Banco Bilbao Vizcaya Argentaria, S.a. · BME:BBVA
Banco Bilbao Vizcaya Argentaria — BBVA — Investor Presentation (February 2005)
39 slides from Banco Bilbao Vizcaya Argentaria's investor presentation, Feb 21, 2005
Slide 1: Conversion to IFRS
Conversion to IFRS (International Financial Reporting Standards) Analyst and Investor briefing 21st February 2005
Slide 2: Disclaimer
DISCLAIMER •The information in this presentation has been prepared by BBVA on the basis of information available to this company. Its purpose is to reflect the conversion of the BBVA group’s equity and income statement at 31-Dec- 04 to the IFRS (international financial reporting standards). This inf
Slide 3: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 3
Slide 4: Main impacts of IFRS
1 Main impacts of IFRS Goodwill ˜ Goodwill ˜ Securities portfolio ˜ Securities ˜ portfolio // equity equity method method consolidation consolidation Provisions for ˜ Provisions ˜ for loan loan portfolio portfolio Fee income ˜ Fee ˜ income Pensions ˜ Pensions ˜ Insurance ˜ Insurance ˜ Derivatives ˜
Slide 5: Goodwill: accounting criteria
Goodwill: accounting criteria § Amortisation on straight-line basis (max. 20 yrs) BS criteria 4/91 § Test for impairment: unspecified methodology § Denominated in euros § Deducted from Core Capital § Goodwill is not amortised based on useful life § Provisions for impairment: specific methodology app
Slide 6: Goodwill: accounting criteria
Goodwill: accounting criteria § Goodwill is the difference between the price paid and the value of the BS criteria 4/91 corresponding amount of shareholders’ funds, with possible adjustments to assets § Further purchases of shares in companies under effective control generate goodwill § Goodwill is
Slide 7: Goodwill: impacts on BBVA
Goodwill: impacts on BBVA § Goodwill has been recalculated at the time of the initial acquisition in local currency. § Impairment test analysis carried through (*) Impacts Impacts On shareholders’ funds On core capital On profits Reduction due to exchange Positive: goodwill is • Positive: no amortis
Slide 8: Securities: accounting criteria
Securities: accounting criteria § Equities, associated companies: equity method based on significant influence (assumed when >20% or >3% of quoted companies) BS circular 4/91 § Other equities and fixed-income: latent capital gains are not recognised. Losses on equities are charged to income statemen
Slide 9: Securities portfolio: impact on BBVA
Securities portfolio: impact on BBVA § Criteria for using equity method for holdings: >20% stake or shareholder agreement >20% and significant influence § All significant holdings have been classified as Available for Sale except BNL (consolidated under equity method as a shareholder pact is in plac
Slide 10: Securities Portfolio Available for Sale: Latent Capital Gains
Securities Portfolio Available for Sale: Latent Capital Gains Million Euros at 31-12-04 Previous New Tax Credit to Criterion Criterion impact reserves (1) Equities portfolio AFS 1,732 2,191 -625 1,566 Fixed income portfolio AFS 447 447 -148 299 TOTAL 2,179 2,638 -773 1,865 (1) Credited to reserves n
Slide 11: Loan loss provisions: accounting criteria
Loan loss provisions: accounting criteria § Categories of portfolio provisions: BS circular 4/91 §Generic: between 0% and 1% §Statistical: between 0% and 1.5%. Capped at 3x coefficient over stock §Country risk §Specific: coverage as per calendar after 3 months in arrears §Subjective NPLs: case-by-ca
Slide 12: Loan loss provisions: impact on BBVA
Loan loss provisions: impact on BBVA §Generic provision at 31-Dec-04 reached maximum level (1.25% α) §On domestic portfolios: § Generic: no initial impact on reserves. At 31-Dec-04 provisions in excess of cap must be credited to 2004 earnings § Specific and country risk: no significant effect §On po
Slide 13: Arrangement fees: accounting criteria
