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This story was delivered to BI Intelligence "Fintech Briefing" subscribers. To learn more and subscribe, please click here. Amid growing interest from the financial services industry in digital identity technologies, major Spanish bank BBVA has...
Banking Business Review  Jun 21  Comment 
Spanish banking group Banco Bilbao Vizcaya Argentaria (BBVA) has jointly formed a new biometrics company with startup Das-Nano.
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This story was delivered to BI Intelligence "Fintech Briefing" subscribers. To learn more and subscribe, please click here. Spanish bank BBVA has established itself as an early mover in adjusting to changes wrought by fintech innovation,...
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BBVA has launched it open banking program by making eight of its APIs commercially available.


Banco Bilbao Vizcaya Argentaria, S.A. (or BBVA), one of Spain's oldest banks, is a large diversified financial services firm with total assets of €537 billion (US $772 billion).[1] With 48 million customers, 108,000 employees, presence in over 32 countries, and over 8,000 branches, BBVA is the second largest financial institution in Spain and ranks among the top seven largest financial institutions in the world in terms of market capitalization.[2] BBVA provides a wide range of financial services, including commercial and wholesale banking, retail banking services, consumer loans, mortgages, credit cards, securities brokerage, wealth management, pension plan management and insurance, but its strength lies in traditional retail banking, asset management, private banking and wholesale banking.[3]

The group's primary source of funds is its customer deposit base, which includes demand, savings and time deposits, accounting for €255.236 billion (US $347 billion) out of €450.605 billion (US $612.6 billion) total deposits--other sources of funds include debt securities in issue, and dues to credit entities.[4] The group's main source of income is interest on loans provided.[5]

The group's principal capital expenditures are its subsidiary companies and affiliates located in foreign countries in which the group operates.[6] Such developments include the completion of the merger between Banco Bilbao Vizcaya Argentaria's banking subsidiaries in Texas into one entity known as BBVA Compass on September 7, 2007 and the December 2009 increase in stake ownership which it has held since 2006 in CITIC (China International Trust and Investment Company) International Financial Holdings Limited in Hong Kong up to 30% and in China CITIC Bank up to 15%.[7][8] Economic conditions in Spain has affected the group adversely--on January 27, 2010, BBVA reported a 94% drop in profit due to loss of consumer confidence and decreased fund flows.[9] To address this, the group has focused its efforts on its international operations to lessen its European exposure and to secure new untapped sources of investable assets and revenue.

Business Overview

BBVA was formed through the January 2000 merger of Banco Bilbao Vizcaya and Argentaria.[10][11][12] The merger combined the strengths of Vizcaya's retail and private banking operations centered in cities and industrial centers with Argentaria's lower risk businesses, including public sector lending, mortgages, and asset management, centered in rural areas.

Based in Spain, BBVA has expanded into over 32 countries, mainly in Latin America, to become a diversified international financial group, and has accordingly divided its organizational structure into six business areas: Spain and Portugal; Global Businesses (Wholesale Banking and Asset Management); Mexico; the United States; South America; and Corporate Activities.[13][14]

Business and Financial Metrics[15]

In 2009, BBVA generated a net income of €4.6 billion on €23.8 billion in interest income. This represents a 14.7% decrease in net income and a 21.8% drop in interest income from 2008, when the company earned €5.4 billion on €30.4 billion in interest income.

Business Segments[16]

On January 1, 2008, Banco Bilbao Vizcaya Argentaria's organizational structure was officially modified to be divided into six areas: Spain and Portugal; Global Businesses (also named Wholesale Banking and Asset Management); Mexico; the United States; South America; and Corporate Activities.[3]

Spain and Portugal (56.4% of net income)

The Spain and Portugal business segment provides banking services and consumer finance to private individuals and businesses in the region.

Business units in this segment include:[17]

  • Spanish retail network (services financial and non-financial needs of individual customers, high net worth individuals and small businesses in the Spanish market)
  • Corporate and business banking (deals with small and medium enterprises, large companies, and institutions in the Spanish market)
  • Consumer finance (manages online banking, consumer finance, credit cards and leasing plans)
  • European insurance (manages insurance businesses in Spain and Portugal)
  • BBVA Portugal (manages banking business in Portugal)
  • Dinero Express (manages immigrant segment in Spain)

Global Businesses (24.0% of net income)

The Global Businesses segment, also known as Wholesale Banking and Asset Management, provides services to large international companies and investment banking, capital markets and treasury management services to clients.

