annual report 2008

Transcription

annual report 2008

ANNUAL REPORT 2008
Contents
GRUPO BANCO POPULAR
CONTENTS
General Information
4
Banco Popular financial highlights
5
Board and management
6
Editorial
8
Management Report
11-90
Banco Popular Group
13
Economic Environment
17
Positioning of the Banco Popular Group in the banking sector
20
Main consolidated results
Net interest income. Gross operating income. Net operating profit.
Consolidated profit for the year. Attributable profit.
23
Activity by business line
33
Solvency
40
Risk management
42
Credit risk. Cross-border risk. Structural balance sheet risk. Market risk.
Liquidity risk. Operational risk. Reputational risk.
Banco Popular ratings
66
Shareholders - Market performance of the Bank's shares
68
Additional information for listed companies
Principal companies in the Group
X7973
79
91-277
Financial statements of Group banks and companies
81
Corporate Governance Report
91
Financial statements
173
Report of independent auditors
176
Financial reporting responsibility
177
Consolidated statements
178
Notes to the financial statements
186
Independent review report on Annual Corporate Governance Report
352
3
ANNUAL REPORT 2008
/ Group management performance
GENERAL INFORMATION
state, pursuant to Regulation 1606/2002 of the
European Parliament and Council dated 19 July
2002.
Banco Popular Español S.A. (“Banco Popular”, “the
Bank” or “the Group”) was founded on 14 July
1926, and is registered in the Madrid Mercantile
Register in volume 174, folio 44, page 5,458, 1st
entry. The Bank is a member of the Deposit
Guarantee Fund for banking entities. The year 2006
was its 80th year of existence. The head office is
located at Velázquez 34, 28001 MADRID.
The financial information was prepared in
accordance with the new regulations and reflects the
Group’s entire economic activity, both financial and
insurance and non-financial, and accordingly gives a
true and fair view of the net worth, financial
position, risks and consolidated earnings.
The Ordinary Shareholders Meeting is scheduled for
26 June 2009, at José Ortega y Gasset 29, 28006
MADRID.
The financial accounting and statistical data
provided herein were prepared with the utmost
objectivity, detail, reporting clarity and consistency
over time, from the Group’s internal accounting
data. 1 January 2005, saw the entry into force of the
obligation to prepare consolidated financial
statements in conformity with the International
Financial Reporting Standards adopted by the
European Union (IFRS-EU) for entities with shares
listed on a regulated market in any EU member
4
Average balances are calculated on the basis of
daily, monthly or quarterly data, depending on the
information available in each case. Figures in
brackets are negative amounts, differences or
variation rates.
In addition to the Annual Report and its
accompanying documents, Banco Popular issues
quarterly financial reports on its operations,
including a detailed analysis of variations in assets,
liabilities, earnings and profitability in each quarter.
All the information is available at the Banco Popular
Shareholders Office (José Ortega y Gasset 29,
28006 MADRID; telephone 34 91 5207265, fax 34
91 5779209; e-mail [email protected]).
All the information is also available at:
http://www.bancopopular.es
GRUPO BANCO POPULAR
BANCO POPULAR FINANCIAL HIGHLIGHTS (CONSOLIDATED FIGURES)
(€ thousand, unless otherwise indicated)
2008
2007
%
variation
Business volume
Total assets managed . . . . . . . . . . . . . . . . . . . . . . . . . . .
On-balance sheet total assets . . . . . . . . . . . . . . . . . . . . .
Own funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer deposits adjusted . . . . . . . . . . . . . . . . . . . . . .
Lending to customers (gross) . . . . . . . . . . . . . . . . . . . . .
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . .
123,806,700
110,376,051
6,734,394
51,665,410
93,452,619
15,132,009
Solvency
Core capital(%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1(%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.17
8.12
6.47
7.92
Risk management
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performing Loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowances for credit losses . . . . . . . . . . . . . . . . . . . . . .
Non-performing loans ratio (%) . . . . . . . . . . . . . . . . . . .
Non-performing loans coverage ratio (%) . . . . . . . . . . . .
108,584,628
3,042,612
2,221,902
2.80
73.03
100,828,237
834,478
1,822,353
0.83
218.38
Earnings
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating profit
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated profit for the year . . . . . . . . . . . . . . . . . . .
Profit attributed to the controlling entity . . . . . . . . . . . . .
2,535,261
3,656,770
1,312,537
1,461,020
1,110,700
1,052,072
2,287,874
3,452,429
1,919,735
1,939,939
1,341,474
1,264,962
10.8
5.9
(31.6)
(24.7)
(17.2
(16.8)
Net return and efficiency
Average total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average total equity
ROA (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROE (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating efficiency (%) . . . . . . . . . . . . . . . . . . . . . . . . .
107,221,735
5,913,340
1.04
17.79
33.25
98,182,325
5,262,817
1.37
24.04
32.39
9.2
12.4
Per share data
Final number of shares (thousands) . . . . . . . . . . . . . . . .
Average number of shares (thousands) . . . . . . . . . . . . .
Share closing market price (€) . . . . . . . . . . . . . . . . . . . .
Market capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share book value (€) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share (€) . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend per share paid in the period (€) . . . . . . . . . . .
Price/Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price/Earnings (annualised) . . . . . . . . . . . . . . . . . . . . . .
1,235,741
1,213,540
6.08
7,506,604
5.45
0.867
0.5006
1.12
7.00
1,215,433
1,214,993
11.70
14,220,566
5.12
1.041
0.4347
2.29
11.24
1.7
(0.1)
(48.0)
(47.2)
6.4
(16.7)
15.2
Other data
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Men . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Branches: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mundocredit offices . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,282
15,069
13,370
9,185
4,185
1,699
1,112
587
2,504
2,255
249
59
3,390
121,427
15,038
13,299
9,319
3,980
1,739
1,199
540
2,493
2,245
248
38
3,426
7.3
0.2
0.5
(1.4)
5.2
(2.3)
(7.3)
8.7
0.4
0.5
0.4
55.3
(1.1)
125,109,722
107,169,353
6,228,215
42,577,395
88,513,558
12,314,679
(1.0)
3.0
8.1
21.3
5.6
22.9
7.7
>
21.9
5
ANNUAL REPORT 2008
BOARD AND MANAGEMENT
Board of Directors
Angel RON, Chairman (a)
Roberto HIGUERA,Vice Chairman & CEO (a) (b)
Francisco APARICIO, Director and Secretary (a) (b)
Directors::
Nicolás OSUNA
Asociación de Directivos ((Represented by Roberto HIGUERA) (a)
Helena REVOREDO
Américo AMORÍM
José Ramón RODRÍGUEZ (a) (b) (d)
Eric GANCEDO (a) (b) (c) (d)
Vicente SANTANA (a) (b) (d)
Luis HERRANDO (a) (b) (c)
Sindicatura de Accionistas de BPE (Represented by José Mª MÁS)
José María LUCÍA
Miguel Ángel SOLÍS (d)
Casimiro MOLINS
Vicente TARDÍO
Luis MONTUENGA (b) (c)
Allianz S.A. (Represented by Herbert WALTER)
Manuel MORILLO
Miguel NIGORRA
Member of: (a) Executive Committee (b) Risk Committee (c) Appointments Committee (d) Audit Committee
Executive Management
Ángel RON , Chairman
Roberto HIGUERA, CEO (1) (2) (3)
Ángel RIVERA, Retail & Commercial Banking (1) (2) (3)
Francisco GÓMEZ, Risks(1) (2) (3)
Fernando de SOTO, Corporate Affairs
Jesús ARELLANO, Human and Technical Resources (2) (3)
Joaquín ARIZA, Bancopopular-e.com (3)
Juan ECHANOJAUREGUI, Business Development (2) (3)
Javier GEFAELL, Popular Banca Privada (3)
Miguel Angel LUNA,Innovation (3)
José Luis MANSO, Human Resources
Rafael de MENA, Technical General Secretary (2)
Eutimio MORALES, Comptroller (2)
Alberto MUÑOZ, Chairman’s Office (3)
Jose Heraclio, PEÑA, Quality, CSR & Regulatory Compliance Office
Tomás PEREIRA, Legal Counsel (2)
José Manuel PIÑEIRO, Asset Management (3)
Ernesto REY, Financial Officer (2)
Fernando RODRIGUEZ, Technical Resources (2) (3)
José María SAGARDOY, Wholesale Banking (3)
Francisco SANCHA,Investor Relations (2) (3)
Network Line Management
Banco Popular Español
Senior Line Managers:
Antonio FÉREZ, Southern Spain (3)
Juan José RUBIO, Northern Spain (3)
Antonio PUJOL, Central Spain (3)
Francisco J. SAFONT, Cataluña, Aragón, Navarra y La Rioja (3)
Carlos VELÁZQUEZ, Levante (3)
José F. MARTÍNEZ ISACH, Castilla (3)
Miguel MOZO, Andalucía (3)
Antonio RAMIREZ, Vasconia (3)
Jose Manuel HEVIA, Galicia (3)
Alfonso RUSPIRA, Crédito Balear (3)
Regional Managers:
J. Luis ACEA, Madrid I
Ramón BOSCH, Valencia
José Luis CABERO, Madrid II
Manuel CASTILLO, Galicia
Alonso CUETOS, Castilla-León
Jose Antonio FERNÁNDEZ, Alicante
Manuel GARCÍA, Asturias-Cantabria
Jesús M. GONZÁLEZ, Andalucía I
Vicente LÓPEZ, Cataluña I
6
Luis MARIN, Madrid III
Fernando MERINO, Canarias
Antonio PÉREZ Murcia
Manuel QUERO, Castilla La Mancha-Extremadura
José Antonio REGO, Aragón-Navarra-La Rioja
Antonio SILVA, Andalucía II
José Luis SANGÜESA, País Vasco
Eladio SEBASTIÁN, Cataluña III
Francisco J. SUBIRANA, Cataluña II
GRUPO BANCO POPULAR
Banking subsidiaries Regional Managers:
Victoriano APARICIO, Castilla Zona II
Antonio DEAN, Galicia Zona Sur
Vicente GALVEZ, Vasconia Zona II
Rafael GIL, Andalucía Zona I y Zona Sevilla-Madrid
Antonio GONZALEZ, Castilla Zona I
Alberto Alfonso MARCHANTE, Vasconia Zona I
Manuel MOLINA, Andalucía Zona II
Antonio ORTIZ, Galicia Zona Norte
Ramón Angel PARIS, Andalucía Zona III
Manuel PONCELA, Castilla Zona III
Executive Managers:
Banks outside Spain
Rui Manuel SEMEDO, Banco Popular Portugal
Jorge ROSSELL, TotalBank (2) (3)
Other Units
José Ramón ALONSO, Commercial Banking
Ángel BLAZQUEZ, Popular de Mediación
Rosa María BUENO, Europensiones, Eurovida
Juan Manuel COBO, Popular de Factoring
Rafael DUARTE, International Financial Institutions
Miguel Ángel FRANCO, Corporate Banking
Rafael GALAN, General Treasury
Francisco J. GARCIA, Corporate Development
Gonzalo GÓMEZ, Banco Popular Hipotecario
Luis Felipe MARCOS, Regulatory Compliance
José Carlos MARIÑO, Mundocredit
Javier MORENO, Financial Management
Carmen ORTIZ, Popular Gestión
Miguel Angel PRIETO, Corporate Social Responsibility
Carlos RAMOS, Popular Bolsa
José María SANZ, Customer Care
Francisco VALÉRIO, Eurovida Portugal
Francisco Javier ZAPATA, Corporate Counsel
Member of: (1) General Management (2) Management Committee (3) Business Committee
7
ANNUAL REPORT 2008
EDITORIAL
“The word ‘crisis’ when written in Chinese
consists of two characters: one represents
danger, the other represents opportunity…….
In a crisis, be aware of the danger but
recognise the opportunity.”
John Fitzgerald Kennedy
A financial plague wreaked havoc with disastrous consequences on European and American banks in the last
quarter of 2008. Banks with any weakness went under or had to be rescued in extremis by their governments.
The cackhanded handling of the problems of Lehman Brothers in September struck a mortal blow at
international debt markets which were agonising since a year earlier. Any vestige of liquidity interchange
vanished completely, and banks with funding weaknesses or paucity of capital suffered a deadly battering in the
stock market. Firm concerted action by the main developed countries staunched – partly and temporarily to
judge by subsequent events – the wounds of the institutions affected, with capital and funding reinforcements.
Although these measures were necessary because of the virulence of the crisis and fears of its impact on the rest
of society, they did introduce grave distortions in the functioning of the international banking system as a result
of the substantial state presence in the private financial sector. The year ended with serious uncertainties, the
trigger for which was the apparition in 2007 of the US subprime mortgage virus following the bursting of the
property bubble.
Banco Popular successfully navigated through the successive crises in 2008, thanks to the strength of its capital
and of its funding – and because it was not materially affected by the three viruses of this plague: subprime
securitisation, Lehman, and Madoff. The Bank’s capital is among the strongest of the strictly private banks, i.e.
those not reinforced by the state. The core capital stands at 7.17% and Tier 1 at over 8.1% and will be shortly
further strengthened by the placement of preferred stock, the launching of which is being finalised. As regards
funding, the Group continues to have available the possibility of obtaining nearly an additional €15,000 million
backed by its second liquidity line or collateral. Energetic pursuit of customer deposits, which grew by 21.3%,
made it possible to reduce the commercial gap in 2008 by €2,327 million, as compared with the increase of
€5,376 million in 2007, with a sharp reduction of dependence on wholesale liabilities.
In the two cases mentioned, a prudent and forward-looking strategy – which indeed provoked incomprehension
and criticism at the time – of strengthening capital and building up a powerful second line of liquidity
safeguarded the organisation against the vicissitudes of the markets. This same attitude of prudence and
foresight characterised the Group’s management decisions during the year and led to priority being given to very
conservative and precautionary provisioning for the loan portfolio, even though all the possibilities of generating
profits under the accounting regulations were not exploited. Despite this conservative decision, attributed profit
amounted to €1,052 million, making Banco Popular the thirteenth European bank among the fourteen banks
estimated to have exceeded net profit of €1,000 million in 2008. This result, exceptionally high in absolute terms,
in an international context of losses or low earnings, is even more outstanding when compared with the much
greater balance sheet size of the other twelve banks. In terms of ROE, Banco Popular was the third most
profitable European bank per these figures. Had the precautionary and savings measures of provisions for the
future not been taken, the attributed profit would have been €1,345.9 million, a growth of 6.4% over the 2007
figure, rather than the 16.8% decrease resulting from the accounting attributed profit.