Arrangement fees: accounting criteria § Arrangement fees (set-up and study) booked at onset, as well as commissions paid for new business: credited / debited to income when BS circular 4/91 received / incurred § Arrangement fees (set-up and study) charged at onset and commissions paid for operations
Slide 14: Arrangement fees: impact on BBVA
Arrangement fees: impact on BBVA § Income credited to results in previous years for transactions outstanding at 31-Dec-03 has been calculated and an accrual account has been set up against shareholders’ funds. § The income statement for 2004 has been amended according to the new criteria Impacts Imp
Slide 15: Pensions: internal funds
Pensions: internal funds § Actuarial hypotheses are those published by the DGSFP (Pension and Current criteria Insurance regulator): üLife expectancy tables (less than 20 yrs of records) üInterest rate set at 4% üRotation not used § “Corridor” concept does not exist § Unbiased and consistent assumpt
Slide 16: Pensions: externalisation and deficit
Current criteria Pensions: externalisation and deficit § Externalisation in accordance with Act 1588/1999 taken off balance sheet generating a deficit due to use of new assumptions. This is amortised as per a calendar approved by the regulator § The deficit does not reduce shareholders’ funds or cor
Slide 17: Pensions: impact on BBVA
Pensions: impact on BBVA § All actuarial hypotheses have been revised for all existing commitments. Latest available tables are used. § The deficit on externalised funds has been settled § Earlier impacts have been charged (net of tax) against shareholders’ funds at the initial time. § Corridor impa
Slide 18: Insurance: accounting criteria
Insurance: accounting criteria § Consolidation under equity method even when fully owned (different BS circular 4/91 activity) § Consolidation: global integration § Results of the insurance business: on ordinary revenues New criteria § Aligning the insurers’ income statement with the new criteria §
Slide 19: Insurance: impact on BBVA
Insurance: impact on BBVA § Externalised and immunised policies: DGS (insurance regulator) criteria are followed. Assets and liabilities are offset § Non significant positive impact on reserves for capital gains on assets not offset against liabilities (commitments) § Consolidation by global integra
Slide 20: Derivatives: accounting criteria
Derivatives: accounting criteria § Instruments traded on organised markets with daily settlement: MTM to profits BS circular 4/91 § OTC instruments: losses are charged to earnings and gains are not recognised (neither in earnings nor as higher reserves) § Hedge derivatives: to be classified as hedge
Slide 21: Derivatives: impact on BBVA
Derivatives: impact on BBVA § Effectiveness of hedge is tested and majority proven to be valid § An inventory was made of latent capital gains on OTC derivatives at the initial date (net of tax) § Impact on earnings due to changes in latent capital gains/losses during the year § Full application of
Slide 22: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 22
Slide 23: Summary of impacts on shareholders' funds and attributable net profit in 2004
2 Summary of impacts on shareholders’ funds (net of tax) and attrib. net profit in 2004 Millions of euros Shareholders' Core Attrib. net funds Capital profit (*) Goodwill (net) -2,990 801 355 Securities portfolio 1,642 (1) 527 -109 Prov. for NPLs -301 -301 28 Arrangement fees -216 -216 -45 Pensions
Slide 24: Situation at 31-Dec-04
... leading to the following situation at 31-Dec-04 Millions of euros Shar e h o l d e r s ' Goodwill Shareho lders ' funds funds net o f go o dwill Situation 4/91 15,575 5,229 10,346 Impacts -2,905 -4,458 1,553 New Situation 12,670 771 11,899 Attrib. net Core Capital profit Situation 4/91 10,910 2,
Slide 25: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 25
Slide 26: Reclassification of items on income statement
