25th Jul 2007 08:14
Banco Bilbao Vizcaya Argentaria SA25 July 2007 First half results for 2007 BBVA increases net profit 20.4% to €2.6 bn excluding extraordinary items BBVA launches a strategic innovation and transformation plan to expand itscustomer base by 20% (adding 8.5 million customers) and to lower the cost/incomeratio to 35% by 2010 Main margins and profit in the second quarter are the highest ever in theGroup's history O BBVA's operating profit before non-recurrent items in the first half rose20.2% compared to 2006, to €4.87 billion, thanks to strong growth of recurrentrevenues O The Group's cost/income ratio recorded an important advance, improving to41.6%, compared to 44.3% in the first half of 2006 O BBVA continues to lead European banks in terms of profitability, withreturn on equity (ROE) at 31.5%, and return on assets (ROA) at 1.28% O Spain & Portugal increased operating profit 20.6% to €2.02 billion andnet attributable profit rose 28.3% to €1.17 billion O Global Businesses recorded strong growth in operating profit, which rose31.2% to €658m and net attributable profit increased 5.7% to €451m O In local currencies Mexico & USA increased operating profit 26.5% to€1,783m and net attributable profit climbed 25% to €949m O South America increased operating profit 25.7% to €699m and netattributable profit rose 22.7% to €326m In the year to June, BBVA generated €2.62 billion in net attributable profitbefore non-recurrent items. This was 20.4% higher than the same period lastyear. A sharp rise in recurrent revenues pushed profit and the Group's mainmargins to record highs in the second quarter. In the first half operatingprofit grew steadily at 20.2% to €4.87 billion. Efficiency (measured by the cost/income ratio) improved from 44.3% to 41.6% and return on equity stands at31.5%, ahead of other European banks. At the end on the first half BBVA has once again demonstrated its capacity togenerate profitable growth in a recurrent manner. It has just launched aninnovation and transformation plan to carry this strategy forward. The planpursues ambitious goals for 2010, improving productivity 15%, lowering the cost/income ratio to 35% and increasing the customer base by 20% - adding 8.5 millionbetween Spain, Mexico and South America. At the same time, the Group willcontinue to push ahead with its growth strategies in the USA and Asia. Halfway through 2007, BBVA has again demonstrated its considerable ability togenerate recurrent earnings in all business areas. It has achieved importantimprovements in key management indicators, boosted organic growth plans throughinnovation and set ambitious goals in terms of productivity and efficiency. At the same time, BBVA remains committed to its Asian development plans throughthe agreement with CITIC Group and the first BBVA board meeting in Beijing inJune. Furthermore, it hopes to move the acquisition of Compass Bancsharesforward to the third quarter of this year and start integration of its US banksahead of the initial calendar. After including extraordinary items net attributable profit in the year to Junerose 1.1% to €3.37 billion. However this is not indicative of the outlook forthe full year because of considerable profit on non-recurrent operations in thefirst half of 2006. In the second half last year the impact of non-recurrentitems was negative. Therefore the comparison of earnings centres on the figuresbefore non-recurrent items. In the second quarter of 2007 the business volumes and earnings of the BBVAGroup maintained their high cruising speed. Strong marketing at all unitsresulted in higher volumes of business and sharp growth in recurrent revenues.This further improved the cost/income ratio and was the main driver of operatingprofit and net attributable profit. The most relevant financial aspects of the Group's performance and strategy inthe second quarter and first half of 2007 are summarised below: O The extraordinary general meeting of shareholders, held in Bilbao on 21stJune, approved a capital increase by issuing 196 million new ordinary shares tobe used for the acquisition of Compass Bancshares Inc. The operation has beenauthorised by the US Federal Reserve, by the State of Alabama and by the Bank ofSpain. Furthermore on 8th August, Compass will hold its annual general meetingat which its board of directors will propose acceptance of BBVA's offer. O The BBVA Group announced a strategic innovation and transformation plan.Under the slogan "Something new every day" it plans to create value throughinnovation, distinguishing the Group from its competitors in all the markets inwhich it operates. The plan will finish in 2010 and the main goals are expansionof the customer base and improvements in productivity and efficiency. O China CITIC Bank (CNCB) has been listed on the stock exchange at a pricehigher than the cost of BBVA's 4.83% holding. At the end of June, the Groupenjoys capital gains of €400 million in its investments in CITIC Group. O BBVA will own a new corporate headquarters