8
GRUPO BANCO POPULAR
The published accounting profit reflects a voluntary bringing forward of provisions for asset impairment of €189
million and the non-release of €244 million of general allowances, despite being permitted by current
regulations. With these conservative criteria, as well as having an additional reserve, the Bank has a general
allowance balance of nearly €1,300 million which at the present rate it will be possible to use over more than
two years.
The management team is aware that the decision to strengthen provisions at the cost of apparently worsening
the earnings may not be unanimously accepted, as occurred when the Bank increased capital without, in the
opinion of some, any apparent need, or when it built the second line of liquidity with an increase of the financial
costs. These decisions have been revealed as far-sighted and successful with the passage of time and we are sure
that the same will happen with the present strengthening of the balance sheet involving a voluntary reduction
of the results.
Net interest income grew strongly by 10.8% and shows signs of a clearly expansive trend in 2009. The good
performance of net interest income was the result of two factors. The first was the notable increase of credit, in
the present circumstances, at an underlying annual rate of nearly 5.8%, a good deal higher than the nominal
GDP rise and much higher than Spanish domestic demand. Moreover, 44% of the lending was to SMEs and
approximately 32% to private individuals, making Banco Popular one of the most markedly commercial and
retail banks in Europe with unquestionable fidelity to the financing of these two segments. These figures are
objective proof of the fact that Banco Popular not only did not restrict credit but indeed boosted it in a context
of a sharp decline in credit demand from firms and private individuals. This behaviour of the social partners is
not surprising since it was the foreseeable reaction to deleveraging across the globe in a situation of intense and
prolonged recession at international level.
The second explanatory factor for the good performance of net income was the 8 basis points improvement in
the spread in the last quarter compared with 2007 year end and the 5 basis points rise over the third quarter of
2008. Noteworthy was the excellent behaviour of risk fees and commissions, which were up 13.9% year on year,
and those for management services, which rose by 0.1%. The inevitable downturn in asset management
operations – mutual and pension funds – led to a fall in the fees and commissions therefor, which held growth
of the gross operating income to 5.9%. Management service fees, in absolute amounts, were similar to those for
2007, and therefore escaped from the downward trend observed in the sector.
The evolution of expenses showed that the expense control measures are beginning to have an effect. Excluding
the increases in headcount arising from the consolidation of Totalbank and the tardy expansion of other units in
the Group, which are being checked, personnel expenses would have grown by 7.4%. Making the same
correction for the Totalbank effect and for the higher cost of rentals following the sale of the Central Services
buildings, general expenses would have increased by 3.0%. This strong downward trend leads us to expect a
notable moderation of total costs in 2009. The combination of sustained fees and commissions with moderation
in expenses took the rate of coverage of general expenses with commissions to 71.1%, compared with an average
of 51.1% for European banks and of 59.1% for Spanish banks. According to estimates published by analysts, this
coverage would be higher than that for all Spanish banks and the highest of European commercial banks.
The efficiency ratio was again the best of all European and Spanish banks: 33.25%, compared with 70.5% for
European banks and 38.15% for Spanish banks, per the latest published data.
The non-performing ratio of 2.71% for the business in Spain was clearly better than the 3.14% figure published
in November for all Spanish banks and savings banks. The 43 basis points improvement signified an expansion
of the delinquency differential between Banco Popular and the Spanish banking system, which in December
2007 stood at 17 basis points. In the consolidated balance sheet the ratio was 2.80% because of the greater
delinquency in Portugal.
Of the provisions of €905 million for loans and receivables, €189 million related to voluntary or precautionary
provisions. The latter, as stated earlier, are a reserve to absorb potential future needs for provisions which may
be considered to be added to the nearly €1,300 million of general allowances.
9
ANNUAL REPORT 2008
Looking to 2009, the Group expects to continue applying conservative provisioning criteria during the first
quarter, and perhaps the second quarter, until this phase of adjustment in the property development sector has
been absorbed, especially as regards the big and medium size companies, and so to be able to address with
less pressure a less acute flow over the rest of the year. In any case, it is better to engage with the always
uncertain future from a basis of capital and funding strength and excess reserves.
10
Management Report
ANNUAL REPORT 2008
12
GRUPO BANCO POPULAR
BANCO POPULAR GROUP
The Group has made efforts to introduce a variety of worklife balance measures which many of the Group's staff are
now enjoying.
Banco Popular heads a banking group with a strictly
financial vocation, i.e. it has no strategic corporate
investees other than financial instrumentality companies.
It focuses on commercial and retail banking, specializing in
meeting all the financial needs of businesses, with a
particular emphasis on SMEs, and on banking for
individuals. Other activity lines such as investment banking
or wholesale banking address the coverage of the
requirements of its commercial or retail banking
customers.
The Group consists of the parent entity (Banco Popular);
one regional bank (Banco de Andalucía - in which the Bank
has a stake of 80.19%), operating mainly in the south of
Spain but with branches throughout the country; Banco
Popular Portugal (wholly-owned); Totalbank, operating in
the state of Florida, United States, also wholly-owned by
the Group; and other banks and financial service
companies.
The Group’s basic management criteria are:- The pursuit of profitability, maximizing ROE, which at 31
December 2008 stood at 17.79% and was the third
highest of Spanish and comparable European banks.
- On-going strengthening of balance sheet soundness and
solvency, as reflected by the Bank's high rating,
underpinned by the following factors:
- At 2008 year end, Banco Popular had core capital of over
7.15%, which is among the highest in Europe of banks
that have not been recapitalised by the public sector.
- Banco Popular's liquidity line is one of the biggest in
Spanish banking.
- Although the credit quality is not immune to the present
macroeconomic environment, there is a positive gap with
respect to the Spanish financial sector, as was also the
case in the last cycle.
- The systematic improvement in efficiency, making the
Group the most efficient bank not only in Spain but also in
Europe, with an efficiency ratio of 33.25%.
To apply these principles, management considers that it is
essential to place customers at the centre of all decisions,
to be responsive to the aim of maximizing shareholder
value with a medium and long-term outlook. At 31
December 2008 the Group had 6.7 million customers,
was managing assets worth €123,807 million and onbalance sheet funds of €98,957 million, with a capital
base of €6,734,000 million.
To serve its customers and support the commercial
network, the Group had a headcount of 15,069 persons,
compared with 15,038 in 2007. 13,370 of them are in
Spain and 1,699 are in Portugal and the United States.
The Group's vocation for creating value in the long term is
also reflected in its human resources policy focused on
internal promotion and work-life balance, which are both
aspects that contribute to a more expert and motivated
workforce.
Banco Popular and Banco de Andalucía offer a similar
range of products, they are managed under the same
criteria and with common technological and administrative
platforms, in order to optimize costs. Banco Popular
Portugal also shares the Group's technological platform
and is integrated in its central services. But it maintains a
minimal structure of its own in order to comply with
Portuguese regulations and to respond to the special
characteristics of its customers.
In addition to the banks mentioned above, the Group
controls Banco Popular Hipotecario, a wholly-owned
subsidiary specialising in property financing;
bancopopular-e, which is an Internet bank; and the
Popular Banca Privada private banking unit (owned 60%
by the Group and 40% by Dexia-BIL.
Lastly, the Group also has other affiliates specialising in
factoring, mutual fund management, pension funds and
plans, securities and stock markets, a share portfolio and
ownership company, a venture capital company, renting,
insurance and a number of special-purpose financial and
asset-holding companies, with which it covers substantially
all the financial services demanded by its customers.
There were two noteworthy transactions in 2008
concerning the Group's structure:
- The takeover in December 2008 of the regional banks
Banco de Castilla, Banco de Crédito Balear, Banco de
Galicia and Banco de Vasconia by their parent entity Banco
Popular Español. This transaction seeks to simplify the
regulatory obligations with which listed companies must
comply and to cut costs by eliminating some duplication. It
also aims to give greater liquidity and depth to the price of
the shares held by the shareholders of the banks taken
over and to facilitate application of the recommendations
on good corporate governance.
- The sale in June 2008 of Banco Popular France to the
French Group Crédit Mutuel, with which a broader
agreement of partnership in other businesses was also
signed. The bank's sale is classified as a discontinued
operation both as regards the earnings generated by it
prior to its disposal and the earnings recorded as a result
of its sale, net of tax.
13
ANNUAL REPORT 2008
The Group is committed to financial personalisation and
therefore sees the commercial network as its main and
most direct channel of communication with customers, due
to its proximity and accessibility. To provide coverage to its
customers, the Group has 2,504 branch offices (2,493 in
2007). 2,255 of these are distributed throughout Spain,
235 of them are in Portugal and 14 are in the United
States.
In addition to its operations in Portugal and the United
States, the Group also has a substantial international
presence through representative offices or operating staff
seconded to local correspondent banks in other countries,
to cater for the financial needs of customers without
exposure to cross-border risk.
In addition to the commercial banking branch network, the
Bank has more specialised offices that support the network
and provide direct service to private individuals,
businesses and institutions: personal banking, banking for
businesses and corporate banking. It also has
Mundocredit, a Banco Popular and Mundo Envíos agent
specialising in providing financial services - international
giros, mini-loans, mortgage loans, insurance and cards and non-financial services - marketing of consumer goods
14
and services - to foreign workers resident in Spain. It
operates through its own network of branches located
throughout Spain (59 branches at 31 December 2008).
The Banco Popular Group occupies third place in the
national league table of Spanish banking groups, in terms
of volume of assets, and is in fifth place if savings banks
are also included. It had a 4.51% share in the credit
market at September 2008 (4.49% in 2007) and a 4.19%
share in the deposit market (4.10% in 2007).
In 2008, the Group obtained a net attributable profit of
€1,052 million. At year end market capitalization
amounted to €7,506 million and there was a base of
130,282 shareholders, with a markedly institutional
character. At the close of 2008, 40.62% of the Group’s
common stock was represented on the Board of Directors
of Banco Popular.
The consolidated balance sheets as of 31 December 2008
and 2007, and the consolidated income statements for the
years then ended, are presented on the following pages.
GRUPO BANCO POPULAR
Table 1. Consolidated Balance Sheets
(in thousands of euros)
31.12.08
31.12.07(*)
% variation
ASSETS
Cash and balances with central banks . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investments
Changes in the fair value of hedged items in portfolio hedges of interest
rate risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts linked to pensions . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,859,577
1,334,199
336,666
3,760,410
96,606,802
34,854
1,955,178
1,173,709
(4.9)
13.7
992,626
1,660,596
32,151
182,368
5,566
1,355,443
546,576
827,306
840,911
500,157
4,211,248
96,739,984
562
115,615
228,125
20,393
206,213
3,856
729,573
524,792
526,188
233,760
(32.7)
(10.7)
(0.1)
>
>
>
57.7
(11.6)
44.3
85.8
4.2
57.2
>
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,376,051
107,169,353
3.0
Financial liabilities held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities at fair value through profit or loss . . . . . . . .
Financial liabilities at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the fair value of hedged items in portfolio hedges of interest
rate risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities associated with non-current assets held for sale . . . . . . . . . .
Insurance contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities
...........................................
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital redeemable on demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,729,742
134,520
98,957,138
670,365
>
414,217
931,865
474,463
185,717
490,733
-
326,784
96,655,928
914,312
793,487
461,730
253,396
448,898
-
(58.8)
2.4
(54.7)
17.4
2.8
(26.7)
9.3
-
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103,318,395
100,524,900
2.8
Own funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,734,394
30,770
292,492
6,228,215
13,968
402,270
8.1
>
(27.3)
TOTAL EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,057,656
6,644,453
6.2
TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,376,051
107,169,353
3.0
15,132,009
18,755,570
12,314,679
20,678,554
22.9
(9.3)
LIABILITIES
SHAREHOLDERS' EQUITY
MEMORANDUM ITEMS
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*)The main changes in balance sheet presentation compared with the previous format are as follows:
- The assets include the “Other assets” item grouping together and summarising the lines of “Prepayments and accrued income” and “Other
assets” in the Group’s consolidated balance sheet published in 2007.
- On the liabilities side, the “Capital having the nature of a financial liability” item has been eliminated and its balance was reclassified to
“Subordinated liabilities” in the “Financial liabilities at amortised cost” caption.
- The liabilities side includes the “Other liabilities” caption which groups together the liability items in the consolidated balance sheet included
in the financial statements at 31 December 2007 as “Accrued expenses and deferred income” and “Other liabilities”.
- The deposit component of life insurance has been reclassified from “Insurance contract liabilities” to “Other liabilities at fair value through profit
or loss”
- Non-accrued fees for financial guarantees have been transferred to “Financial liabilities at amortised cost” and those for technical guarantees
have been transferred to “insurance contract liabilities”
15
ANNUAL REPORT 2008
Table 2. Consolidated Statements of Income
Interest and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of results of entities accounted for using the equity method . . . . .
Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains or losses on financial assets and liabilities (net) . . . . . . . . . . . . . . .
Held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments at fair value through profit or loss . . . . . . .
Financial instruments not valued at fair value through profit or loss . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from insurance and reinsurance contracts issued . . . . . . . . . . .
Sales and income from non-financial service provision . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance and reinsurance contract expenses . . . . . . . . . . . . . . . . . . . .
Variation in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GROSS OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other general administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation & amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions to allowances (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial asset impairment losses (net) . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments not valued at fair value . . . . . . . . . . . . . . .
NET OPERATING PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses for impairment of other assets (net) . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains/(Losses) on disposal of assets not class. as
non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative difference on business combinations . . . . . . . . . . . . . . . . . . . .
Gains/(Losses) on non-current assets held for sale
not classified as discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT BEFORE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FOR THE PERIOD FROM ONGOING OPERATIONS . . . . . . . . . . . .
Profit/Loss from discontinued operations (net) . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED NET PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . .
Profit attributed to the controlling company . . . . . . . . . . . . . . . . . . . . .
Profit attributed to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . .
