CORPORATE ACTIVITIES

This area includes the results of ALCO (the assets and liabilities committee), the large industrial companies unit and the financial shareholdings unit. It also covers certain provisions such as early retirements, provisions at the corporate level and the costs of central units that have a strictly corporate function.

The main aspects in the third quarter were the practical absence of dividends and slightly negative trading income (€36m loss). This loss was mainly due to forex hedging of assets and movements stemming from the appreciation of Latin-American currencies against the euro. Other items on the income statement did not change significantly compared to other quarters this year. In the year to date, there was an operating loss of €276m compared to an operating profit of €18m in 2004.

Provisions for the year to September came to €244m. This was lower than the €587m provided in the same period last year owing basically to lower early retirements charges this year. Moreover, the first nine months of 2004 included €243m of capital gains (Banco Atlántico and Direct Seguros) while this year there have been no such sales of interests in other companies. As a result the area recorded a loss of €258m.

ALCO

The assets and liabilities committee (ALCO) administers the group’s interest rate and exchange rate positions, group liquidity and shareholders’ equity. In the year to September the unit generated net attributable profit of €51m.

As part of its active management of interest rate exposure, at 30-Sep-05 ALCO held a portfolio of fixed income investments worth €25.87 billion to compensate or reduce the negative impact of a decline or continuation of interest rates, on the group’s net interest income. In the year to date this portfolio contributed €198m to net interest income and €56m to net trading income. In addition the unit conducts other hedging operations related to interest rates via a portfolio of options. This activity generated €22m.

Exchange rate exposure is mainly associated with the group's operations in Latin America. The most relevant currencies have appreciated against the euro in recent months and this has a positive effect on equity and on the regions’ results expressed in euros. However, in the year to September it generated €47m in costs (net of tax) for the coverage of equity, shared between net interest income and net trading income. At 30-Sep-05 overall coverage of BBVA’s equity in the Americas stands at 47% with perfect coverage of 41% in Mexico, 77% in Chile, 100% in the dollar area and 31% in Peru. These levels of coverage do not include the long position in US dollars held by some affiliate banks at local level.

HOLDINGS IN INDUSTRIAL AND FINANCIAL COMPANIES 

This item comprises the group’s holdings in listed industrial companies (mainly Telefónica, Iberdrola and Repsol YPF) and in financial entities (currently limited to Bradesco). These holdings are managed according to uniform criteria with the goal of maximising value, following strict principles of return, liquidity, rotation and use of economic capital. All these holdings are currently classified as “available for sale”.

In addition and until the Banca Nazionale del Lavoro operation is wound up, it continues to be part of the portfolio, although it is booked via the equity method.

At 30-Sep-05 the market value of the holdings portfolio (including equity swaps) stands at €8.68 billion with latent capital gains of €3.42 billion before tax.

In the first nine months of the year, industrial and financial holdings generated €104m in dividends and €274m in net trading income. Net attributable profit comes to €285m compared to €412m in the same period last year, which included capital gains of €218m on the sale of BBVA's interest in Banco Atlántico.