3 Reclassification of items on income statement (no impact on attrib net profit or shareholders’ funds) • Cost of preference shares (under NII) Reclasifica- • Income on Group transactions from equity holdings Reclasifica- tions tions reclassified as AFS (under trading income) (no impact (no impact o
Slide 27: Changes in the consolidation method and in the income statement
Changes in the consolidation method and in the income statement • From equity method to global integration: Insurance Changes inin and real estate companies Changes the the • From proportional method to equity method: consolidation consolidation Corporación IBV method method • Equity consolidation (
Slide 28: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 28
Slide 29: 2004 income statement up to operating profit
4 2004 income statement up to operating profit Million Euros Adjust- New Reclassifi- Consolida- YEAR 2004 4/91 IAS ments criteria cations tion method DIVIDENDS 704 -259 445 0 0 -259 CORE NET INTEREST INCOME 6,366 -462 5,904 -163 -295 -4 NET INTEREST INCOME 7,069 -721 6,349 -163 -295 -263 EQUITY METH
Slide 30: 2004 income statement up to attributable net profit
2004 income statement up to attrib. net profit Million Euros Adjust- New Reclassifi- Consolida- YEAR 2004 4/91 IAS ments criteria cations tion method OPERATING PROFIT 5,440 36 5,476 -125 -97 258 NET INCOME EQUITY METHOD 360 -360 0 -158 0 -202 AMORTIZATION OF GOODWILL -582 389 -193 389 0 0 NET INCOME
Slide 31: Change of criteria
Change of criteria NEW CRITERIA Million Euros Equity YEAR 2004 N P L pro v i- D e riv a t i- TOTAL Go o dwill s e c urit i e s Fees P e ns io ns Ins ura n c e Othe r p o rt f o lio s io ns ves DIVIDENDS 0 CORE NET INTEREST INCOME -163 -186 23 NET INTEREST INCOME -163 0 0 0 -186 0 0 0 23 EQUITY METHO
Slide 32: Reclassifications
Reclassifications Million Euros RECLASIFICATIONS Co s t o f In c o m e S o f t w a re Loss YEAR 2004 TOTAL p re f e re n c e G ro u p a m o rtiza tio n Sharing s h a re s t ra n s a c . DIVIDENDS 0 CORE NET INTEREST INCOME -295 -190 -105 NET INTEREST INCOME -295 -190 0 0 -105 EQUITY METHOD 0 NET FEE
Slide 33: Changes in consolidation method
Changes in consolidation method CONSOLIDATION METHO D YEAR 2004 In s ura n c e R e a l s tate TOTAL O t h e r ( *) c o m p a n ie s c o m p a n ie s DIVIDENDS -259 -162 -79 -18 CORE NET INTEREST INCOME -4 0 0 -4 NET INTEREST INCOME -263 -162 -79 -21 EQUITY METHOD 107 0 0 107 NET FEE INCOME 0 0 0 0 I
Slide 34: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 34
Slide 35: Capital ratios
5 Capital ratios COR E Data at 31-12-04 T IER I T IER II CAP ITAL B a lance 4/91 10,910 14,708 22,647 Capital ratio 4/91 6.0 % 8.1% 12.5% B a lance new criteria 10,802 14,600 24,097 Capital ratio new 6.0 % 8.1% 13.3% criteria § Stable CORE and TIER I § TIER II : Increases as a consequences of latent
Slide 36: Contents
Contents 1 Main impacts of IFRS Summary of impacts on shareholders’ funds, core 2 capital and profits 3 Reclassification of items on income statement and changes in consolidation method 4 2004 Income Statement 5 Capital adequacy ratios 6 Conclusions 36
Slide 37: Conclusions
6 CONCLUSIONS 1 — Treatment of goodwill - Significantly reduces probability of future impairment and volatility of shareholders’ funds – Treatment of industrial portfolio - Lower earnings from companies carried by equity method but reserves increase due to higher potential capital gains. - Industria
Slide 38: Conclusions
CONCLUSIONS 2 Level of 2004 operating profit sustained Impact on 2004 attributable net profit is slightly positive (up 4%) Impact on balance-sheet items: . Pension deficits fully funded . Generic provisions at maximum levels . Higher latent capital gains . Goodwill lower Core capital and Tier I rema
Slide 39: Disclaimer
Disclaimer T h is d o c u m e n t is o n ly p r o v id e d fo r in fo r m a tio n p u r p o s e s a n d d o e s n o t c o n stitu te, n o r m u st it b e in terp r e t e d a s , a n o ffer to s e ll o r e x c h a n g e o r a c q u ire , o r a n i n v i t a t i o n f o r o f f e r s t o b u y s e c u