BASIC EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands of euros)
31.12.08
31.12.07(*)
6,289,255
3,753,994
2,535,261
23,839
14,356
1,015,647
151,099
74,484
16,488
(10,230)
49,522
18,704
54,229
250,380
141,735
39,333
69,312
160,327
118,477
41,850
3,656,770
1,215,770
818,142
397,628
100,786
29,515
998,162
905,174
92,988
1,312,537
15,242
15,242
5,216,413
2,928,539
2,287,874
58,763
3,920
1,048,136
165,343
65,864
55,218
24
12,470
(1,848)
52,638
253,774
141,692
46,045
66,037
153,197
113,792
39,405
3,452,429
1,118,211
747,311
370,900
99,642
12,563
302,278
289,836
12,442
1,919,735
349
349
233,020
(69,295)
1,461,020
390,343
1,070,677
40,023
1,110,700
1,052,072
58,628
0.867
0.867
%
variation
8,622
11,931
1,939,939
605,734
1,334,205
7,269
1,341,474
1,264,962
76,512
1.041
1.041
20.6
28.2
10.8
(59.4)
>
(3.1)
(8.6)
13.1
(70.1)
<
>
<
3.0
(1.3)
0.0
(14.6)
5.0
4.7
4.1
6.2
5.9
8.7
9.5
7.2
1.1
>
>
>
>
(31.6)
>
>
>
(680.8)
(24.7)
(35.6)
(19.8)
>
(17.2)
(16.8)
(23.4)
(16.7)
(16.7)
(*) The presentation format change involved several reclassifications. The main variations from the previous format are as follows:
- Net interest income: Net interest income ex dividends + insurance income + finance income from non-financial activities
- Other operating income: Basically includes insurance premium income, other operating income, Other Gains-Other items and sales and
income from non-financial services.
- Other operating expenses: Includes the former Other operating expenses less provisions to foundations, cost of sales for non-financial
services + Other losses – Other items except Other payments to pensioners + Insurance and reinsurance contract expenses.
- Other general administrative expenses: general expenses + provisions to foundations
- Provisions to allowances: provisions to allowances + Other payments to pensioners
- Losses for impairment of financial assets: Impairment of financial assets held for sale + Impairment of loans and receivables.
- Gains/Losses on the disposal of assets not classified as non-current assets held for sale: Gains or losses on the sale of buildings and
shareholdings not classified as non-current assets held for sale.
Finally, the option to recognise actuarial gains and losses through equity was taken.
16
GRUPO BANCO POPULAR
ECONOMIC ENVIRONMENT
2008 brought confirmation of the worst fears about the
transfer to the real economy of the crisis of confidence
in the international financial markets that began
halfway through 2007. The spread was rapid as a result
of the worsening of the financial crisis with new
episodes such as the bankruptcy of Lehman Brothers
and the Madoff fraud, but particularly because of the
marked structural imbalances of many of the world's
most developed economies, including most notably the
heavy trade deficits, the over- indebtedness of private
sectors, the scant diversification of some economies and
the overvaluation of real estate and financial assets. In
this environment of sharp deterioration, governments
and international organisations reacted by announcing a
series of measures of great magnitude intended both to
ensure the stability of the financial system and to
reactivate economic activity. Most notable among the
first were the strong injections of liquidity into the
markets by the central banks, the provision of
guarantees for short- and long-term debt issues, and the
direct subscription of capital in its different forms. The
insufficiency of these measures has recently prompted
consideration of the acquisition by governments of
severely troubled assets in order to limit banks' losses
and halt the rise in the need for additional capital,
which could lead to mass bank nationalisation in some
countries. The policies adopted with the aim of checking
the slowdown were both monetary and fiscal, with
sharp reductions in the interest rates of the world's
main currencies and the approval of major packages of
fiscal stimulus and aid for the most affected sectors. But
despite their magnitude, these measures have so far
had only a limited effect and therefore there is
enormous uncertainty about the intensity and duration
of this situation, although the belief of the majority is
that the end of the crisis may come some time during
the second half of 2010.
Initially monetary measures were adopted to combat
the financial crisis. The U.S. Federal Reserve cut interest
rates by 400 basis points during 2008 and by 500
since mid-2007, taking them after the latest change to
between 0% and 0.25%. In turn, the European Central
Bank followed the trend set by the Fed, albeit somewhat
reluctantly, making the most significant cuts once
European inflation had ceased to be a cause for
concern. The ECB lowered rates by 225 basis points
from the peaks reached in July 2008, after an upward
movement of 25 bp intended to avoid a rise in inflation,
which finally registered a clearly downward trend. In
the same way, the Bank of England and the Bank of
Japan both applied similar measures in line with the
scope allowed by their respective interest rates. The
former cut rates by 350 basis points over the year,
while the latter did so by 45. However, these measures
did not filter through fully to the markets until the final
quarter due to the lack of confidence regarding the
impact of the crisis on individual financial institutions.
The additional rate cuts made by the central banks in
the fourth quarter, together with the extension of the
mechanisms for injecting liquidity and governments'
plans for stabilising the financial markets and avoiding
further bankruptcies after the demise of Lehman
Brothers began to achieve positive results in October. As
a result, interest rates for different terms fell rapidly and
steadily and this trend continues in the present. The
terms that are of the greatest relevance to banking in
Spain - 3- and 12-month interest rates - have fallen
from highs in October by 250 and 248 basis points,
respectively, while the spread between them has
remained steady. If we consider forward rates to be the
market consensus on the future performance of interest
rates, an environment of low rates is expected during
the period 2009-2010, bottoming out between April
and June 2009 and starting slowly to rise thereafter.
The crisis spread with particular virulence through the
Spanish economy, where the rate of growth slowed
rapidly throughout the year to end with a markedly
negative annual variation, thereby putting an end to 14
years of uninterrupted growth. The structural
deficiencies of the Spanish economy, with heavy
leverage in the export sector, low productivity and
overdependence on the building/property sector,
combined with a rapid adjustment of consumer
expectations, were the main catalysts of the slowdown.
Both consumers and business people adapted their
spending and investment decisions extremely quickly,
giving rise to a very sharp drop in GDP of 0.7% year on
year. The consensus of forecasts points to a decline in
activity of more than 1% in 2009 and puts the start of
the recovery back to well into 2010. However, there is
much uncertainty about the duration and severity of the
crisis, which is reflected in the array of estimates from
the various teams of analysts both for 2009 and 2010.
17
ANNUAL REPORT 2008
5%
On the demand side, construction was also the
component that underwent the biggest adjustment, as
Spain
shown in Figure 3. The annual variation stood at 10.9% at year end. Private consumption recorded a
EMU
downward trend which gathered momentum in the last
six months to end the year with an annual rate of
variation of -2.9%, due to both the loss of consumer
0%
confidence and the reduction in disposable income. The
fall in gross capital formation in capital goods was
faster: at the end of the fourth quarter there was a
-2 %
1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q2008 2Q 2008 3Q 2008 4Q 2008 negative growth rate of -9.7%. This performance shows
the slender expectations of recovery of the Spanish
Fig. 1
economy in the coming months, and the difficulty of
Interannual variation in GDP (%)
taking attractive projects forward despite the low
Source: INE, Eurostat
interest rates. In contrast, there was a year-on-year
increase in public authority spending of 6.3%, as a
The performance of the various components of supply
result of the Government's policy of increased public
shows an overall trend of decline in activity during
spending.
2008, particularly in construction, with a negative rate
of annual variation of -8% at year end, compared with
growth of 2.8% at the end of 2007. The performance of
both the primary and the industrial sectors steadily
15
worsened during the year, ending with negative rates of
Capital goods
annual variation of -2.7% and 5.5%, respectively. The
energy sector showed signs of resisting the deterioration
in the first half of the year, but joined the general trend
in the second half, since when its decline increased and
Public spending
it ended the year with a growth rate of 0%. Figure 2
shows the performance of the various sectors since the
0
first quarter of 2007.
Household consumption
6
Primary sector
Energy sector
Construction
0
Industrial sector
-15
1Q 2Q
3Q
2007 2007 2007
4Q
1Q
2007 2008
2Q
3Q
4Q
2008 2008 2008
Fig. 3
Interannual variation in demand side components of
GDP (%)
Source: INE
Construction sector
-10
1Q 2Q
2007 2007
3Q
2007
4Q
1Q
2007 2008
2Q 3Q
4Q
2008 2008 2008
Fig. 2
Interannual variation in supply side components of GDP (%)
Source: INE
18
As a result, the public accounts will record a negative
balance at the end of 2008, with a public deficit that
exceeded 3% of GDP for the first time since the EU
Convergence Criteria were established. Further
deterioration is expected in this indicator in 2009 as a
result of the Government's plans for reactivating the
economy.
GRUPO BANCO POPULAR
16%
2.0
2008
0
2006
2007
-3.4(e)
Balance of payments
Public surplus / deficit
-8.9
-12
0
0%
0
1Q
2007
2Q
2007
3Q
2007
4Q
2007
1Q
2008
2Q
2008
3Q
2008
4Q
2008
Fig. 5
Unemployment in Spain
Source: Funcas
4
1.8
Registered unemployed
Rate of unemployment
With regard to the Spanish economy's need for
financing in 2008, the current account balance of
payments is expected to end the year at around -10% of
GDP, similar to the -10.1% of 2007. This almost neutral
variation year on year is the result of contrasting events.
On the one hand there was an increase in the energy
deficit and a deterioration of the income balance, while
on the positive side a benefit was achieved from the fall
in oil prices in the second half of the year and the drop
in imports. The annual variation of the balance of
payments and the public accounts can be seen in Figure
4.
3.500
-10.1
-9.9(e)
Fig. 4
Public accounts and foreign trade deficit (%)
Source: INE
As a result of this macroeconomic picture, and given the
absence of other adjustment mechanisms such as
foreign exchange or monetary policy, and the as yet
limited impact of fiscal policy, the Spanish economy is
reacting by sharply reducing its installed capacity. The
main collateral effect has been the rise in
unemployment (see Figure 5). This is occurring at a
substantial pace: the unemployment rate at 2008 year
end was 13.91%, compared with 8.6% at the end of
the previous year, and there are now more than
3,100,000 people out of work, in contrast with
2,100,000 in December 2007. This severe increase is
not just a reflection of the destruction of jobs, since the
number of new job-seekers, most of them foreign
nationals, is still rising. It is estimated that the
contribution of both these events is very similar.
However, this is an extremely worrying aspect of the
Spanish economy, given the dependence of its model of
growth on labour-intensive sectors. Estimates
published to date suggest an unemployment rate of
15%-17% by the end of 2009 and further worsening in
2010, with no expectation of recovery of this indicator
until 2011.
Inflation behaved unusually in 2008 with an abrupt
change in trend during the year. This pattern was
triggered mainly by the behaviour of oil prices but also
by the change in trend of fresh food prices. Thus, during
the early part of the year, the upward pressure exerted
by these components pushed the CPI to a peak of 5.3%
in July, its highest since December 1992. This was
when the price of oil was also at its highest: more than
US$140 dollars per barrel. Since then the collapse in
oil prices took the CPI down to a low of 1.4% in
December. The steady performance of underlying
inflation at levels of slightly more than 2% illustrates
the distortion introduced by the above components (see
Figure 6). The prospects for the future reflect a
continuation of the downward trend in the very short
term, with even the possibility of negative growth.
However, given the performance of underlying inflation,
deflation seems unlikely to occur.
6
CPI
Underlying inflation
0 1Q
2007
2Q
2007
3Q
2007
4Q
2007
1Q
2008
2Q
2008
3Q
2008
4Q
2008
Fig.6
Inflation in Spain (%)
Source: INE, Eurostat
19
ANNUAL REPORT 2008
POSITIONING OF THE
BANCO POPULAR GROUP IN
THE BANKING SECTOR
Against a background of extreme crisis in the international
financial sector, with leading American and European
banks going under or having to be bailed out by their
governments, Banco Popular has shown its strength and its
effective management.
In 2008, the Group was able to maintain its signs of
identity: (i) adequate solvency, underpinned by a volume of
own funds that covers all the risk exposures plus possible
increases associated with unexpected events, (ii) high
profitability, founded on recurring business and on a
pricing policy that takes into account the individual
characteristics and risks of each customer, (iii)
extraordinary efficiency, which is possible as a result not
only of a proper expense control culture, but also of a high
base of recurring income, and (iv) good credit quality
resulting from a business model based on businesses and
private individuals, who are well known to the Bank, and
the absence from the balance sheet of lending originated
by third parties that present a high level of impairment and
uncertainty as to their fair value.
The strategy based on strengthening these signs of identity
has proven to be the most appropriate in the current
economic climate, as shown by the fact that Banco Popular
has improved its relative position in the different league
tables of comparable European and Spanish banks, based
on either rating or capitalisation.
In addition, the closure of the international capital markets
in response to the different episodes of crisis occurring
since July 2007, the fall in value of assets linked to
subprime mortgages, the bankruptcy of Lehman Brothers
and the Madoff fraud all made it necessary to round out
this strategy with a clear objective of strengthening the
liquidity position, amply achieved by the Bank, with the
result that at 31 December 2008 it had sufficient funds
and sources of liquidity for it to cope with the possible
disappearance of capital markets for more than a year.
Solvency
Even though it started the year with one of the best core
capital ratios in the world, the Group continued to
strengthen its solvency, focusing, on the one hand, on the
policy of controlling risks and obtaining guarantees and, on
the other, on managing risks by using advanced models for
the capital calculation of its main portfolios. These
measures, together with the retained profit for the year,
generated 70 basis points of core capital, which stood at
7.17% at the end of 2008. This means that Banco Popular
is one of the 4 most solvent banks in Europe that have not
received public capital. In addition, at year end the Bank
had a notable 8.12% of Tier 1 capital. For comparison
purposes, at 30 September (the latest data published by
the Spanish Banking Association (AEB)), Spanish banks
had on average a Tier 1 capital ratio of 7.83%.
It should also be mentioned that Banco Popular has the
best ratio of tangible equity to tangible total assets of all
European and American banks, according to different
analyses published in 2008.
Profitability and efficiency
The Group succeeded in ending the year with an attributed
profit of €1,052 million.
This is an exceptional result if we take into account that
only 14 European banks obtained a profit of more than
€1,000 million in 2008. This has enabled the Group to
reach 13th place in Europe and 9th place in the euro area
in terms of profit, which is far higher than it should be
based on its balance sheet size, according to which Banco
Popular would be 20th among comparable banks.
The Group's relative strength is evident despite the
conservative policies applied, leading it to record
precautionary asset impairment provisions of €189 million
and to prefer not to release a further €244 million from
general allowances, as would have been permitted by the
applicable legislation. Had these decisions not been taken,
the profit would have risen to €1,346 million.
20
The Group's most significant ratios and its position in
relation to its domestic and international competitors are
analysed in the following paragraphs.
20º
13º
Fig.7
League table positions
Source: Consensus of stock market analysts except SAN,
BBVA, SAB, BKT, POP & ING which are actual data
20
1º
0
EFFICIENCY
2º
COVERAGE
3º
ROE
PROFIT
ASSETS
GRUPO BANCO POPULAR
One of the pillars of the income statement is the net
interest yield, i.e. net interest income as a percentage of
total assets, which remained at an exceptional 2.36% in
December 2008. This represents an important competitive
advantage, since it is well above the average figure of
2.01% for Spanish banks at 30 September, the most
recent published by the Spanish Banking Association,
compared to the Group's 2.38% at that date. This yield is
the result of a model based on the traditional banking
business, primarily with small and medium size
companies, and of the Group's skilful management of the
risk-return ratio.
