,793 18.8
Customer funds(balance sheet)14,176,308 85,201 79,814 6.8
Other Customer funds managed 10,336,813 62,126 50,347 23.4
Total funds managed 24,513,121 147,327 130,161 13.2
Shareholders' funds 889,597 5,347 4,946 8.1
Income statement (Millions)
Basic Margin 529,914 3,185 2,917 9.2
Activity business income 244,452 1,469 1,279 14.9
Income before taxes 182,414 1,096 925 18.5
Net attributable profit 93,189 560 447 25.4
Data per share
Net attributable profit 45 0.27 0.22 23.4
Book value 428 2.57 2.44 5.6
Share price 2,331 14.01 15.77 -11.1
Key ratios(%)
ROE (Net attributable/Average equity) 23.1 19.2
ROA (Net Income/Average total assets) 1.05 0.99
RORWA (Net income/Risk weighted assets) 1.92 1.88
Capital adequacy ratios. BIS regulations
Total 12.6 12.6
Tier 1 9.4 9.0
Other relevant figures
Number of employees 73,501 66,575
Spain 24,968 25,279
Abroad 48,533 41,296
Number of branches 5,537 4,943
Spain 2,817 2,802
Abroad 2,720 2,141
BBV GROUP INCOME STATEMENT (*)
(millions)
JUNE 99 JUNE 98 % Change
Pesetas Euros Euros
Financial revenues 921,645 5,539 4,947 12.0
Financial costs -558,123 -3,354 -2,935 14.3
NET INTEREST INCOME 363,522 2,185 2,012 8.6
Fees & Commissions 166,392 1,000 905 10.5
Collection and payment
services 54,623 328 316 4.0
Investment securities
services 33,434 201 190 5.9
Mutual and pension funds
management 59,268 356 307 16.0
Other Commissions 19,067 115 92 24.5
BASIC MARGIN 529,914 3,185 2,917 9.2
Market operations 54,113 325 203 59.9
ORDINARY REVENUE 584,027 3,510 3,120 12.5
Administrative Costs -319,667 -1,921 -1,685 14.0
Personnel -204,118 -1,227 -1,095 12.1
General Expenses -115,549 -694 -590 17.6
Other income-costs -10,385 -62 -59 4.8
DGF annual fee -10,749 -64 -60 7.4
Other items 384 2 -1 NS
Depreciation -30,550 -184 -156 18.2
OPERATING INCOME 223,445 1,343 1,220 10.1
Income by the equity method 21,007 126 59 114.2
ACTIVITY BUSINESS INCOME 244,452 1,469 1,279 14.9
Group Net transactions 105,295 633 441 43.3
Loan loss provisions -66,199 -398 -393 1.2
Gross -107,516 -546 -559 15.6
Reversals 29,261 176 105 67.6
Bad debts recoveries 12,056 72 61 18.4
Securities writedowns -4,776 -29 -1 N.S.
Goodwill amortization -68,376 -411 -191 115.2
Extraordinary items -27,982 -168 -210 -20.1
Disposals 3,488 21 25 -16.2
Other -31,470 -189 -235 -19.7
PROFIT BEFORE TAX 182,414 1,096 925 18.5
Corporate tax -59,940 -360 -305 18.2
NET INCOME 122,474 736 620 18.7
Minority interest -29,285 -176 -173 1.4
Preference shares -13,226 -79 -46 7.1
Other -16,059 -97 -127 -23.9
NET ATTRIBUTABLE 93,189 560 447 25.4
(*) Audited non date. 1 Euro = 166.386 ptes. Consolidated accounts are
presented in accordance with Bank of Spain Circular 4/91 (and ensuing circulars)
and follow generally accepted accounting principles.
BBV GROUP BALANCE SHEET (*)(millions)
JUNE 99 JUNE 98 % Change
Pesetas Euros Euros
Cash and Central Banks 703,668 4,229 2,298 84
Government Debt 789,580 4,745 7,349 -35.4
Due from Banks 5,133,450 30,853 39,944 -22.8
Total lending (Gross) 11,028,719 66,284 55,793 18.2
Reserves -375,454 -2,257 -1,775 27.1
Fixed income 4,127,467 24,807 13,940 77.9
Securities 898,557 5,400 4,422 22.1
Property and equipment 645,593 3,880 3,459 12.2
Goodwill on consolidation 139,045 836 653 28.1
Other assets 1,279,791 7,692 5,361 43.5
TOTAL ASSETS 24,370,416 146,469 131,444 11.4
Capital 186,847 1,123 1,058 6.2
Reserves 873,241 5,248 4,317 21.5
Minority Interests 741,893 4,459 2,768 61.1
Due to Banks 6,992,404 42,025 36,985 13.6
Customer Funds 14,176,308 85,201 79,814 6.8
Other Liabilities Accounts 1,277,249 7,677 5,882 30.5
Net Income 122.474 736 620 18.7
TOTAL LIABILITIES 24,370,416 146,469 131,444 11.4
Average Total Assets 22,259,283 133,781 122,553 9.2
Average Shareholders' funds 791,303 4,756 4,600 3.4
Risk weighted assets 12,175,836 73,178 62,982 16.2
NPL as % Lending (Bank of Spain) JUNE 99 JUN 98 JUNE99 BBV(l)
NPL
Initial 263,063 1,581 1,550 563
June 30th, 1999 277,738 1,669 1,506 528
Net change 14,675 88 -44 -35
% Net change 5.58 5.58 -2.86 -6.28
NPL's Reserves
Last 375,454 2,257 1,775 832
% Coverage 135.18 135.18 117.89 157.76
Lending quality (International regulation)
NPI as % Lending 1.63 1.63 1.66 0.54
% Coverage NPL 195.40 195.40 169.81 270.56
(*) Audited non data. 1 Euro = 166,386 ptas. Consolidated accounts are presented
in accordance with Bank of Spain Circular 4/91 (and ensuing circulars) and
follow generally accepted accounting principles.
