BBVA - Press Room

“I am convinced that Spain has sufficient resourcesto weather the economic slowdown. We must all join forces to preparefor the recovery”

• "Our performance has been better than that of our competitors, but, in absolute terms, we are not satisfied. The stock’s real value is far higher than the current share price, and I believe we will see a strong recovery”"BBVA in 2007 celebrated its 150th birthday with historic earnings, a new record for profit and great progress in building an even better future”
• “We have launched the Innovation and Transformation Plan throughout the Group, which puts us far ahead of industry standards”
• “Now is the time for strong, well-managed banks; now is the time for BBVA"
• “The sharp increase in BBVA's 2007 earnings stands out clearly on the global banking scene. Most international banks posted significant declines in earnings, and, in some cases, heavy losses"
• “We have been able to register strong growth while maintaining very prudent credit risk standards. No other bank in the global big league can come close to our figures, and we have no exposure to any of the instruments that are causing so many problems for others."
• “Without carrying out large mergers or mega-acquisitions, BBVA has moved up the ranking of the largest banks by market value on the stock market. We were No. 20 in 2005, and we are now No. 11”
• “BBVA in 2007 again stood out from the rest. What makes us different is our vision and the three cornerstones of our strategy: Principles, Innovation and People”

“BBVA will face 2008 with a solid foundation of capital and liquidity, high levels of efficiency and profitability, a healthy balance sheet and low level of risk. BBVA today is probably the strongest bank in our industry's big league," said Francisco González in a speech at the Bank’s Annual General Meeting, held today at the Euskalduna Palace in Bilbao. The BBVA Chairman and CEO also discussed the correction underway in financial markets in 2008 following a period of sharp expansion. “This correction is already having a negative effect on the financial industry and on economic growth both at a global level and in Spain. I am convinced that Spain has sufficient resources to weather the economic slowdown. We must all join forces to prepare for the recovery,” he said.

Francisco González began his speech to shareholders with a reminder that 2007 was an historic year for BBVA, when the bank marked its 150th birthday. “In 2007, BBVA turned 150 years old. Few companies reach that age. And very few do so with BBVA’s vitality and momentum. Ours is a success story. And we have marked this well-deserved celebration in all of the areas of the world where BBVA has a presence. But the most important thing is that we’ve celebrated these 150 years with historic earnings, a new record for profit and great progress in building an even better future for BBVA,” said the Chairman and CEO.

BBVA in 2007 again posted record earnings, with net profit of €6.13 billion euros, 29.4% higher than a year earlier. “These very positive results are even more impressive if we consider the difficult economic and financial environment of 2007," said González.

“But in addition to delivering these excellent results, in 2007 we have made important progress in our plans for the future. We have met the commitments and targets we set for ourselves a year ago:

Leap forward in international expansion

First, BBVA took a great leap forward in the world's largest, fastest-growing markets:

• In the United States, we completed the purchase of Compass very successfully. This is the largest transaction in BBVA's history, and makes us the largest regional bank in the SunBelt -- the southern US -- which is the fastest-growing area in the country
• In Asia, our strategic alliance with CITIC has made us one of the top five or six international banks with a significant presence in China

“We have also launched the Innovation and Transformation Plan throughout the Group, which puts us far ahead of industry standards. This plan is fully underway," said the BBVA Chairman and CEO.

Francisco González divided his speech into three sections. He first gave a brief overview of BBVA's 2007 earnings, calling them "earnings that have clearly set us apart from our competitors in the industry".

He explained that, starting in summer 2007, the global economic and financial environment suffered an abrupt change. “We were coming out of a long period of rapid growth, very plentiful and cheap liquidity and heavy indebtedness on a worldwide scale.” The problems in the US subprime mortgage market unleashed a sharp correction that has extended to other markets. Now is not the time to go into this issue at great length, but I do want to point out that this is a correction that was without a doubt inevitable, because debt had clearly reached unsustainable levels".

“And what was behind it all?” he asked, answering as follows: “Poor perception of risk, a severe lack of transparency, and, in many cases, deviation from the principles of good banking practice. The outcome is that we have entered a much more complex and difficult environment, in which liquidity and credit are harder to come by and economic growth is slowing. During the bonanza period, almost all banks were able to post good earnings. Now we’re seeing greater differences, with hefty losses in 2007 at many European and US banks.

“Now is the time for strong, well-managed banks; now is the time for BBVA," stressed Francisco González, who pointed out that in this difficult environment, BBVA has maintained its profitable growth streak: net profit climbed more than 29% and earnings per share rose 22.4%.

“The sharp increase in BBVA's 2007 earnings stands out clearly on the global banking scene. Most international banks, European or American, posted significant declines in earnings, and, in some cases, heavy losses, in this context of financial turbulence".