Another significant aspect is the recurring nature of both
the financial and the fee and commission income, as well
as the income from the trading activity, which made it
possible to grow the net interest income and the gross
operating income by an outstanding 10.8% and 5.9%,
respectively. This recurrence is especially appreciable in
this economic environment, since it makes it possible to
measure the capacity to absorb the impairment of assets
without jeopardising solvency.
The third element that characterises Banco Popular's
income statement is its high operating efficiency operating costs as a percentage of operating income which stood at 33.25% in December 2008. This rate
proves the success of the Group's strategy of controlling
costs and maximising income, and makes it top among
Spanish banks, where the average ratio is 38.15% and
comparable European banks, where it is 70.5%.
Another aspect that shows the success of the policy of
controlling costs and maximising income is the high level
of coverage of operating costs by fee and commission
income: an outstanding 71.1%. This ratio is topped by
only one bank in Europe whose main business is
investment banking and whose main source of income is
service fees.
As a result of the circumstances described above, the
17.79% return on equity at the end of 2008 was the third
highest among Spanish and comparable European banks,
where the averages were 15.5% and 6.5%, respectively.
20
17.8
15.5
6.5
0
Popular
Average
Spain
Average
Europe
Fig. 9 ROE (%)
Source: Consensus of stock market analysts except BBVA, SAB, BKT, POP &
ING which are actual data
Credit Quality
One of Banco Popular's traditional strengths has been the
high quality of its assets. This is a consequence of a
business model based on proximity commercial banking
undertaken through an extensive branch network, and the
absence from the balance sheet of risks that do not
originate in one of the Group's areas and have not been
subjected to the strict criteria governing the extension of
credit that have always been applied. The practical result
of this strategy is a balance sheet in which 84.7% consists
of loans and advances extended to businesses, mainly
SMEs, and to private individuals the majority of whom are
resident in the Iberian peninsula.
Additionally, the rest of the balance sheet consists
primarily of financial assets and interbank deposits of the
highest credit quality as certified by the most important
rating agencies.
80
70.5
71.1
51.1
Fig. 8
Coverage and
efficiency (%)(%)
Source: Quarterly
reports
59.1
38.15
33.25
0
Popular Average Average
Spain Europe
Coverage/Operating costs by fees and commissions
Popular Average Average
Spain Europe
Nevertheless, despite these characteristics that set Banco
Popular clearly apart from its competitors, the Bank is not
immune to the macroeconomic environment in which it
operates. For this reason, at 2008 year end the nonperforming loans ratio had risen to 2.80% at consolidated
level and to 2.71% considering only the business in Spain.
Comparing this performance with the rest of Spanish
banks, which had a non-performing loans ratio of 3.14%
in November 2008, shows that there is a positive
differential in Banco Popular’s favour which increases as
the Spanish economy continues to deteriorate, as occurred
in the previous cycle. This performance is shown in Figure
10.
Efficiency
21
ANNUAL REPORT 2008
9
Credit institutions
43 bp diff.
System NOV 08
17 bp diff.
System DEC 07
Banco Popular
0
1992
Fig. 10
Non-performing loans ratio (%)
Source B.Popular and Bank of Spain
2007 Marz 08
To absorb the increase in the non-performing loans ratio,
the Group has provisions of €2,222 million, giving a
coverage rate of 73.03%. However, if the guarantees
provided by delinquent debtors are included, the coverage
rate rises to a healthy 159.4%. Of the total amount of
provisions, €1,296 million relate to general allowances
not allocated to any specific risk, and it is estimated that it
will be possible to use these for at least the next two years.
Business
Despite the steady decline in GDP in 2008, there was a
5.6% increase in lending to customers. This net growth,
together with the renewal or replacement by other new
transactions of the transactions that matured during the
year, meant that the volume of production of loans granted
in the year was more than €37,000 million. This growth
made it possible to increase the market share in Spain by
2 basis points through September 2008, per the latest
data published by the Bank of Spain.
On the liability side, noteworthy was the 21.3% growth in
customer deposits, leading to an increase in market share
of 9 basis points, and the 7.5% increase in customer
funds, against a background of strong commercial
competition due to the shortage of liquidity on the
international markets. At year end the Group had
6,734,206 customers, including most notably the addition
of 16,207 new businesses, mainly from the SME segment.
Liquidity
The extraordinary growth in the customer deposits
attracted discussed above made it possible to reduce the
commercial gap substantially by €2,327 million, thereby
generating an additional flow of liquidity.
22
Nov 08
Mention should also be made of the 8 percentage point
reduction in the dependence on wholesale liabilities,
which accounted at year end for 32% of the funding,
compared with 40% the previous year.
The Group also continued to strengthen its second line of
liquidity consisting of top credit quality assets, which at
€14,640 million at year end was one of the biggest in
Spanish banking. These assets will enable the Bank to
cover all the maturities of wholesale funding during 2009.
Additionally, during 2009 Banco Popular will be able to
use the state guarantee line for an amount of €4,500
million and the auctions of the Financial Asset Acquisition
Fund, although no use was made of this option in 2008.
To summarise, in a year marked by a very profound
financial crisis and very pronounced macroeconomic
deterioration, Banco Popular was able to maintain and
boost its strengths. The strategy followed both in 2008 and
in previous years has proven to be correct, as is shown by
the fact that the Group's relative position compared with
Spanish and comparable European banks has improved
significantly at all levels. This makes it possible to face
with optimism the coming years which will continue to be
marked by economic weakness and higher levels of nonperforming loans, with the conviction that Banco Popular
will be able to maintain its signs of identity and to improve
its competitive position.
GRUPO BANCO POPULAR
MAIN CONSOLIDATED
RESULTS
Despite the current economic situation, the Banco Popular
Group continues to demonstrate its ability to generate
recurring earnings and to grow the business in both volume
and new customers, especially SMEs and private
individuals, as evidenced by the improvements in the
market share of loans and receivables - 4.51% compared
with 4.49% in 2007 - and customer deposits - 4.19%
compared with 4.10% in 2007. These figures were
obtained from Bank of Spain data for September.
The commercial banking business model and the strategy
implemented by the Group received their reward in the net
interest income and the gross operating income, which were
up by 10.8% and 5.9% on 2007, respectively. The net
operating profit achieved was substantial, despite the
impact of the asset impairment losses as a result of the
deterioration of the Spanish economy during the year.
Finally, the profit attributed to the Group amounted to
€1,052 million, which was among the highest not only in
Spain but also in Europe.
NET INTEREST INCOME
Net interest income, i.e. interest income minus interest
charges (excluding income from equity instruments
following the publication of Bank of Spain Circular
6/2008), grew by 10.8% to more than €2,535 million.
This good performance is the result of the growth of the
business and the improvement in spreads.
The following paragraphs analyse the performance of the
net interest income from three different aspects:
- Performance of assets and interest income
- Performance of liabilities and interest charges
- Performance of spreads
Performance of assets and interest income
Of the total assets managed in 2008, amounting to
€123,807 million, €110,376 million were on-balance
sheet assets that recorded annual growth of 3.0%. These
included most notably loans and receivables amounting to
€98,351 million before valuation adjustments. As shown
in Table 3, most of this amount related to transactions with
customers. The remaining lesser amount relates mainly to
treasury transactions intended for liquidity management.
Table 3. Loans and receivables, gross
(Amounts in € thousand)
% variation
31.12.08
31.12.07
98,350,605
98,181,267
0.17
4,897,986
9,667,709
(49.3)
93,452,619
88,513,558
5.6
Lending to general government . . . . . . . . . . . . . . . . . . . . .
561,395
129,943
>
Lending to other private sectors . . . . . . . . . . . . . . . . . . . .
92,891,224
88,383,615
5.1
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,700,128
9,191.096
79,880,534
8,503,081
4.8
8.1
Total loans and receivables
Loans and advances to credit institutions . . . . . . . . . . . . . .
Loans and advances to other customers:
Loans and advances to other customers - unadjusted account for 84.7% of the balance sheet, placing the Group
among the European banks with the greatest commercial
banking vocation. The growth of this caption was a notable
5.6%, although it would rise to 5.8% if the adjustment for
the fact that 31 December 2007 was a non-business day
and there were no commercial portfolio maturities were
taken into account. As can be seen, the increase in lending
to customers was a good deal higher than the nominal GDP
rise and Spanish domestic demand. In 2008, the volume of
production of loans granted, in terms of both growth of the
business and replacement of matured transactions,
amounted to €37,668 million, compared with €41,004
million in 2007.
These figures indicate that Banco Popular not only did not
restrict credit but indeed boosted it in a context of a sharp
decline in credit demand from firms and private individuals,
subject to the inevitable additional measures of prudence
that must be adopted in response to a change in economic
cycle.
68% of the lending was to businesses, mainly SMEs, and
around 32% was to private individuals, with year-on-year
increases of 8% and almost 2%, respectively.
23
ANNUAL REPORT 2008
Table 4. Lending to private customers (gross)
Trade loans and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overdrafts and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
6,377,878
48,420,181
48,276,130
144,051
1,921,419
26,345,484
3,612,091
3,743,582
2,853,024
178,960
93,452,619
7,709,354
47,086,454
46,860,392
226,062
2
26,338,589
3,788,261
2,364,628
405,690
820,580
88,513,558
% variation
(17.3)
2.8
3.0
(36.3)
>
(4.7)
58.3
>
(78.2)
5.6
% underlying
variation
(11.0)
5.8
(*) Owing to the fact that 31 December 2007 was a non-business day and there were no commercial portfolio manurities, the final trade loans and discounts balance would be approximately €7,176 million.
Turning to the breakdown of lending to private customers,
as shown in Table 4, 51.7% related to mortgage loans, the
growth of which continued to slow dropping to 3% in
2008. This slowdown goes back to 2006 as part of the
Group's strategy of reducing credit to the property sector.
This portfolio is backed by high quality mortgage
guarantees with total LTV of 56.76% (58.05% for private
individuals and 55.87% for businesses). To this must be
added the fact that in the case of private individuals, the
average rate of effort, calculated taking debt service as a
percentage of disposable income, stood at 22.83%, which
was well below the 35%-40% considered to be prudent.
The interest income represented a yield of 5.86% on the
Group's average total assets, which was an increase of 55
basis points on 2007.
financial fees and commissions, including those for the
analysis and arrangement of credit transactions accrued
throughout the life of the transactions.
Table 5 shows that the yield on earning assets arises mainly
from the lending activity with the private sector, which
accounts for 91.3% of the total. There is a progressive
increase of the spreads in this activity in order to transfer
the increased cost of liabilities to the asset side. In the
fourth quarter of 2008 the yield on lending to customers
was 6.61% compared with 6.26% in the same quarter of
2007, although there was an environment of lower rates in
the fourth quarter of 2008. A further 4.9% of the income
was from transactions with financial institutions, and was
mainly generated by the Group's Treasury activities. 3.3%
related to securities transactions, primarily of fixed income
securities and 0.2% related to other earning assets.
The major portion of the €6,289 million of interest and
similar income related to interest which totalled €5,923
million. The remaining €366 million related to sundry
Table5. Interest and similar income in 2008
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade loans and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overdrafts and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
Total
308.151
15.980
5.739.835
494.188
2.824.464
4.908
1.772.519
230.334
387.764
25.658
207.424
16.330
1.535
6.289.255
% 2008 distribution
4.9
0.3
91.3
7.8
44.9
0.1
28.2
3.7
6.2
0.4
3.3
0.2
100.00
GRUPO BANCO POPULAR
As Figure 11 shows, the Group's income comes mainly from
business with customers in the Iberian Peninsula, which
contributed almost 98% of the interest and similar income, of
which Banco Popular Portugal accounted for nearly 8%. The
remaining 2% came from TotalBank and from activities with
other non-resident businesses and private individuals.
Banco
Popular Portugal
7.7%
Rest of non resident sector
2.3%
Figure 12 shows the sources of the income by type of
transaction with private sector customers that are not credit
institutions.
Trade loans and discounts
Resident
private sector
90.0%
8.64
Secured loans
Fig. 11
Distribution of income
from the private sector (%)
49.38
Asset repos
0.08
Other term loans
30.99
Financial leasing
4.03
Overdrafts and other
6.88
0
50
Fig. 12
Origin of income by type of transaction with the
private sector (%)
The drivers of 2008 growth were income arising from
secured loans and from other term loans (personal loans
and credits), which amounted to 49.38% and 30.99%,
respectively, of the total yields from the private sector.
Performance of liabilities and interest charges
Table 6 shows that, at 31 December, the on-balance sheet
funds, i.e. customer deposits, domestic commercial paper,
interbank deposits and wholesale markets amounted to
€98,957 million, which was 2.4% more than in 2007.
Table 6. Funds managed (net)
31.12.08
31.12.07
% variation
Deposits from central banks. . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions. . . . . . . . . . . . . . . . . . . . .
3,644,312
10,619,566
9,417,398
12.8
Customer deposits. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
51,665,410
42,577,395
21.3
Unadjusted customer deposits . . . . . . . . . . . . . . . . . . . .
51,494,503
42,776,874
20.4
General government . . . . . . . . . . . . . . . . . . . . . . . . . .
6,491,790
6,092,873
6.5
Other private sectors . . . . . . . . . . . . . . . . . . . . . . . . .
45,002,713
36,684,001
22.7
Residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonresidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,639,457
6,363,256
31,026,210
5,657,791
24.5
12.5
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . .
170,907
(199,479)
<
Debt certificates including bonds . . . . . . . . . . . . . . . . . . . . .
30,208,172
41,881,373
(27.9)
Unadjusted debt certificates including bonds. . . . . . . . . .
29,846,312
41,814,696
(28.6)
Bonds & other securities outstanding . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,040,340
9,805,972
26,203,705
15,610,991
(23.5)
(37.2)
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . .
361,860
66,677
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .
1,616,757
1,202,921
1,794,537
985,225
(9.9)
22.1
Total on-balance sheet funds. . . . . . . . . . . . . . . . . . . . . . .
98,957,138
96,655,928
2.4
>
25
ANNUAL REPORT 2008
The customer funds, which include customer deposits and
domestic commercial paper, as shown in Table 7, were up
by 7.5% on 2007, driven mainly by customer deposits
which rose by an outstanding 21.3% and, particularly, by
time deposits, which were up by 40.5% on the previous
year due to the strong commercial efforts of the branch
network.
Table 7. Customer funds (net)
Demand accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts & valuation adjustments . . . . . . . . . . . . . . .
Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This growth enabled the Group to strengthen its funding
structure by increasing the weight of retail customer funds,
which accounted at 31 December for 62% of the total, 4
percentage points more than at 31 December 2007, while
at the same time reducing dependence on the wholesale
markets, the contribution of which to the funding structure
fell by 8 percentage points.
At €3,754 million, the interest expenses represented
3.50% of the average total assets, which was 52 basis
points more than in 2007. In general, the increase in the
cost of funds was due not only to the higher average level of
interest rates in 2008, but also to the widening of the
spreads of some instruments.
In the case of the retail funds, the increased competition to
attract customer funds, particularly for time deposits, led to
a slight increase in spreads, which then became wider with
the sharp fall in interest rates in the last two months of the
year. This effect will be corrected in 2009 and will give a
boost to earnings in the first few months. In turn, the
increased cost of wholesale funds was due almost entirely
31.12.08
14,026,839
4,806,340
25,719,428
6,692,298
420,505
51,665,410
5,737,102
31.12.07
15,360,499
5,578,768
18,300,051
3,257,756
80,321
42,577,395
10,806,188
% variation
(8.7)
(13.8)
40.5
>
>
21.3
(46.9)
57,402,512
53,383,583
7.5
to the high interest rates in the month of November, since
Banco Popular launched no further issues of long-term debt
during the year and the short-term instruments hardly
called for wider spreads when they were open.
As regards the breakdown of interest expenses by
provenance and product, Table 8 reveals that 53.7% of the
expenses arose from transactions with customers, and the
remainder related to wholesale sources of financing, and
shows separately those associated with credit institutions
and those arising from marketable securities. In fact, the
weight of the former is lower than the table suggests
because the day-to-day management of liquidity provokes
the need for deposits placed and taken at different terms.
Deducting from the €484.7 million the €307.6 million
income from asset transactions with credit institutions gives
a net amount of €177.1 million, which is closer to the
actual cost of this type of financing. Therefore, the real cost
of inter-bank financing as a part of the total cost is 5.1%.
Table 8. Interest expense and similar charges in 2008
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
Total
484,718
130,838
1,885,572
183,805
23,612
931,718
668,163
76,209
2,065
1,232,815
1,141,304
69,915
21,596
19,241
810
3,753,994
Weight (%)
12.9
3.5
50.2
4.9
0.6
24.8
17.8
2.0
0.1
32.9
30.4
1.9
0.6
0.5
100.0
26
GRUPO BANCO POPULAR
Assets repos
4.04
Commercial paper
35.44
Time deposits
49.41
Savings accounts
1.25
Current accounts
9.75
Others accounts
0.11
60
0
The breakdown of interest expenses by type of operation
with the private sector is shown in Figure 13. The higher
cost of customer deposits is notable, and to a lesser extent,
of commercial paper. In both cases these are instruments to
capture funds from the savings of individuals or excess
liquidity from companies, that can be traded by customers
without limitations in a highly competitive market.
Additionally, demand and savings deposits bear a lower
cost in spite of the fierce competition that also exists for
these products. The reason is that the balances are fully
available to customers and therefore the yield on them for
the account holders is lower. In addition, current accounts
are often an accessory since they act as operating accounts
linked to other customer transactions.
Fig. 13
Origin of costs by operation
type with private sector (%)
Performance of spreads
As Table 10 shows, the customer spread was 3.37% at the
end of the year, which was 26 basis points lower than in
2007 as a result of a 63 basis points increase in the yields
on loans and receivables and a higher increase of 89 basis
points in the costs of customer funds. Although as the table
shows the lending rates rose more than the increase in
average rates from one year to the next, the increase in the
cost of liabilities, both of demand accounts and time
deposits, was greater as a result of the strong competition
between institutions arising out of the lack of liquidity in the
system.
Cuadro 10 Yields and costs
(Amounts in € thousand and rates annualized)
31.12.08
Average
balance
Distrib.
(%)
31.12.07
Income
or expense
Rate
(%)
Average
balance
Distrib.
(%)
Income
or expense
Rate
(%)
7,783,749
89,071,929
3,980,538
319,607
7.26
83.07
3.71
0.30
309,686
5,755,815
207,424
16,330
3.98
6.46
5.21
5.11
8,127,924
81,609,550
2,592,430
343,808
8.28 325,740
83.12 4,759,273
2.64 118,962
12,438
0.35
4.01
5.83
4.59
3.62
Total earning assets(b) . . . . . 101,155,823
94.34
6,289,255
6.22
92,673,712
94.39 5,216,413
5.63
6,065,912
5.66
-
-
5,508,613
-
-
Total assets (c) . . . . . . . . . . . . . 107,221,735
100.00
6,289,255
5.86
9 8 , 1 8 2 , 3 2 5 100.00 5,216,413
5.31
Financial system . . . . . . . . . . . . . . .
Lending to customers (a) . . . . . . . . .
Securities portfolio . . . . . . . . . . . . .
Other earning assets . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
5.61
Financial system . . . . . . . . . . . . . . .
Customer funds (d) . . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . .
Savings & time deposits . . . . . . .
Marketable debt securities & other
Other interest-bearing liabilities. . . .
11,950,170
43,603,071
13,327,297
30,275,774
39,377,318
303,281
11.15
40.67
12.43
28.24
36.73
0.28
485,528 4.06
1,348,247 3.09
226,038 1.70
1,122,209 3.71
1,900,978 4.83
19,241 6.34
9,863,793
36,197,506
13,197,817
22,999,689
41,400,175
325,324
9.86 362,697
36.87 797,408
13.44 149,730
23.43 647,678
42.17 1,754,252
14,182
0.33
3.75
2.20
1.13
2.82
4.24
4.36
Total interest-bearing liabilities (e)
95,233,840
88.83
3.94
87,606,798
89.23 2,928,539
3.34
6,074,555
5,913,340
5.65
5.52
3,753,994
-
-
5,312,710
5,262,817
Total liabilities & equity (f) . . . . . 107,221,335
100.00
Other non-interest-bearing liabilities .
Equity . . . . . . . . . . . . . . . . . . . . . .
Customer spread (a-d). . . . . . . . . . .
Spread (b-e) . . . . . . . . . . . . . . . . . .
Net interest margin (c-f) . . . . . . . . .
5.41
5.36
-
-
3,753,994 3.50
9 8 , 1 8 2 , 3 2 5 100.00 2,928,539 2.98
3.37
2.28
2.36
3.63
2.29
2.33
27
ANNUAL REPORT 2008
To limit this effect, Banco Popular performed efficient
management of the costs of wholesale financing by using all
the instruments available to it and by replacing maturities
with other liabilities with a narrower spread. This was
possible thanks to the second line of liquidity available and
the appropriate distribution of maturities constructed over
the last few years.
GROSS OPERATING INCOME
CAs a result, the spread between earning assets and
interest-bearing funds remained steady with respect to the
previous year, with an increase in the fourth quarter over
the third quarter of 2008 of 5 basis points, and of 8 basis
points in comparison to the same period of the previous
year. This positive variation illustrates once again the
Group's successful management, improving, on the one
hand, the structure of its funding and, on the other,
positioning itself correctly in the face of falling interest rates
which, as will be seen in the section on interest rate risk,
benefits the spread.
The return on equity instruments amounted to €24 million,
arising mainly from a small share portfolio of the Treasury
trading activity. This amount is appreciably lower than the
amount recorded the previous year as a result of the
Group's prudence in its management of liquidity, since
dividend generating activity requires high volumes of
investment.
The gross operating income totalled €3,657 million at 31
December 2008, a year-on-year increase of 5.9%.
Following the Bank of Spain's new Circular 6/2008, this
calculation now includes other income and other operating
expenses
The share in the results of entities accounted for using the
equity method was more than €14 million at 2008 year
end, based mainly on the extraordinary earnings obtained
by the Sistema 4B company.
As the causal analysis of the variation in the spread
presented in Table 11 shows, the changes in the funding
structure contributed 12 basis points to the total spread,
while the variation in the rates of the different aggregates
reduced it by 9 basis points.
Table 11 Causal analysis of variations in interest rates
Total earning assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest-bearing funds . . . . . . . . . . . . . . . . . . .
Net spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate
2008
5.86
3.50
2,36
The caption of net fees and commissions amounting to
€865 million, which was 2.1% lower than in 2007, can be
considered to have performed very positively due to the
strong impact of the behaviour of asset management fees
and commissions. Figure 14 shows the quarterly variations
during 2007 and 2008.
Thus, analysis of the individual components of this caption
as shown in Table 12 highlights the excellent behaviour of
the risk fees and commissions, which were up by 13.9%
year on year, and the stability of those relating to
management services overall, with a big increase in fees
and commissions for the administration of demand
accounts, which were up by 5.1%, and of other fees and
commissions for management services, which were 6.2%
higher than in 2007. On the contrary, asset management
fees and commissions were down by 20.6% as a result of
the sharp fall in stock markets and investor preference for
more conservative deposits and financial assets.
28
Rate
2007
5.31
2.98
2.33
07 Rates
with 08
balances
5.32
2.87
2.45
Variation by
structure
+0.01
-0.11
+0.12
1º
Variation
by rate
+0.54
+0.63
-0.09
Total
variation
+0.55
+0.52
+0.03
225.6
217.2
2º
2007
3º
4º
1º
214.2
225.7
215.7
226.2
208.6
213.9
2º
2008
3º
4º
Fig. 14
Net fee & commission income
(€ million)
GRUPO BANCO POPULAR
Table 12. Net fee and commission income
31.12.08
31.12.07
%
variation
% 2008
distribution
Risk fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-related services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision of guarantees and other sureties . . . . . . . . . . . . . . .
266,031
143,108
122,923
233,540
107,202
126,338
13.9
33.5
(2.7)
30.8
16.6
14.2
Customer financial asset management . . . . . . . . . . . . . . . . . . . . .
Securities portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
196,972
30,257
114,387
52,328
248,103
32,029
160,614
55,460
(20.6)
(5.5)
(28.8)
(5.6)
22.8
3.5
13.2
6.1
Operating services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection and payment handling. . . . . . . . . . . . . . . . . . . . . . .
Securities and foreign currency purchases and sales . . . . . . . .
Administration of demand accounts. . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401,545
215,876
17,374
106,553
61,742
401,150
215,528
26,101
101,373
58,148
0.1
0.2
(33.4)
5.1
6.2
46.4
25.0
2.0
12.3
7.1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
864,548
882,793
(2.1)
100.00
The assets managed via mutual funds amounted to €8,649
million in 2008, compared with €12,097 million in 2007.
Popular Gestión and Popular Gestión Privada, the Group's
two main management companies, managed €8,073
million of assets in 2008, compared with €11,662 in
2007, as shown in Table 13. Of this 31% decrease in
assets, 27% was due to outflows of funds that were
subsequently transferred to more conservative savings
products, and 4% was the result of adverse variations in the
market.
The fund categories which performed best in the year were
money market funds and fixed income funds. The Group's
market share in Spain was 4.82%, placing it sixth in the
Spanish asset portfolio management league table.
The gains on financial assets and liabilities recorded very
significant growth of 13.1%, based on the distribution of
treasury products and the management of proprietary
positions.
Table 13.. Assets of and variation in mutual funds, by type
Net value of the assets
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mixed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
1,321 .
3,830
348
351
2,029
194
8,073 .
% variation
(3.7)
(13.7)
(73.7)
(61.9)
(33.4)
(65.7)
(30.8)
Distribution (%)
16.4
47.4
4.3
4.3
25.1
2.4
100.0
Variation due to:
Net subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management / Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(27.2%)
(3.6%)
Market share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.82%
29
ANNUAL REPORT 2008
The exchange differences grew by 3%, assisted by the
volatility of the US dollar, which is the main foreign currency
with which the Group operates.
+9.5%
747
With the publication of Bank of Spain Circular 6/2008,
insurance business results have ceased to be a separate
caption and are now largely included under other operating
income and other operating expenses, as appropriate. The
earnings from this line of business performed unevenly
through the year, but overall there was a drop in net income
which is directly related to the decrease in the volume of
premiums of loan-linked products.
NET OPERATING PROFIT
Net operating profit amounted to €1,313 million at the end
of 2008, a drop of 31.63% from the previous year. As
discussed earlier, this decrease is mainly due to the fact that
financial asset impairment losses (net) are now included in
the calculation. After exclusion of the effect of the financial
asset impairment losses, the profit before provisions would
have been 4% up on 2007.
As Table 14 shows, the operating costs relating to personnel
and administrative expenses were 8.7% higher than in the
same period of the previous year.
Personnel expenses were up by 9.5%. This rise was mainly
due to the increase in headcount following the incorporation
of Totalbank (a US bank) in November 2007, and the tardy
expansion of other Group units. Excluding the first effect,
there would have been a 7.4% increase in personnel
expenses, of which 3.4% was due to the increase in
headcount and 4% was the result of the pay increase, as
shown in Figure 15.
General administrative expenses increased by 7.2%. Since
the publication of Bank of Spain Circular 6/2008, the
calculation of them now includes other operating expenses
that were previously booked separately.
The administrative expenses were not only affected by the
incorporation of TotalBank in November 2007, but also by
the higher cost of rentals following the sale of the Central
Services buildings, and the subsequent rental of them for a
limited time until a new corporate headquarters is built.
Excluding both effects in order to make a uniform
comparison with the previous year, the growth would have
been 3.0%, a rate that illustrates the efforts made by the
Group to adapt to the new macroeconomic environment.
The 24% increase in costs under the "IT and other technical
expenses" and “Technical reports and legal expenses”
captions is due mainly to the processes of adaptation to
Basel II and to other regulatory requirements.
30
2007
+7.4%
818
2008
Published
744
2007
800
2008
Excluding TotalBank
Fig. 15
Personnel costs
(€ million)
As a result of the performance of the income and expenses
discussed above, Banco Popular was able to maintain its
usual level of efficiency with a ratio at year end of 33.25%,
which continues to be not only the best in Spain, but also
of the comparable European banks. It is also worth
highlighting that the ratio of coverage of general expenses
with commissions was 71.1%, compared with an average
of 51.1% for European banks and of 59.1% for Spanish
banks. This ratio places Banco Popular among the leaders
both in Europe and Spain, and is topped by only one
banking group that engages in investment banking, whose
main source of income is service fees and commissions.
Despite this extraordinary competitive edge, one of Banco
Popular's objectives for 2009 is to continue focusing on its
cost control strategy. It will be assisted in this goal by the
savings arising out of the merger transaction between Banco
Popular Español S.A., Banco de Castilla S.A., Banco de
Crédito Balear S.A., Banco de Galicia S.A. and Banco de
Vasconia S.A., completed in December 2008, as explained
in the Banco Popular Group section of this report.