in Madrid. From 2010 onwardsit will house 6,500 employees who are presently dispersed in ten separatebuildings, improving efficiency. The project entails the sale of four buildingsowned by BBVA and the second quarter profit and loss account includes €235mcapital gains. O The quarter's accounts contain a €200m charge for the promisedcontributions to the BBVA Microcredit Foundation. Its goal is to promoteaccesses to credit to the under-developed communities of Latin America. O The net effect of the non-recurrent items mentioned in the last twopoints is additional net attributable profit of €54m in the second quarter of2007. This complements €696m of capital gains from Iberdrola obtained in thefirst quarter. Furthermore in the second quarter of 2006 capital gains from thesale of holdings in Repsol, BNL and Andorra contributed €1,157m of netattributable profit after tax. The remarks below exclude these one-timeoperations unless otherwise stated because that provides a better picture of theGroup's underlying performance. O Despite BBVA's active management of structural exchange-rate risk, theeffect of variations in exchange rates in the Americas against the euro wasnegative. However, their impact was less than the first quarter (as foreseen inthe previous quarterly report). O Net attributable profit in the second quarter of 2007 came to €1,369m(excluding non-recurrent items), rising 18.1% over last year's figure of €1,159mfor the same period. The increase would be 20.0% at constant exchange rates.This result is supported by operating profit, which grew 19.2% to €2,522m (up21.7% at constant rates). O It should be noted that in the second quarter of 2007 all the mainmargins and the profit figures on the income statement set new all-time records. O As a result net attributable profit for the first half came to €2,624m,an increase of 20.4% over last year's €2,179m for the same period (up 25.0% atconstant exchange rates). Earnings per share came to €0.74, a rise of 14.9%compared to €0.64 for the first half of 2006, and ROE stands at 31.5% (lowerthan the 35.8% in the same period of last year due to the November capitalincrease). Including non-recurrent items, net attributable profit is €3,374m,earnings per share are €0.95 and ROE is 36.0%. O The increase in net profit is the result of solid operating profit. Inthe year to June it grew 20.2% to €4,872m (up 25.1% at constant exchange rates).The impact of items on the lower part of the income statement was negligible. O Operating profit was supported, in turn, by the growth of recurrentincome. Net interest income was up 13.9% (thanks to higher volume and towidening spreads). Net fee income and insurance income rose 7.4% and ordinaryrevenues increased 13.8%. O Operating expenses including depreciation grew more slowly, at 7.4%, andtherefore the cost/income ratio improved to 41.6% (44.3% in the first half lastyear). This ratio improved in all business areas. O The quality of BBVA's loan portfolio remains high. The non-performingloan ratio stands at 0.86%, compared to 0.82% at the same point last year. Theslight rise is due to the greater weight of consumer finance, credit cards andSMEs because this type of lending is more profitable but more susceptible todefault. The coverage ratio remains high, at 253.8%. At 30-Jun-07 total coveragefunds amount to €7,407m, of which €5,310m are generic provisions (€4,305m a yearearlier). O The Group's capital base continues to reflect the high level of capitaladequacy. Core capital stands at 6.2% (6.2% at 31-Mar-07 and 6.0% at 30-Jun-06),Tier I capital is 7.8% and the BIS ratio is 11.8%. O On 10th July a first interim dividend of €0.152 per share was paidagainst 2007 results. This is an increase of 15.2% compared to the first interimdividend paid in 2006. O In the Spain and Portugal Area lending rose 15.5% and customer fundsincreased 7.1%. Helped by the improvement in spreads, net interest incomeincreased 13.7%. Other revenues also performed well, the recent innovativeproducts in particular (insurance, derivatives, etc), and expenses remainedunder control (up 2.1%). This led to a new improvement in the cost/income ratioand operating profit rose 20.6%. Net attributable profit rose 28.3% to €1,172m. O Earnings in the Global Businesses Area were also based on strongrevenues. The figure that best reflects this area's performance is ordinaryrevenues, which increased 28.6% year-on-year (with high growth in lending andcustomer funds). Operating profit rose 31.2%. Net attributable profit came to€451m (up only 5.7% year-on-year due to sale of equity holdings in 2006). O In the Mexico and USA Area, the dominant factor was net interest income.At constant exchange rates, this grew 29.8%, helped by increases in lending andcustomer funds (up 39.5% and 21.9%, respectively, in local currencies). Theimprovement in customer spreads also contributed. After adding other income,ordinary revenues rose 24.2%, outpacing the rise in expenses, and thus the cost/income ratio improved and