Business units in this segment include:[18]

  • Corporate and investment banking (manages corporate and investment banking products such as corporate finance, structured finance, syndicated loans and debt capital markets, and provides trade finance and transaction services)
  • Global markets (manages market products which are placed through trading rooms in Europe, Asia and the Americas)
  • Asset management (Manages products such as traditional asset management, alternative asset management and Valanza, Banco Bilbao Vizcaya Argentaria's private equity unit)
  • Industrial and real estate holdings (manages portfolio of industrial holdings and real estate projects)
  • Asia (represents its stake ownership in CITIC International Financial Holdings Limited in Hong Kong and China CITIC Bank, and other investments in China that exceed €2 billion)

Mexico (32.3% of net income)

Business units in this segment include:[19]

  • Banking businesses (includes retail banking through its subsidiary, Bancomer, asset management, and investment banking)
  • Pensions and insurance (operates in pensions business through Afore Bancomer, in insurance through Seguros Bancomer, in annuities through Pensiones Bancomer and in health through Preventis)

The United States (-25.4% of net income)

Business units in this segment include:[20]

  • BBVA Compass banking group (the entity resulting from the merger of Banco Bilbao Vizcaya Argentaria's four subsidiary banks in the sunbelt region, Compass Bancshares, Texas State Bank, State National Bank, Laredo National Bank and Guaranty Bank[7])
  • Other units: BBVA Puerto Rico, BTS and BBVA Bancomer USA

South America (20.7% of Net Income in 2008)

Business units in this segment include:[21]

  • Banking businesses (BBVA Banco Francés covers Argentina, BBVA Chile covers Chile, BBVA Colombia covers Colombia, BBVA Panama covers Panama, BBVA Paraguay covers Paraguay, BBVA Banco Continental de Perú covers Peru, BBVA Uruguay covers Uruguay and BBVA Banco Provincial de Venezuela covers Venezuala)
  • Pensions businesses (in Argentina, Bolivia, Chile, Colombia, Ecuador, Peru and Dominican Republic)
  • Insurance businesses (in Argentina, Chile, Colombia, Dominican Republic and Venezuela)

Corporate Activities (-7.9% of net income)

This area handles the Banco Bilbao Vizcaya Argentaria's general management functions. Business units in this segment include:[22]

  • Financial Planning, carried out by the Asset-Liability Committee (manages interest- and exchange-rate structure, overall liquidity and shareholders’ funds)
  • Holdings in Industrial and Financial Companies (manages the investment portfolio in companies operating in the telecommunications, media, electricity, oil, gas and finance sectors)

Key Trends and Forces

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VaR of market risk factors affecting Banco Bilbao Vizcaya Argentaria's trading portfolio in 2008.[23]

Significant dependence on the Spanish economy adversely affects the bank in a downturn

Having originated in Spain, Banco Bilbao Vizcaya Argentaria's lending business continues to conduct a majority of its business in Spain. With 61.4% of its loan portfolio coming from business activity in Spain, it has been affected adversely by Spain's economic deterioration - BBVA reported on January 27, 2010 a 94% drop in Q4 profit due to setting aside more money for bad loans.[9][24] The International Monetary Fund (IMF) estimates Spanish gross domestic product to have dropped 4% in 2009, and predicts a further contraction of 0.8% in 2010.[25] Additionally, the Spanish economy's heightened need for foreign financing, observed in its high current account deficit, is likely to result in further damage if it faces difficulty in making payments. Other Spanish banks have been just as negatively affected, and accordingly, Credit Suisse cut its 2010-2012 earnings estimates for all Spanish banks by 11 percent on average, except for Banco Santander, Spain's largest bank, which it rates as "outperform."[26]

Santiago Lopez, an analyst at Credit Suisse in Madrid, stated in a note on February 18, 2010 that not only is Spain expected to remain in recession for the next two years, but also that the housing market appears to be 30% overvalued, and banks may be under-reporting bad loans by as much as 40%.[26] Weakening of the housing sector adversely affects credit demand and households wealth, disposable income and consumer confidence, and as a result, BBVA expects to see lower earnings, decreased funds, and markdowns.

2010 European sovereign debt crisis will decrease consumer confidence and fund flows

Europe's economy is drastically affected by Portugal, Ireland, Greece, and Spain's debt woes--their inability to finance budget deficits amounting to over 10% of gross domestic product, is creating panic over the possible collapse of the European Union[27] Consequently, the Euro (EUR) slid to an eight-month low against the dollar, European stocks dropped, and bond yield spreads widened. Although as a multi-national company, BBVA's operations outside of Europe will as a result be valued higher, but because over 52% of its net income comes from Spain and Portugal specifically, BBVA will suffer a great deal from the crisis.[28] Consumers will lose confidence and fund flows will decrease. The Spanish 10-year debt bond spread reached its highest level since April 2008 (99 bps).[29]

International expansion shelters BBVA from Spain's deterioration

Although the group extends its operations to over 32 countries, its main focus is its Spain and Portugal business segment, which contributed to 52% of net income in 2009.[28][13] It aims to develop its reach in Asia and Europe, but its largest presence is in Spain, Mexico, Latin America and the Sunbelt Region of the United States.[30] After being affected heavily by the recession in Spain, it became even more important for the group to focus on its operations abroad to lessen its European exposure and find new sources of capital. BBVA chairman Francisco González is optimistic about the United States and Asia regions, claiming that in the next three years, the percentage of the bank's profits from the US region will rise to 15% from 11%, and the percentage of profits from Asia will double to 8% from 4%.[9] This will place BBVA in a better position to face obstacles and effectively lessen exposure concentrated in Spain and Portugal, as well as allow the group to acquire untapped revenue.