Depreciation and amortisation amounted to €100.8
million, a year-on-year increase of 1.2%. Most of this
amount related to the depreciation of tangible assets, which
was down by 5.9% as a result of the sale of the Central
Services buildings.
The provisions to allowances amounted to €29.5 million as
a result of the provisions allocated for early retirements.
GRUPO BANCO POPULAR
Table 14 Personnel and general expenses
31.12.08
31.12.07
%
variation
Personnel expenses:
Wages & salaries ........................................................................
Social security charges ...............................................................
Other personnel expenses ..........................................................
Pensions ......................................................................................
818,142
617,781
142,379
26,165
31,817
747,311
565,939
135,101
21,051
25,220
9.5
9.2
5.4
24.3
26.2
General expenses:
Rents & common services...........................................................
Communications .........................................................................
Maintenance of premises and equipment..................................
IT & other technical expenses.....................................................
Stationery & office supplies .......................................................
Technical reports & legal expenses ...........................................
Advertising and publicity ............................................................
Insurance .....................................................................................
Security & fund transport services..............................................
Travel...........................................................................................
Property taxes, VAT and other.....................................................
Allcations to foundations ............................................................
Other general expenses...............................................................
397,628
68,820
28,607
25,307
73,711
8,475
19,785
37,557
4,504
20,353
12,695
51,273
19,227
27,314
370,900
55,206
25,597
23,382
72,516
7,831
16,852
38,715
4,399
18,877
12,782
51,406
22,775
20,562
7.2
24.7
11.8
8.2
1.6
8.2
17.4
(3.0)
2.4
7.8
(0.7)
(0.3)
(15.6)
32.8
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,215,770
1,118,211
8.7
The €998 million of net financial asset impairment losses
reflect the impact of the adverse economic situation. 90.7%
of this amount (€905 million), related to loans and
receivables, of which €716 million were ordinary
provisions representing a risk premium of 81 basis points,
and €189 million were precautionary provisions made in
anticipation of impairments that could occur in 2009.
Although use was made during the year of €262 million of
general allowances, an additional €244 million of general
allowances were not released, even though this would have
been permitted by the applicable legislation. As can be
seen, the Group preferred to follow a voluntarily demanding
criterion, within what is allowed by the regulations, giving
priority over profit to the coverage of non-performing loans,
in order to face the foreseeable worsening of the economic
situation in 2009 from a position of greater strength.
Asset impairment losses on non-financial assets and noncurrent assets held for sale of €15 million and €69 million,
respectively, relating mainly to writedowns of real estate
assets.
Earnings from the disposal of assets not classified as noncurrent assets held for sale totalling €233 million and
reflecting mainly the capital gains on the sale of own
buildings used by the centralised administration services
that will move in the next few years to a new corporate
headquarters that is being built.
Earnings from discontinued operations amounting to €40
million that encompass mainly the sale of Banco Popular
France to a French bank, Crédit Mutuel, as part of a general
partnership agreement signed with this institution in the
second quarter of 2008.
The remaining financial asset impairment losses of €93
million, i.e. 9.3% of the total, related to available-for-sale
financial assets, distributed between debt securities
(12.8%) and equity instruments (87.2%).
Income tax, which in 2008 amounted to €390 million, was
positively affected by the reduction of the tax rate in Spain
from 32.5% in 2007 to 30% in 2008.
CONSOLIDATED PROFIT FOR THE YEAR
ATTRIBUTED PROFIT
At 31 December 2008, the consolidated profit for the year
amounted to €1,111 million, which was 17.2% lower than
in 2007, and included the net operating profit and the
following components.
In 2008, the profit attributed to the Group amounted to
€1,052 million, 16.8% less than in 2007. This result
reflects the application of conservative criteria by including
a voluntary bringing forward of provisions for asset
impairment of €189 million and the non-release of €244
million of general allowances, despite being permitted by
current regulations. If these decisions had not been taken,
the profit would have been €1,346 million, an increase of
6.4% on 2007 (see Figure 16).
31
ANNUAL REPORT 2008
Despite these conservative policies, the Group occupies
ninth place in the euro area league table for net profit in
2008, and is among the fourteen European banks to have
achieved a net profit of more than €1,000 million.
As Figure 17 shows, the earnings per share, calculated on
the average number of shares in the year, was €0.867,
compared with €1.041 in 2007, a drop of 16.7%.
1,345.9
+6.4%
1,052.1
Per the proposed distribution of profit for 2008 formulated
by the Bank’s Board of Directors and to be submitted to the
General Meeting of Shareholders for approval, as detailed in
Note 4 to the Financial Statements, the dividend out of
2008 earnings is €0.3335 per share, 32.2% lower than
the €0.4919 in 2007. The total dividend out of 2008 profit
amounts to €411 million. This proposal results in a cash
pay-out - the portion of attributable profit allocated for
payment of cash dividends - of 39.05%. The evolution of
the dividend per share in the last two years is shown in
Figure 18. At 31 December 2008, the ROE continued to be
among the highest in Europe at 17.79%.
The ROA was 1.04%.
-16.8%
Figures 19 and 20 show the evolution of the ROE and the
ROA in 2008 and 2007.
2008
2008
Published
Adjusted
Fig. 16
Net profit
(€ million)
2007
1.041
2007
2008
0.867
2008
0
1,5
0.4347
0.5006
24.04
2008
17.79
25
Fig. 19
ROE (%)
32
Fig. 18
Dividend per share (€)
2007
0
0,50
0
Fig. 17
Earnings per share (€))
1.37
2007
2008
1.04
0
1,60
Fig. 20
ROA (%)
GRUPO BANCO POPULAR
ACTIVITY BY BUSINESS LINE
As Table 15 shows, the franchise in Spain contributes more
than 90% of the business measured in terms of both total
assets and lending to customers. However, in terms of
earnings, the percentage rises to nearly 98% because of
the lower level of profitability of the businesses in Portugal
and the USA.
This section provides information about the segments
identified by the Group from the geographical and business
viewpoints. The segmentation methodology is described in
Note 7 to the consolidated financial statements.
The Banco Popular Group conducts its business mainly in
the Iberian Peninsula, although it is also present in the
United States through its subsidiary TotalBank. It focuses
on commercial banking, specialising in meeting all the
financial needs of businesses, with a particular emphasis
on SMEs, as well as those of private individuals. The
remaining business lines focus on other non-financial
areas and are more specialised.
From the business standpoint, the Group has identified
four major segments (see Table 16). The most significant of
these for its contribution to pre-tax consolidated profit is
the commercial banking business, with a contribution of
over 87.08%. The institutional and markets area
contributes 5.72%, and the asset management and
insurance businesses contribute 4.67% and 2.53%,
respectively. It should be noted that all the business lines
operate in all the countries in which the Group is present.
Table 15. Segmentation by geographical area
Portugal
Spain(*)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating income . . . . . . .. . . .. . . . . . . . . . . . . . . . . . . . .
Consolidated profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed profit . .. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .. .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to other debtors . . . . . . . . . . . . . . . . . . . . . . .
Weight
2008 (%)
93.31
94.60
>
98.43
98.34
91.54
93.10
Weight
2007 (%)
93.18
93.77
95.12
95.40
95.30
92.92
93.22
Weight
Weight
2008 (%) 2007 (%)
6.69
6.82
5.40
6.23
<
4.88
1.57
4.60
1.66
4.70
8.46
7.08
6.90
6.78
(*) The consolidation adjustments are applied to the Spain segment
Table 16 Segmentation by business area
Commercial banking
Asset management
Weight
Weight
Weight
2008 (%) 2007 (%) 2008 (%)
Net interest income . . . . . .
Gross operating income . . .
Net operating income . . . . .
Profit before taxes . . . . . . . .
Assets . . . . . . . . . . . . . . .
96.40
91.83
>
87.08
83.20
93.08
88.82
89.04
88.11
82.35
0.87
2.68
5.19
4.67
0.36
Insurance activity
Weight
Weight
Weight
2007 (%) 2008 (%) 2007 (%)
0.87
3.44
4.72
4.67
1.63
1.43
1.34
2.82
2.53
0.75
0.90
1.54
2.27
2.25
1.05
Institutional & markets
Weight
Weight
2008 (%) 2007 (%)
1.30
5.15
4.15
5.60
<
5.12
5.72
4.97
15.69
14.97
33
ANNUAL REPORT 2008
Commercial banking
The activities of the commercial banking business are
focused on offering financial products and services to
businesses, mainly SMEs, and private individuals. Its
degree of specialisation means that customers receive
personalised attention according to their requirements,
either through the branch office network or through the
channels made available for remote operating. The
commercial banking activity is conducted mainly in Spain
and Portugal, with a contribution from each to the main
balance sheet and earnings aggregates in line with what
was stated earlier. The contribution of USA is lower than
1% because of the small size of the franchise in that
country.
The total number of customers in 2008 was 6,734,206.
Table 17 Results of the commercial banking activity
31.12.08
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . .
Net fees & commissions . . . . . . . . . . . . . . . . . . . .
+/- Other financial operations . . . . . . . . . . . . . . . .
+/- Other operating results . . . . . . . . . . . . . . . . . .
Gross operating income . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses & other provisions (net) . . . . .
Net operating income . . . . . . . . . . . . . . . . . . . . . . . .
+/- Other results (net) . . . . . . . . . . . . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,444,031
777,479
48,958
87,411
3,357,879
1,174,501
822,938
1,360,440
(88,197)
1,272,243
As Table 17 shows, there was significant year-on-year
growth in the recurring income from this business. The net
interest income of €2,444 was 14.8% up on 2007. The
fact that the net fees and commissions remained
practically flat and the financial asset trading income was
lower was offset by the other operating income, giving rise
to a 10% increase in gross operating income, which
totalled €3,350 million.
31.12.07
2,129,455
785,726
98,930
52,416
3,066,527
1,083,762
273,410
1,709,355
1,709,355
% variation
14.8
(1.0)
(50.5)
66.8
9.5
8.4
>
(20.4)
(25.6)
After reorienting the business in Portugal from a mortgage
profile to a retail banking business that is closer to the
business conducted in Spain, the commercial banking
business is segmented into the business of both countries the Iberian Peninsula - on the one hand, and, on the other
the business in USA, the special characteristics of which
require individual analysis.
Commercial banking in the Iberian Peninsula
As explained in greater detail in the previous section, the
operating costs in 2008 included the integration of
TotalBank at the end of 2007. These additional expenses,
together with the new expenses of renting the buildings for
own use sold during the year, explain the sharp increase.
The Group expects them to remain flat in 2009.
The net operating profit was down by 20.4% as a result of
the increase in impairment losses and other provisions due
to the inevitable growth of non-performing loans, even
though the Banco Popular Group is below the sector
average, and to the application of a policy of prudence
which has led the Bank to allocate higher provisions than
those legally required.
“Other results” reflects mainly the impairment losses of
non-current assets held for sale, after which the profit
before taxes amounted to €1,272 million at year end,
which was 25.6% lower than in 2007.
34
The business in the Iberian Peninsula is conducted
through: (i) Banco Popular, which is present throughout
Spain; (ii) Banco de Andalucía, a regional bank operating
mainly in the Regional Community of Andalusia; (iii) three
specialist banks, one for mortgage lending (Banco Popular
Hipotecario), another for private banking (Popular Banca
Privada), and a third operating through the Internet
(bancopopular-e); and (iv) Banco Popular Portugal which
operates throughout Portugal.
Table 18 presents the segmentation of this business area,
at net interest income and service fee and commission
income levels, into banking for businesses and banking for
individuals.
GRUPO BANCO POPULAR
Table 18 Segmentation of net interest income and service fee & commission income
Banking for businesses . . . . . . . . . . . .
Big companies . . . . . . . . . . . . . . . . . . .
SMEs
........................
Other companies . . . . . . . . . . . . . . . . .
Banking for private individuals . . . . . .
Personal banking . . . . . . . . . . . . . . . . .
Private banking . . . . . . . . . . . . . . . . . .
Foreigners . . . . . . . . . . . . . . . . . . . . . .
Homogeneous groups . . . . . . . . . . . . . .
Other individuals . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
Big companies . . . . . . . . . . . . . . . . . . .
SMEs
........................
Other companies . . . . . . . . . . . . . . . . .
Private banking . . . . . . . . . . . . . . . . . .
Foreigners . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
(Data in %)
LOANS & ADVANCES TO OTHER
DEBTORS (% of average balance)
INCOME (%)
66,9
18,7
42,9
5,3
33,1
4,2
0,1
3,6
5,1
20,1
100,00
68,4
18,2
46,3
3,9
31,6
3,7
0,1
3,9
4,4
19,5
100,00
DEPOSITS FROM OTHER CREDITORS (% of average balance)
COSTS (%)
48,5
8,6
17,1
22,8
51,5
32,8
3,6
2,9
2,2
10,0
100,00
51,8
11,9
13,8
26,1
48,2
36,1
4,8
2,3
1,1
3,9
100,00
SERVICE FEE & COMMISSION INCOME (%)
Big companies . . . . . . . . . . . . . . . . . . .
SMEs
........................
Other companies . . . . . . . . . . . . . . . . .
Private banking . . . . . . . . . . . . . . . . . .
Foreigners . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
Banking for businesses
Banking for businesses contributed 68.4% of the interest
and similar income from customers, 51.8% of the costs
and 48.8% of the service fee and commission income.
From the standpoint of average assets managed, the
proportion is similar, since they represent 66.9% of the
assets and 48.5% of the liabilities.
Comparison with the previous year reveals an increase in
the weight of banking for businesses as a proportion of the
business overall, as a result of the efforts made to attract
new businesses, mainly SMEs, which led to the substantial
addition of 15,122 new businesses in 2008.
48,8
8,1
35,2
5,6
51,2
13,6
2,8
6,1
4,2
24,5
100,00
This segment includes big companies and SMEs. A big
company is defined as a company with total assets of over
€100 million and income of over €100 million. In the
SME section, three types of enterprise are identified: a
medium-sized enterprise is one whose total assets or
income exceed €10 million, a small enterprise is one
whose total assets or income exceed €1 million; and a
micro-enterprise has total assets or income of under
€1million. As stated earlier, the strategy focuses
fundamentally on the SMEs sub-segment, which provides
higher profitability, as evidenced by the fact that 42.9% of
the assets contributed 46.3% of the interest income, and
17.1% of the liabilities accounted for only 13.8% of the
financial costs. It also contributed 35.2% of the service fee
and commission income, as a result of using such products
as bill discounting, guarantees, credit lines and factoring.