Dividend rises 15%

“Our earnings are also high quality, underpinned by the fast pace of growth of our business, which allows us to post sharp increases in revenues: Along with the strength of revenue growth, cost containment allowed us to boost operating profit by nearly 19%. Excluding the effect of the depreciation of the dollar and Latin American currencies vs. the euro, this increase was 23.5%”.

The BBVA Chairman and CEO stressed that good performance in revenues and expenses prompted further efficiency improvement, which fell by 130bp to 41.3%. Earnings were the result of positive performance at all of the company’s business areas, which climbed above 18% in constant euro terms, with Mexico and South America growing by about 30%.

In this climate of turbulence, BBVA knew how to maintain its solid fundamentals once gain. In terms of profitability, efficiency and risk management, BBVA remains the leader in the euro zone, with a very significant position among large international banks.

“Today I have the honor of proposing to this AGM a 15.1% increase in the 2007 dividend, to 0.733 euro per share. This is a 66% increase from the 2004 dividend,” said Francisco González, who added that BBVA can offer this large rise in its dividend “because our earnings are steadily improving, our fundamentals are very strong and our outlook is very positive".

He next highlighted two of the most important issues regarding management of the bank in 2007: “Our superior ability to manage risk and anticipate problems".

“We have been able to register strong growth while maintaining very prudent credit risk standards. No other bank in the global big league can come close to our figures, as I said before,” he said, adding: “I have to add that we have no exposure whatsoever to SIVs, conduits, subprime, leveraged loans, etc., that is, to any of the instruments that are causing so many problems for others".

Staying ahead of the crisis

“As for liquidity, which has become a grave problem in our industry, BBVA is in a privileged position. We were ahead of the curve here too. We issued and securitized more than €38 billion, which was much more than we needed. Because we did this, we will not need to tap the market again until 2009”.

This distinguishing characteristic of BBVA has been recognized by ratings agencies. Standard & Poor's recently raised its long-term rating on the Bank from AA- to AA. In the past year, and in this more difficult environment, BBVA is the only large bank in the world to receive two upgrades from rating agencies (S&P and Moody’s) in addition to a positive outlook (Fitch).

All of the above -- growth in revenues and profit, profitability, efficiency, risk control -- translate into further creation of value for shareholders, said Francisco González. BBVA's TSR, or total shareholder return, including dividends, is clearly higher than that of its benchmark group of large European banks.

“We have a winning project and strategy. We’re following our path in accordance with our principles. Such constant effort and consistency pay off. BBVA has consistently created more value than its competitors, and the market recognizes this. Though maybe it doesn't recognize it enough,” he said.

“But BBVA, without carrying out large mergers or mega-acquisitions, every year moves up the ranking of the largest banks by market capitalization. We were No. 20 in 2005, and we are now No. 11. Since early 2007, we've overtaken big names such as: Goldman Sachs, Barclays, ING, Wachovia, Royal Bank of Scotland and UBS. Only Intesa San Paolo moved ahead of us thanks to its merger of the two banks”.

“Our performance has been better than that of our competitors, but, in absolute terms, we are not satisfied. The stock’s real value is far higher than the current share price, and I believe we will see a strong recovery as soon as markets stabilize," the BBVA Chairman and CEO told shareholders.

“In short, BBVA in 2007 again stood out clearly from the rest,” said Francisco González, who then began to outline the “profound reasons” for the differences between the bank and its rivals, “which allow us to create more value than our competitors in any market environment".

Differences which create value

“What makes us different are the most basic things, the foundations of our project. Starting with our vision: ‘At BBVA, we work for a better future for people.’ This vision guides our whole strategy. A distinguishing strategy which is based on three cornerstones:

1º. The Principles: the framework in which we work and build long-term relationships, those that create the most value

2º. Innovation: the fundamental tool for building a better future

3º. People: because BBVA is made up of people who work for people”.

“These aren’t just words," said the Chairman and CEO. “They translate into facts that distinguish us, that allow us to create more value, as we have just seen." Looking at these three cornerstones, the BBVA Chairman and CEO explained: “The Principles are the true pillars of our project. Our management model uses returns adjusted for risk as a tool for the creation of value, as do the world's most advanced banks. But BBVA also demands compliance with strict ethical criteria. Criteria for integrity, transparency and best practice. That is to say, our management is also based on returns adjusted to the Principles and best practice. This creates value”.

“In Innovation, BBVA has been a pioneer in the financial industry for several years. Last year I spoke about this at length. At BBVA we are very clear about why we innovate. We innovate for people. Innovation is BBVA’s response to wide trends in technological and social changes".