Banco Bilbao Vizcaya Argentaria faces strong competition within most areas of operations. Competition has increased for large demand deposits due to the aforementioned deregulation of interest rates on deposits in Spain. The company's competitors include:

  • Banco Santander with a total of 11,178 branches and 2.27 million shareholders, is the biggest Spanish bank.[31] The bank offers a wide variety of services as BBVA does, and also focuses on retail banking, where 82% of the group's profits comes from.[32]
  • La Caixa Group is considered the third largest financial entity in Spain, with 5,500 offices and over 10.5 million clients.[33]
  • Grupo Banco Popular is another leading financial institution in Spain, with 2,493 branches around the world, as well as the leading financial institution in Puerto Rico in terms of market share.[34][35]
  • Banco Sabadell is another leading financial institution in Spain, with 1,190 domestic branches and 80% of its income from retail banking.[36]
Financial Data Banco Bilbao Vizcaya Argentaria (2008)[5] Banco Santander (2008)[37] La Caixa Group (2008)[38] Grupo Banco Popular (2008)[39] Banco Sabadell (2008)[40]
Net Interest Income (in USD millions)16,14829,3604,7733,4491,975
Gross Income (in USD millions)25,82146,6939,187--3,029
Net Operating Income (in USD millions)8,36924,122[41]3,5461,785503
Income before tax (in USD millions)9,424--3,5591,9881,516
Net Income (in USD millions)7,32725,8852,452--916

With its acquisition of Laredo National Bank in 2005 and Texas Regional Bancshares and State National Bancshares in 2006, BBVA group became the fourth largest bank in Texas, following Bank of America, J P Morgan Chase and Wells Fargo.[42]

Competition in Texas, USA' Number of Branches (2009)[42] Total Deposits in Texas (in $ millions) (2009)[42] Total Market Share (2009)[42]
Bank of America (BAC)48083,866.519.28%
J P Morgan Chase (JPM)65476,539.317.60%
Wells Fargo (WFC)83445,190.510.39%
Banco Bilbao Vizcaya Argentaria (BBV)41329,702.76.83


  1. 3Q09 Report Pg. 2
  2. About BBVA Compass
  3. 3.0 3.1 BBV 20-F 2009 Item 4 Pg. 21
  4. BBV 20-F 2009 Item 5 Pg. 96
  5. 5.0 5.1 BBV 20-F 2009 Item 3 Pg. 8
  6. BBV 20-F 2009 Item 4 Pg. 19
  7. 7.0 7.1 BBVA Press Release September 6, 2007
  8. WSJ BBVA Raises Citic Bank Stake 12042009
  9. 9.0 9.1 9.2 BBVA Profit Drops 94% on Writedowns for U.S., Loans
  10. Grupo BBVA - History: The Creation of BBVA
  11. Grupo BBVA - History: Expansion
  12. Grupo BBVA - History: Commencement
  13. 13.0 13.1 Grupo BBVA - International Presence
  14. Grupo BBVA - Business Areas of the BBVA Group
  15. BBVA 2009 20-F pg. 7  
  16. BBVA 2009 20-F pg. F-47  
  17. BBV 20-F 2009 Item 4 Pg. 23
  18. BBV 20-F 2009 Item 4 Pg. 25
  19. BBV 20-F 2009 Item 4 Pg. 26
  20. BBV 20-F 2009 Item 4 Pg. 28
  21. BBV 20-F 2009 Item 4 Pg. 29
  22. BBV 20-F 2009 Item 4 Pg. 31
  23. BBV 20-F 2009 Item 11 Pg. 139
  24. Empeora pronosticos economia espanola FMI empeora sus pronósticos de la economía española
  25. 26.0 26.1 Investors Too Optimistic on Spanish Banks, Credit Suisse Says
  26. Global Markets Shudder
  27. 28.0 28.1
  28. Grupo BBVA - Markets Observatory February 1, 2010
  29. Grupo BBVA - About Us
  30. Two European Banks Post Strong Profits
  31. Wikipedia - Grupo Santander
  32. La Caixa
  33. Grupo Banco Popular - Our Branch Network
  34. Banco Popular North America - Who We Are
  35. BancSabadell - Executive Summary
  36. Santander Key Data 1Q 2009
  37. La Caixa Group 2008 Financial Report Pg. 40
  38. Grupo Banco Popular Annual Report 2008 Pg. 5
  39. Banco Sabadell Annual Report 2008 Pg. 29
  40. Santander Annual Report 2008 Pg. 2
  41. 42.0 42.1 42.2 42.3 First National Bankshares Investor Relations
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