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BBVA will comfortably comply with the new requirements of the financial reform in Spain
- Earnings resilience: BBVA estimates that the overall net final impact of the measure on its 2012 P&L statement will be ¤1.36 billion. The Group will comfortably absorb this impact thanks to the recurrence and resilience of its earnings
- Capital strength: BBVA today has sufficient capital (based on Bank of Spain definition of “capital principal”) to comply with the new requirement. Also, the reform will not hinder BBVA’s plans to meet the EBA recommendations with ease
BBVA’s strategy of anticipation in respect of risk management will allow it to comply comfortably with the new Spanish financial reform. It estimates the overall net final impact of the new regulation on its income statement at ¤1.36 billion and this will be completely absorbed in 2012 thanks to recurrent revenues and the resilience of its earnings. The Group will maintain its dividend policy as well as its plans to comply with the recommendations of the European Banking Authority (EBA), without the need to sell any strategic asset.
For BBVA, the additional gross amount of provisions and capital before mitigating items and taxes comes to ¤4 billion. This is 8% of the ¤50 billion estimated for the entire Spanish banking sector. This percentage is less than BBVA’s average market share of 12%, providing evidence of the Group's lower exposure to real estate. During the lending boom in Spain, BBVA sacrificed nearly seven percentage points of market share when it stopped participating in excessively risky operations.
Of the ¤4 billion impact, ¤2.8 billion is related to earnings while the rest is related to capital. The use of Spanish generic provisions coupled with the planned provisions for 2012 set before the new regulation reduce the impact on the P&L statement after taxes to ¤1.36 billion. Regarding capital, BBVA today has sufficient capital (based on Bank of Spain definition of “capital principal”) to comply with the new requirement.
The impact on the income statement due to larger provisions in 2012 anticipates possible future losses but in no way reduces the Group’s economic value. BBVA is currently selling real estate assets with capital gains, providing evidence of the quality of our real estate assets. The measure does not take into account the quality of underlying assets; it simply applies uniform provisions across the entire financial sector.
The plan to comply with EBA’s capital recommendations remains intact. BBVA will comfortably meet the requirement of a 9% core capital ratio in June without selling any strategic asset.
BBVA believes the Spanish financial reform is a decisive and needed step in the right direction to dispel concerns over the Spanish financial system. The new regulation, together with recent decisions of the European Central Bank and other structural reforms in Spain, will help accelerate consolidation in the Spanish financial sector, increase the demand for credit and normalize margins.
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BBVA is a customer-centric global financial services group founded in 1857. The Group has a solid position in Spain, it is the largest financial institution in Mexico and it has leading franchises in South America and the Sunbelt Region of the United States. Its diversified business is biased to high-growth markets and it relies on technology as a key sustainable competitive advantage. BBVA ranks among the leading Euro zone banks in terms of ROE and efficiency. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best practices. The Group is present in the main sustainability indexes.