BBVA's responses to these changes are directed to three main directions:

1. Adapting its services to the needs of each individual

2. Facilitating access to financial services to new segments of the population (accessibility)

3. Extending its offering to other products and services.

“The model we are designing is that of a large services company, where people can find the best solutions to their different needs, and not only financial needs. Through the intelligent application of technology, they can access these solutions interchangeably via the physical and virtual worlds at their utmost convenience. We have been working for several years on a profound transformation of our business. We are leveraging all the possibilities offered by technology to build production and distribution models that are more agile and efficient and improve customers’ perceptions of convenience and quality”.

Francisco González explained that BBVA is already one of the world's most efficient banks, “but with the Transformation Plan we are making progress toward a new frontier for efficiency in our industry. Our goal for 2010 is to get our efficiency ratio under 35%, which is out of the reach of any of the world's large banks. But this is only the first step, because this transformation process is laying the groundwork for the BBVA of the future".

“At the same time, we continue exploring and working on other future developments. We are at work on three main areas and have many initiatives underway".

The first consists of new forms of marketing, to adapt them to new consumers. In this area, the bank has launched Blue Webzine, geared to young people aged 16 to 24 years, with multimedia content and special offers for goods and services.

The second area consists of new digital businesses, extending relationships with people. Highlights include eConta, a company which provides accounting, tax and payroll services online to small companies and the self employed, starting from a current account, and MyStrands, a technology which uses consumer behavior analysis to make recommendations for financial and non-financial goods and services.

The third area the bank is working on, is development of new ways of working at BBVA, enhancing work in interconnected networks and improving knowledge and efficiency management. The Blogsphere is a highlight of this area, and consists of the creation of the BBVA digital community. “These initiatives, along with many others, are what will underpin our distinguishing characteristics and create value in the future," said Francisco González.

People for people

The third pillar of BBVA’s distinguishing strategy are people. “BBVA is a company made up of people -- our employees -- for people -- our clients. In a world in which talent is ever harder to find, BBVA's human resources are our critical competitive advantage. At BBVA, talent management -- attracting it, retaining it and developing it-- is key to making the company stand out. We want the best, we want true leaders at all of our divisions and at every level of the organization," the BBVA Chairman and CEO said.

He then outlined the Group’s policies meant to achieve these goals:

• Recruiting policies. In 2007, BBVA studied more than 270,000 applications, and of those it hired 15,700 people worldwide.
• Training policies: in 2008, more than 84,000 BBVA employees (80% of its workforce) will go through some type of training program. The Bank will spend more than €45 million on training, much more than the industry average.
• In addition, a very advanced system of policies for evaluation, promotion and compensation, and policies to foster work-life balance.

These efforts are bearing fruit. For example, according to Universum, a specialized consulting firm, BBVA is No. 4 in the ranking of “The Best Employers.” According to the prestigious magazine Fortune, BBVA is No. 1 in Spain, No. 2 in Europe (after Nokia) and the top bank in the world in the development of leaders.

Francisco González ended his speech by discussing BBVA's priorities and outlook for this year. “In 2008 we've entered a clear correction in financial markets after a very strong expansion period. This correction is already having a negative effect on the financial industry and on economic growth both at a global level and in Spain. I am convinced that Spain has sufficient resources to weather the economic slowdown. We must all join forces to prepare for the recovery”, he said.

Growth plans

In the opinion of the Chairman and CEO of BBVA, “this complex and difficult environment also offers more opportunities for the best companies”.

"How will BBVA face 2008?" asked Francisco González, answering: “With a solid foundation of capital and liquidity, high levels of efficiency and profitability, a healthy balance sheet and low level of risk”.

“BBVA today is probably the strongest bank in the big league in our industry. “BBVA is in the best conditions to continue executing our growth plans, which are centered on our clients and on creating additional value for our shareholders".

The BBVA Chairman and CEO outlined the main projects in the Group's business areas. In Spain, Portugal, Mexico and South America, the top priority is executing the Innovation and Transformation Plan. “This plan has to give us strong revenue growth and significant improvements in efficiency", he said.

“In the US, we will focus on merging our branches and developing our business model. We have a goal of posting pretax profit of .5 billion in 2010. In Asia, we will continue to make progress on building a driver of growth that is key to our future in the medium- and long-term", he said.

In closing, Francisco González thanked the more than 47 million people, families and companies who are BBVA customers for their trust, and welcomed the nearly 10,000 employees of Compass, the US bank which joined the Group this year, and the rest of the 112,000 people who make up BBVA's team, "possibly the best team in the global banking business".

He also thanked BBVA shareholders for their trust: “With your confidence, I am sure that in 2008 and in the years to come, we will continue to build our project: an even stronger BBVA, that is more innovative, more of a leader, and able to create even more value for all of you".