35
ANNUAL REPORT 2008
Banking for Private Individuals
United States
Banking for private individuals contributed 33.1% of the
total lending to customers and 31.6% of the interest and
similar income. On the liability side, customer deposits
contributed 51.5% of the total business and 48.2% of the
costs, with an increase in weight in the course of the year.
This growth was the result of the strong increase in the
amount of deposits in 2008 aimed at reducing the
commercial gap, with commercial efforts targeted on the
personal banking segment, which is the most important in
banking for private individuals with a weight of 32.8% in
total deposits and 36.1% in financial costs, contributing
13.6% of the banking services fees and commissions. The
personal banking segment is especially focused on
customers with medium-high income that do not own
sufficiently high assets to qualify as private banking
customers but that demand personalized service.
The commercial banking business in the United States is
conducted through TotalBank, the accounting acquisition
and consolidation of which were made at the end of 2007.
At 31 December 2008, the bank had 233 employees and
14 branch offices in the south of Florida. Of a balance
sheet total of €1,363 million, lending to customers
accounted for almost 70% and customer funds for 88.4%.
Mention should also be made of the strong competition
faced during the year in deposits for private individuals.
The Group's commercial activity concentrated on attracting
new customers, retaining existing customers and
developing the personal banking and private banking value
proposal.
Noteworthy was the contribution of homogeneous groups
of customers, generally in the same profession, to which
the Bank offers a series of asset and liability products
tailored to their level of income and financial needs. The
actions constantly targeting these groups achieve growth in
volume and number of customers, both of them
commercial banking priority objectives. These groups
contributed 4.4% of the income, 1.1% of the financial costs
and 4.2% of the service fee and commission income.
Noteworthy with regard to Banco Popular Portugal is the
Group's emphasis on reorienting the bank's business
towards commercial or retail banking, fundamentally with
small and medium-sized companies. With this objective, in
2007 and part of 2008 a plan to expand the network was
undertaken and is now complete, giving a total of 235
branch offices and 1,376 staff distributed throughout
Portugal.
This reorientation and expansion of the business enabled
the bank's gross risk, which includes gross lending to
customers and contingent exposures, to grow by 5.4% in
the year to a total of €6,902 million in December 2008,
with outstanding growth in non-mortgage products. The net
interest income rose by 6.4% to €170 million.
36
In a very unfavourable environment marked by the severe
economic crisis, the TotalBank business experienced
spectacular growth in 2008, both in lending to customers
and customer deposits with variations of 36.7% and
24.6%, respectively, totalling in the first case €698 million
and in the second €655 million. This growth is proof of
the strong commercial capability of a bank that had
difficulties accessing the capital and funding that it needed.
Its inclusion in the Banco Popular Group has enabled it to
overcome these restrictions and give a boost to its
franchise. As a result of this growth the net interest income
was up by 15.5%.
Asset management
The asset management business unit comprises the
collective investment institution management activities, the
management of individual and collective plans, and Private
Banking.
For this business, the Group has one bank and a number
of companies engaged in asset management, the most
significant of which from the standpoint of contribution to
Group earnings are located in Spain.
In 2008 the business was marked by the adversities of the
fixed income and equities markets which, affected by the
liquidity and solvency crisis, suffered a widespread crisis of
confidence that led investors to undo their positions in
favour of other safer assets such as government debt
securities or bank deposits.
As a result of this situation, the funds managed fell year on
year by 25.1%, with an impact on fees and commissions
of 10.4%, illustrating the improvement in the return by
unit managed.
GRUPO BANCO POPULAR
The inevitable loss of fees and commissions, although
partially offset by an improvement in net interest income,
brought the gross operating income down by 17.2% and
the pre-tax profit by 24.7% (see Table 19).
Private Banking.
This activity is conducted mainly through the Banco
Popular Banca Privada bank, in which the Group holds
60% of the capital stock and voting rights. The remaining
40% is held by the Luxembourg Dexia-BIL bank. This bank
is orientated to servicing high net worth (at least
€300,000) customers.
The most outstanding aspect of the business in 2008 was
the 7.5% increase in the number of customers of this
segment, taking the total to 3,656. This growth was
achieved against a background of widespread lack of
confidence of customers in services of this type as a result
of the Lehman bankruptcy, the Madoff fraud, the lack of
liquidity of some investments, and the heavy losses
accumulated in direct or indirect investment in hedge
funds, and is proof of the recognition of the prudent
management that is the Group's sign of identity applied to
this business unit.
Table 19 Results of the asset management activity
Net interest income . . . . . . . . . . . . . . . . . . . . . . . .
Net fees & commissions . . . . . . . . . . . . . . . . . . . . .
+/- Other financial operations . . . . . . . . . . . . . . . . .
+/- Other operating results . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses & other provisions (net) . . . . . . .
+/- Other results (net) . . . . . . . . . . . . . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
% variation
22,034
81,113
(3,637)
(1,587)
97,923
30,115
(370)
68,178
68,178
26,405
90,534
1,911
(540)
118,310
28,859
(1,113)
90,564
90,564
10.8
(10.4)
<
>
(17.2)
4.4
(66.8)
(24.7)
Apart from that, due fundamentally to the loss in value of
the assets managed, the net asset value was down by 24%
from 2007, and closed the year with a volume of €5,087
million. This loss in net asset value was offset by the
balance sheet growth from €1,473 million in 2007 to
€1,977 million at the end of 2008, due to the increase in
the volume of customer saving attracted.
Individual and collective pension plans management.
This activity is conducted mainly through Europensiones, a
company domiciled in Spain which is owned 51% by the
Group and 49% by the Allianz insurance company, and
Predifundos, a wholly owned Portuguese subsidiary of
Banco Popular Portugal.
The assets managed by both institutions at 31 December
2008 amounted to €3,734 million, with a market share in
Spain of 4.77%, which was 7 basis points more than in
2007. The market share for individual system plans was
5.78%.
Mutual fund management
The Group manages a total of 107 mutual funds (109 in
2007) through several subsidiaries, with €8,649 million
(24.7)
of assets managed. The fund managers in Spain, Popular
Gestión and Popular Gestión Privada, were managing
assets of €8,073 million at 2008 year end, which
represents 93% of the total funds managed by the Group.
At 2008 year end, there were 359,525 participants in the
funds of these companies.
As was the case for the sector as a whole, the performance
in comparison with the previous year was not positive and
30.8% of the volume managed was lost. As explained
earlier, the turmoil in the markets and the lack of investor
confidence prompted a flight from funds towards deposits
and other financial assets considered to be safer by fund
participants, since they have the guarantee of public
agencies or the Spanish Deposit Guarantee Fund.
The present crisis has also triggered a shift of assets from
equities funds to more conservative funds. This meant that
at the end of 2008 money market and fixed income funds
accounted for 16.4% and 47.4%, respectively, of the total
assets managed, whereas in 2007 these figures were
11.8% and 38%, respectively. Guaranteed funds
accounted for 25% of the total assets, showing that our
fund participants are currently in favour of products with a
conservative profile.
37
ANNUAL REPORT 2008
Insurance activity
The insurance banking business unit is focused on pension
and insurance products that include life insurance (both as
a means of saving and for protection), miscellaneous
insurance (mainly home, health and car insurance) and
those linked to retirement. The range of products is
adapted to each of the Bank's individual businesses and
customer segments, be they private individuals, businesses
or institutions.
This business contributed €37 million to the Group's
income statement in 2008, which was 15.3% less than in
2007. This performance is related, on the one hand, to the
lower volume of insurance and reinsurance premiums
received in the year as a result of the lower volume of
loans and credits and, on the other, to the negative impact
of the markets on savings insurance (see Table 20).
Eurovida (Spain) and Eurovida (Portugal) are the Group's
two life insurance companies. The former is 49% owned
by the Group, the rest of the capital stock being owned by
the Allianz insurance group, and the latter is a whollyowned subsidiary of the Group. The on-balance sheet
assets of Eurovida España grew by 12.8% in 2008, to
€930 million, and its earnings by 2.8%. In contrast,
Eurovida Portugal sustained an 8.5% contraction in its
assets with a year-end volume of €589 million, which was
11.4% less than in 2007.
The Group also has the Popular Seguros non-life company,
and an insurance broking subsidiary called Popular de
Mediación, both of which are wholly-owned.
Institutional and markets activity
This segment mainly includes all the centralized activities
plus those not assigned to any of the previous segments.
Among the most significant are i) the raising of funds in the
wholesale and inter-bank markets, ii) the treasury activity
assigned to the held-to-maturity, the available-for-sale and
the trading portfolios, iii) asset and liability hedging
transactions, iv) management of tangible and intangible
assets including non-current assets for sale. Also assigned
to this business area are the asset and liability balances
arising from pensions, tax assets and liabilities, risk
provisions, and all remaining assets and liabilities not
expressly mentioned in the previous points. From the
Table 20 Results of the insurance activity
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
36,317
5,956
(5,310)
12,416
49,379
9,130
3,254
36,995
36,995
20,510
15
5,020
27,832
53,377
9656
43,653
43,653
results standpoint, in addition to those arising from the
activities listed above, the operating costs of the central
services and non-recurring income are also included.
The profit for the year is marked by the deterioration of the
net interest income as a result of the preference for
liquidity, above all at moments of maximum uncertainty,
38
% variation
77.1
>
<
(55.4)
(7.4)
(5.4)
(15.3)
(15.3)
and by the policies of maximum prudence applied, which
gave rise to heavy liquidity surpluses invested at very
short-term in products of maximum credit quality, with
yields noticeably lower than the financing cost due to the
positive slope of the curve and the spread differential.
GRUPO BANCO POPULAR
With regard to the other components of the income
statement, the good performance of the treasury activities
results and the allocation to this segment of the
extraordinary gains arising out of the sale of the central
services buildings and Banco Popular France, made it
possible to absorb the increase in costs and financial and
real estate asset impairment losses (see Table 21).
Table 21 Results of the institutional and markets activity
31.12.08
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,879
126,897
(8,187)
151,589
102,810
201,855
(153,076)
236,680
83,604
31.12.07
115,273
78,073
20,869
214,215
95,576
49,624
69,015
20,204
89,219
% variation
(71.5)
62.5
<
(29.2)
7.6
>
>
>
(6.3)
39
ANNUAL REPORT 2008
SOLVENCY
Maintaining high levels of solvency has always been one
of the signs of identity of Banco Popular. This strategy has
been successfully combined with the need to adequately
remunerate capital, to maximize its diversification in term
and instruments, and to minimize its cost using all the
alternatives permitted by the regulatory framework.
In 2008 there was a marked deterioration in the
macroeconomic and financial environment, which took
the value of solvency, measured in terms of both the
absolute volume of equity and its composition, even
higher. In response to this new scenario, the Banco
Popular Group successfully implemented a strategy of
strengthening its capital, paying special attention to Tier 1
capital, capital and reserves, that gives greater and more
stable protection. At the same time the Group continued to
focus on improving its risk control policies. As a result, the
solvency ratios are evidence of the strength with which the
Bank is facing the effects of the present moment of the
economic cycle, as shown in Table 22.
Apart from that, Bank of Spain Circular 3/2008 on the
determination and control of minimum equity entered into
force on 11 June 2008. This is an adaptation of the
regulations to the new framework for measuring capital
requirements set by the Basel Banking Supervisory
Committee (commonly known as Basel II), the main
objective of which is to incentivise a more sophisticated
form of risk measurement and control, making capital
requirements more sensitive to the risk assumed in the
operations of each institution. At the same time it
introduces the additional need to have minimum capital to
cover operational risk and calls upon institutions to
measure other risks such as structural balance sheet risk,
business and reputational risk, and to allocate capital to
cover them.
At 31 December 2008, the Group had the necessary
authorisation to apply advanced models to its retail and
medium-size business mortgage portfolios, which
represented 18% and 17.5%, respectively, of the original
exposure at that date. In addition, it has other models
developed, for which the process of validation is expected
to be completed in 2009, representing approximately 42%
of additional exposure.
Table 22. Solvency
Basel II (**)
2008
2007 (*)
Total core capital . . . . . . . . . . . . . . . . . . . . . .
Core capital (%) . . . . . . . . . . . . . . . . . . . . . . .
6,604,457
7.17
5,752,210
6.47
Total Tier 1 Capital . . . . . . . . . . . . . . . . . . . .
Tier 1 ratio (%) . . . . . . . . . . . . . . . . . . . . . . .
7,475,671
8.12
7,040,210
7.92
Total Tier 2 Capital . . . . . . . . . . . . . . . . . . . .
905,735
1,552,135
8,381,406
1,011,082
9.10
8,592,345
1,482,151
9.67
BIS computable capital . . . . . . . . . . . . . . . . .
Capital cushion . . . . . . . . . . . . . . . . . . . . . . .
BIS ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item:
Total BIS risk-weighted assets
92,129,050(***)
88,877,415
(*) Information according to Basel I solvency criteria, for comparison purposes
(**)Calculated using internal models approved by the Bank of Spain
(***)Of which €85,662,938 relate to credit risk and the remainder to exchange and market risk and operational risk.
The computable Tier 1 capital increased by €436 million
in 2008, arising mainly from capitalization of retained
2008 earnings. There was a reduction in Tier 2 capital of
€646 million, €200 million of which related to the
exercising of an option for early redemption of an issue of
subordinated debt and the rest was the result of the loss of
computability of general allowances mainly as a result of
the application of advanced models within the framework
of Basel II. Overall, the Bank's computable capital
40
amounted to €8,381 million, of which 78.80% was core
capital, capital and reserves, 10.39% was mainly preferred
stock and the remaining 10.81% was Tier 2 capital. It
should be noted that 77% of the preferred stock issued by
the Group has special features that reinforce its
permanence and its status as Tier 1 capital due to the lack
of step-ups. The remaining 23% have step-ups of 100
basis points applicable from the tenth year, coinciding with
the initiation of a number of early redemption rights by the
GRUPO BANCO POPULAR
issuer. Because of the differentiated characteristics of both
types of preferred stock, they are directed at different
groups of investors, which allows diversification of the
investor base. The contribution of this type of hybrid
capital to the total Tier 1 computable capital was 17.2% at
31 December 2008, well below the limit allowed for
Spanish entities, which is 30% for issues without step-ups
and becomes gradually lower as other forms of hybrid
capital with structures which limit the capacity to absorb
possible losses are introduced.
In order to evaluate capital adequacy and ensure proper
measurement and coverage of all its risks, Banco Popular
has developed an economic capital model. This model
incorporates methodologies for measuring the risks
covered by Basel Pillar I and II, and makes it possible to
carry out stress exercises. Figure 22 shows the capital
requirements estimated by the Group using the economic
capital model. As can be seen, the Bank's computable
capital adequately covers the Pillar I and II risks.