operating profit increased 26.5%. This offset higherprovisions linked to the increase in lending and net attributable profit thuscame to €949m for the first half (up 25.0% at constant exchange rates). O In the South America Area, business grew faster (loans were up 35.2% andcustomer funds increased 23.1% in local currencies). This helped net interestincome to rise 28.3% at constant rates. Aided by net fee and insurance income(up 16.3%), it pushed operating profit up 25.7% and net attributable profit grew22.7% to €326m. Forward-Looking Statements This document may include "forward-looking statements" within the meaning of the"safe harbor" provisions of the United States Private Securities LitigationReform Act of 1995. Forward-looking statements may be identified by the use ofwords such as "anticipate," "believe," "expect," "estimate," "plan," "outlook,"and "project" and other similar expressions that predict or indicate futureevents or trends or that are not statements of historical matters. Investorsare cautioned that such forward-looking statements with respect to revenues,earnings, performance, strategies, prospects and other aspects of the businessesof Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA"), Compass Bancshares, Inc. ("Compass") and the combined group after completion of the proposed transactionare based on current expectations that are subject to risks and uncertainties. Anumber of factors could cause actual results or outcomes to differ materiallyfrom those indicated by such forward-looking statements. These factors include,but are not limited to, the following risks and uncertainties: those set forthin BBVA's and Compass's filings with the Securities and Exchange Commission ("SEC"), the failure to obtain and retain expected synergies from the proposedtransaction, failure of Compass stockholders to approve the transaction, failureof BBVA stockholders to approve the related capital increase, delays inobtaining, or adverse conditions contained in, any required regulatoryapprovals, failure to consummate or delay in consummating the transaction forother reasons, changes in laws or regulations and other similar factors.Readers are referred to BBVA's and Compass's most recent reports filed with theSEC. BBVA and Compass are under no obligation to (and expressly disclaim anysuch obligation to) update or alter their forward-looking statements whether asa result of new information, future events or otherwise. Additional Information and Where to Find It This document may be deemed to be solicitation material in respect of theproposed transaction involving BBVA and Compass. In connection with theproposed transaction, BBVA has filed with the SEC a registration statement onForm F-4 (File no. 333-141813) (the "Registration Statement") to register theBBVA ordinary shares to be issued in the proposed transaction and that includesa definitive proxy statement of Compass dated June 29, 2007 that alsoconstitutes a prospectus of BBVA. BBVA and Compass have also filed, and intendto continue to file, additional relevant materials with the SEC. TheRegistration Statement and the related proxy statement/prospectus contains andwill contain important information about BBVA, Compass, the proposed transactionand related matters. SHAREHOLDERS OF COMPASS ARE URGED TO READ THE REGISTRATIONSTATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THEPROXY STATEMENT/PROSPECTUS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THEPROPOSED TRANSACTION. Investors and security holders may obtain a free copy ofthe disclosure documents (including the Registration Statement) and otherdocuments filed by BBVA and Compass with the SEC at the SEC's website atwww.sec.gov, from BBVA's Investor Relations department or from Compass'sInvestor Relations department. BBVA has also filed certain documents with theSpanish Comision Nacional del Mercado de Valores in connection with its June 21,2007 shareholders' meeting held in connection with the proposed transaction,which are available on the CNMV's website at www.cnmv.es. Participants in the Transaction BBVA, Compass and their respective directors and executive officers and othermembers of management and employees may be deemed to be participants in thesolicitation of proxies in respect of the proposed transactions. Informationregarding BBVA's directors and executive officers is available in BBVA's annualreport on Form 20-F/A, which was filed with the SEC on June 28, 2007, andinformation regarding Compass's directors and executive officers is available inCompass's proxy statement for its 2006 annual meeting of shareholders, which wasfiled with the SEC on March 17, 2006. Additional information regarding theinterests of such potential participants is also included in the RegistrationStatement and in the definitive proxy statement/prospectus for the proposedtransaction and the other relevant documents filed with the SEC. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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