All companies belonging to the Group are also assigned to business areas depending on their activity. Where necessary units are split and allocated to more than one area if the diversity of their activities so requires.

Once the structure of each area has been established, the management adjustments inherent in the model are applied. With regard to allocation of equity, the model uses a business capital allocation system based on the risks incurred by each business, evaluating the capital needs in terms of the lending, operational and market risks. First, the model quantifies the volume of strict equity (capital and reserves) attributable to the risks in each area, which is used to determine the return on equity (ROE) of each business. Next, the other capital base components (attributable subordinated debt and preferential shares) as well as the associated costs, are allocated.

There is one exception to the equity-allocation methodology described above. In particular, for the Mexico and Banking in America units, BBVA has maintained the book equity that would arise from a consolidated subgroup in each country. Therefore the full equity figure represents the BBVA Group's share, while minorities are recorded under Other Eligible Funds.

Furthermore, the model allocates all direct and indirect expenses to the relevant business areas except for expenses of a markedly corporate or institutional nature (from the Group’s standpoint) that are not clearly linked to the corresponding activities.

Lastly, it should be underscored that the method used to calculate the net activity of each business (Retail, Wholesale and America) does not eliminate intergroup transactions that affect more than one area because these are considered an integral part of each business unit’s activities. When intergroup transactions are eliminated during consolidation they are posted to the Corporate Activities area and thus certain items on the corresponding balance sheet may have a negative balance.

In order to afford a realistic view of the business and permit a uniform comparison of the areas, the earnings of Group companies in Argentina and Brazil are recorded by the equity method under Corporate Activities. 

This Quarterly Report breaks down the information per area into the following lines of business:

• Retail Banking in Spain and Portugal: formed by the retail business, asset management and private banking business conducted by the Group in Spain and Portugal. Therefore it includes the individual customer and SME segments in the domestic market, the Finanzia/Uno-e Group (which specialises in e-banking, consumer financing, card distribution and renting activities), BBVA Portugal, the private banking business, the pension and mutual fund management business, and the earnings associated with the insurance business.

• Wholesale and Investment Banking: this covers the Group’s businesses with large companies and institutions through national and international corporate banking and institutional banking. In addition, it also includes the trading room businesses in Spain, Europe and New York, the securities business and depository and custodial services. Furthermore, it includes other business and real estate project activities that are not covered through the Group's interests in large corporations. 
ROE Cost/Income Ratio
• America: consists of activities and earnings of the Group's affiliate banks in Latin America and of their associate holdings, including pension fund managers and insurance companies as well as the international private banking business. This area does not include the earnings generated in Argentina and Brazil (which are recorded as income from companies by the equity method, under Corporate Activities) in order to provide an equitable comparison of the various businesses.

 • Corporate Activities: includes holdings in large industrial corporations and financial institutions, as well as the activities and earnings of support units such as the Assets and Liabilities Committee. Furthermore, it comprises other items, such as country-risk allocations and goodwill amortisation charges, that cannot be assigned to the areas on account of their nature (except those related to interests held by Business and Real Estate Projects, in the Wholesale and Investment Banking area). Lastly, and for the reasons specified above, it includes the earnings of the Group companies based in Argentina and Brazil, which are recorded as equity accounting income.

This area structure reflects the current organisation that manages and monitors the BBVA Group’s business activities. The 2002 figures, which are shown for comparison, are based on the same criteria.