(1) Excluding BBV Mexico (Mexico), Continental (Peru) Gunudero (Columbia) BBV B.
Francais (Argentina),Provincial (Venezuela), BBV Puerto Rico, BBV Brasil
(Brasil) and BHIF (Chile)
TOTAL LENDING AND CUSTOMER FUNDS BREAKDOWN
JUNE 99 JUNE 98 % Change
Pesetas Euros (Euros) YOY
Due from Public Sedor 493,916 2,968 2,637 12,6
Due from residents 6,131,903 36,854 32,510 13.4
Commercial bills 726,823 4,368 3,852 13.4
Borrowers with collateral 2,012,474 12,095 9,796 23.5
Personal loans 2,135,549 12,835 11,388 12.7
Other term loans 684,782 4,116 1,042 N.S.
Other 257,862 1,550 1,155 -0.4
Leasing 314,413 1,890 1,555 21.5
Due from non residents 4,125,162 24,793 19,140 29.5
Non performIng loans 277,738 1,669 1,506 10.8
TOTAL LENDING (GROSS) 11,028,719 66,284 55,793 18.8
--------------------------------------------------------------------------------
- Reserves -375,454 -2,257 -1,775 27.1
TOTAL LENDING (NET) 10,653,265 64,027 54,018 18.5
Pesetas 6,838,928 41,103 34,458 19.3
Foreign currencies 3,814,337 22,924 19,560 17.2
--------------------------------------------------------------------------------
Public Sector 499,271 3,001 2,801 7.1
Resident Sector 6,378,874 38,337 42,077 -8.9
Current accounts 1,978,351 11,890 9,893 20.2
Saving accounts 1,385,572 8,327 6,680 24.7
Time deposit& 1,545,619 9,289 14,138 -34.3
Assets sold with repurchase
commitment 1,469,332 8,831 11,366 -22.3
Non-resident sector 5,455,569 32,789 26,711 22.8
Marketable debt securities 1,537,692 9,242 6,495 42.3
Subordinated debt 304,902 1,832 1,730 5.9
CUSTOMER F. RECORDED ON
BAL. SHEET 14,176,308 85,201 79,814 6.8
--------------------------------------------------------------------------------
Customers portfolios and
assets 2,987,044 17,953 13,834 29.8
Mutual funds 5,683,400 34,158 28,789 18.6
Pension funds 1,666,369 10,015 7,724 29.7
OFF-BALANCE FUNDS 10,336,813 62,126 50,347 23.4
--------------------------------------------------------------------------------
TOTAL FUNDS UNDER MANAGEMENT 24,513,121 147,327 130,161 13.2
--------------------------------------------------------------------------------
Breakdown of yields and costs (1)
2Q99 1Q99 4Q99
Avge. Avge. Avge. Avge. Avge. Avge.
Balance yields Balance yields Balance yields
Landing 10,790 9.17 10,359 9.65 10,040 10.78
In EMU currencies 6,871 5.46 6,628 5.85 6,174 6.41
In foreign currencies 3,919 15.67 3,731 16.40 3,866 17.75
Fixed-income securities 4,381 14.01 3,538 11 08 3,424 13.33
In EMU currencies 2,317 3.56 1,529 5.58 701 5.45
In foreign currencies 2,064 25.75 2,009 15.27 2,723 15.36
Companies carried by
e. method 660 7.40 667 5.59 621 4.87
Other holdings 195 2.83 152 2.03 145 1.97
Credit entities 5,432 4.09 5,655 5.72 6,019 5.07
In EMU currencies 2,705 0.38 2,992 3.88 2,338 3.17
In foreign currencies 2,727 7.77 2,663 7.79 3,681 6.27
Bank of Spain 196 4.49 195 5.60 104 6.01
Non-income producing
assets 1,767 1,825 1,685
TOTAL ASSETS 23,421 8.17 22,391 8.05 22,038 8.71
2Q99 1Q99 4Q98
Avge. Avge. Avge. Avge. Avge. Avge.
Balance yields Balance yields Balance yields
Customer funds 13,892 6.24 13,553 5.13 13,653 6.04
in EMU currencies 7,768 1.56 7,899 1.92 7,633 2.35
Deposits 5,843 1.07 6,092 1.48 5,905 1.98
Repurchase 1,617 2.67 1,544 3.00 1,618 3.46
Debt and other table 308 5.09 263 5.74 110 5.89
securities
In foreign currencies 6,124 12.19 5,654 9.61 6,020 10.71
Credit entitles 6,376 5.00 5,841 6.00 5,949 5.78
In EMU currencies 3,197 1.14 2,686 3.93 1,410 3.67
in foreign currencies 3,179 8.88 3,155 7.76 4,539 6.44
Shareholders' funds 817 828 751
Other funds without
costs 2,336 2,169 1,685
TOTAL LIABILITIES 23,421 5.09 22,391 4.72 22,038 5.34
NET INTEREST INCOME/ATA 3.08 3.33 3.37
(1) Balances in billions of pesetas
END
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