There was a 3.66% increase in weighted risks compared
100.000
with the 7.9% increase in total risks as a result of the
application of the new regulations. Figure 21 shows the
breakdown of weighted risks by type of risk and the
comparison with 2007. The application of Basel II signified
88,420
a reduction in the credit risk-weighted assets, leading to a
85,663
3.10% decrease in total risk-weighted assets in the year,
while the introduction of operational risk gave rise to a
6.70% increase in these assets year on year. The increase
in the market risk-weighted assets accounted for the
remaining 0.06% increase in the total risk-weighted assets.
As a result of this performance of computable capital and
weighted risks, there was an overall improvement in the
0
Tier 1 capital ratios. Particularly notable was the growth in
2008
2007
the core capital ratio, with a 70 basis points improvement
Credit risk
in the year, taking it to a noteworthy 7.17%. The Tier 1
capital ratio topped 8.1% and the total or BIS ratio was
Fig. 21
9.10%, which meant that Banco Popular had a capital
Risk-weighted assets
cushion of almost €1,011 over the minimum requirement.
8.000.
421
4.000
8,381
Pillar II
7,370
Pillar I
0
Computable capital
Fig. 22
Computable capital vs. Minimum capital
Minimum capital
515
457
5,951
2008
2007
2008
Market risk
2007
Operational risk
Lastly, taking into account the uncertainty associated with
the current situation, and as part of the process of strategic
planning, the Bank has established the appropriate
procedures for estimating capital needs in the medium
term. These have included developing different nonperforming loans and earnings scenarios that make it
possible to analyse the Bank's future solvency. The results
of this process make it possible for Banco Popular to face
with optimism the period 2009-2010, which it hopes to
complete with a strengthened solvency position. To do this,
the Group will rely on the recurring nature of its profits and
the conservative provisioning policy it has implemented. In
addition, in the first quarter of 2009 an issue of preferred
stock is being launched through the Group's commercial
network for €300 million, that can be increased to €600
million. Like the majority of the Bank's issues of preferred
stock, this issue has no step-up, giving it a status that is
very close to core capital. This transaction will increase the
Tier 1 capital by between 30 and 60 basis points.
41
ANNUAL REPORT 2008
RISK MANAGEMENT
-Diversification of the risk attached to lending, setting
or complying with the limits extended to borrowers, sectors
and distribution by terms.
The risks implicit in the banking activities conducted by
the Group are managed with criteria of prudence,
permanently safeguarding the basic objectives of solvency,
profitability, efficiency and adequate liquidity.
-Profitable, quality lending, opting for profitable,
balanced and sustained growth overall and for riskadjusted return at individual borrower level.
The risk policy is a synthesis of strictly professional criteria
for the analysis, assessment, assumption and monitoring of
risks by all the entities comprising the finance group, which
are conducive to maximization of the risk/return concept
inherent to credit and market risk, and minimization of all
other risks (operational, liquidity, interest rate,
concentration, business, reputational and other).
The in-house policies, which are known to and applied by
all the Group’s business areas to achieve integral risk
management and control, are set forth in a Lending
Policies Manual, approved by management, which
vigilantly verifies effective compliance with them.
Noteworthy in Risk Management, as signs of identity and
management criteria, are the following aspects:
-Involvement of senior management: Among other
functions, the Group's senior management regularly
monitors the progress made in the internal management of
risk with the aim of expediting the implementation of the
new international capital regulations (Basel II), which are
already being used in the day-to-day risk management,
allocating the necessary material and human resources, as
well as defining a comprehensive risk framework, setting
an appropriate risk policy and taking care to ensure its
ongoing adaptation to any variations in markets, customers
and regulations that may occur.
-Separation between the risk and commercial areas.
-Formal system of attributions for the extension of
credit, under which the various hierarchical levels in the
organisation have been assigned delegated powers for the
authorisation of transactions.
-Priority of risk policies intended to guarantee the
Group's stability, short- medium- and long-term viability,
and to maximise the risk-return ratio.
-Flexibility of the target-oriented organisational
structure.
-Evaluation and rigorous documentation of the risk
and the guarantees. .
-Application of in-house automatic rating or scoring
systems.
-Monitoring of risk from analysis to termination.
The Group has in place risk control systems covering the
entire range of its activities, which basically consist of the
commercial banking business. These systems address
credit or counterparty risk, including concentration risk,
market risk, liquidity risk, interest rate risk, operational
risk, business risk and reputational risk, and embody
formal procedures for analysis, authorization, monitoring
and control, which are applied in a way consistent with the
nature and amount of the risks and under the supervision,
as appropriate, of collegiate decision-making bodies,
specifically the Risk Committee, the Management
Committee and the Assets and Liabilities Committee.
In accordance with the new framework of International
Convergence of Capital Measurement and Capital Standards
(Basel II), the comprehensive management of the different
risk exposures and their coverage in terms of regulatory
and economic capital is performed by the General
Management Risks Department on the premises defined by
the Board of Directors through its Risk Committee.
For the purposes of the following analysis, seven major
categories of risk are addressed: credit risk, cross-border
risk, structural balance sheet risk, market risk, liquidity
risk, operational risk and reputational risk.
CREDIT RISK
-Bespoke tailoring. Terms and conditions are
negotiated with the customer depending on their
connection to the Bank, the risk being assumed and the
return thereon.
Credit risk arises from the possible loss triggered by the
breach of contractual obligations of the bank’s
counterparties. In the case of refundable financing granted
to third parties (in the form of credits, loans, deposits,
securities and others), credit risk arises as a consequence
of non-recovery of principal, interest and other items in the
terms regarding amount, period and other conditions
stipulated in the contracts. In the case of off-balance-sheet
risks, it arises from the failure by counterparties to fulfil
their obligations to third parties, thus forcing the Bank to
assume them by virtue of the commitment undertaken.
-Nimble response in deciding on proposed
transactions, as a basic competitive instrument, without
detriment to the thoroughness of the analysis.
For the correct management of credit risk, the Group has
established a methodology whose main elements are
described in the following paragraphs.
-Scrupulous compliance with all aspects of the
applicable legislation, paying particular attention to
following the instructions for the prevention of money
laundering and the financing of terrorism.
-Pursuit of maximum balance between lending and
funds.
42
GRUPO BANCO POPULAR
Credit risk analysis
The Group has in place a formal system of attributions for
the extension of credit, under which the various
hierarchical levels in the organization have been assigned
delegated powers for the authorization of transactions,
which vary depending on a number of factors, such as:
-The probability of default according to Bis II internal
models / Technical Alerts
-The amount of the transaction
-The transaction interest rate
-The maximum term of the transaction
-The party to the transaction
-The sector of activity
-The yield
For these purposes, the steps in the organization with
delegated powers for authorising transactions are as
follows:
-Branch Office
-Regional Management to which the branch belongs
in the case of Banco Popular, Area Management in the case
of the banking and other subsidiaries, or the Retail Banking
Office.
-Senior Line Management in the case of Banco
Popular and General Managements in the case of the
banking and other subsidiaries
-Commercial Network Lending / Corporate Risks
-General Management Risk Department
-Risk Committee
-Board of Directors or Executive Committee
The initiative to undertake a new transaction always starts
at a branch office: for decision there if within its
attributions, or for reporting and passing to the next higher
step, if it exceeds those attributions. The same rule applies
at subsequent levels, and thus the biggest transactions will
have been evaluated throughout the chain of attributions.
No other office or area in the Group, regardless of the
hierarchical level of its management personnel, is
empowered to make, nor even to propose, risk
transactions outside the established circuit. Exceptions to
this principle are the:
-International Financial Institutions and Treasury
Offices, which through the units that report directly to
them may propose the acceptance of Financial Institution
risks, or Public and Private Sector issues covering a range
of financial assets traded on capital markets to the Risk
Department.
-Wholesale Banking, which through Commercial
Network Risks or Corporate Risks may propose the
acceptance of risks to the Risk Department, if the
complexity of the risk structures and designs so requires.
In the other business areas, the procedure is similar: risk
assumption proposals originate in the relevant operating
office, which likewise has decision-making powers
delegated to it. Above this level, the transaction travels
with its preliminary reports to the General Management
Risk Department and, if beyond its powers, to the Risk
Committee.
The Committee analyzes and decides on a half-yearly basis
on risk limit authorizations for customers or economic
groups relating to amounts exceeding €60 million, and
limits exceeding €30 million are decided on yearly. This
limit is lowered to €20 million in the case of off-balance
sheet risks in which the Group’s risk represents more than
50% of its debt in the system or a PD of more than 10% of
the economic group. In addition, it takes decisions
regarding any new risk with a unit amount exceeding €15
million.
Transactions originated by the network of commercial
agents also commence through a Branch Office and are
subject to the control of attributions as described above.
Risks with related parties, such as transactions with
significant shareholders, members of the Board of
Directors, General Managers or their equivalents, or with
companies related to them, and with Group companies,
are expressly excluded from the foregoing delegated
powers, and can only be authorized by the Board of
Directors or the Executive Committee, after receiving a
report from the Risk Committee, unless they are performed
under standardized contracts or with generally stipulated
conditions or involve low amounts, and other exceptions
established by the regulations.
For the admission of risks and the rating of customers
based on their credit profile, and as support for decisionmaking, the Group has internal credit risk rating and
scoring models. For the retail segment the credit-scoring
models used are tailored to each kind of product. For the
businesses segment, the internal rating is calculated on the
basis of analysis of variables representative of their
economic and financial position and their activity sector.
For the big companies and financial institutions segments,
the Group has replication models.
At 31 December 2008 Banco Popular had received
authorisation from the Bank of Spain to use advanced
models for risk management within the framework of Basel
II for its retail and medium-size business mortgage
portfolios.
Lastly, the Bank has developed its own complete model for
measuring credit risk and concentration risk in order to
estimate the adequate economic capital for its risk profile
and comply with the capital self-assessment obligations
under Pillar II of the Accord, which is supported by and
integrated with the developments undertaken to estimate
the risk parameters included in the models described
above.
To increase permanent internal transparency, in line with
the standards of Pillar III of the New Capital Accord, the
Group’s network has received numerous training actions
on the philosophy and objectives of Basel II in order to
adapt to its requirements, to the new concepts, tools and
management models.
A new Lending Policies Manual has been authorised and
published containing:
The Bank's risk profile
Credit risk operating standards
Risk analysis, admission and monitoring policies
43
ANNUAL REPORT 2008
-
System of attributions and delegation procedure.
Credit rating models
Definition of and exposure to other risks
Internal Validation
“The Group has an Internal Validation unit in line with the
guidelines established by the Supervisor in "Validation
Document no. 2: Internal validation criteria of risk
management advanced models."
The opinion of the Internal Validation unit is a fundamental
requirement for the approval of the internal risk rating
models, and for the monitoring of them and any changes
that are required after approval.
The scope of the validation covers the essential elements of
an advanced risk management system, which requires the
review of the following items:
Methodology: adequacy of the statistical method, the
assumptions and the techniques applied.
Documentation: quality and sufficiency of the
documents supporting the models.
Data Used: quality of the data used when developing
the models and in estimating the risk parameters, as well
as other databases used to calculate the minimum capital
requirement.
Quantitative Items: a number of measures are
developed that permit the periodic evaluation of the
validity and efficiency of the parameters and models.
Qualitative Items: review of the information generated
by the models, and compliance with the minimum
regulatory qualitative requirements, which include the Use
Test, the role of the credit risk control units, the aspects
relating to Corporate Governance and the adequacy of the
internal controls.
Technological Environment: review of the systems
integration, the applications environment and the quality of
the information provided by the systems."
Risk monitoring
The monitoring of the transactions approved makes it
possible to evaluate risk quality at borrower level and
establish mechanisms for special supervision of their
evolution, and to react to avoid situations of default. In this
respect, the Group has a surveillance system in place,
based on “Technical Alerts” and “Information Alerts”, that
uses the evolution of the rating levels to enable it to take
preventive measures for current risks.
This system is based fundamentally on the analysis of a set
of variables relating to transactions and to customers, in
order to detect possible anomalous deviations in their
behaviour and be warned of situations such as:
--Negative information
-Financial statements
-Variation in rating levels
-Past-due credit accounts
-Overruns
44
-Overdrafts
-Non-payment of trade discounts
-Loan repayments not made at due date
-Etc.
The monitoring of the technical alerts is performed by the
Risk Monitoring offices located at each of the territorial
headquarters and banking subsidiaries and at the Central
Services. Risk Monitoring performs thorough monitoring of
certain customer risks and economic groups with a high
volume of risk exposure or that present certain incidents.
This monitoring is divided into three groups according to its
intensity: intensive, i.e. weekly review of the status of risks;
periodical, i.e. monthly review; and sporadic, i.e. quarterly
review.
The Control and Audit Area performs monthly analyses of
customers with incidents. Based on this information, plus
additional financial or other documentation relating to the
customer, Risk Monitoring classifies the borrowers.
The classification system is two-fold: on the one hand, it
assesses the overall quality of the risk of the customer; on
the other, it proposes the policy to be followed as regards
the contractual risks. This two-fold classification based on
the circumstances of each case analyzed is inserted
graphically in the borrower’s electronic file, a
teleprocessing application that includes all the customer’s
information with all the positions, for consideration in riskrelated decisions. In drafting and defining this report the
BIS II probability of default parameters are also taken into
account.
This system of alerts is supplemented by an analyst’s
report, also included in the customer’s electronic file,
which by means of a questionnaire about the evolution of
the customer, of the customer’s risks and incidents, asset
situation, guarantees, etc., summarises the policy to be
followed and identifies the necessary actions for the
satisfactory outcome of the risks.
If there is more than one rating and more than one risk
policy for the same customer, those assigned by the Risk
Monitoring Office prevail over those assigned by the branch
office or territorial management.
The risk of concentration is also constantly monitored by
continually analysing the structure of the loans and
receivables, broken down by amounts, terms, sector of
activity, type of transaction, geographical area and other
attributes that are considered relevant.
Management of non-performing balances and recovery of
impaired assets
Units to perform this function in the Group exist at each of
the territorial headquarters and banking subsidiaries, and
also at headquarters level. The fundamental objective of
these units is to recover the balances classified as nonperforming as quickly as possible and in the best possible
conditions.
The Default Analysis and Claim Centre is responsible, in the
first instance, for handling defaults; it analyzes the risks in
an irregular situation and establishes, based on individual
GRUPO BANCO POPULAR
analysis of the particular circumstances of each customer
or transaction, the most effective claim strategies. It also
coordinates with the Group branch offices in carrying out
the appropriate measures for balance regularisation.
Initially, use is made of the out-of-court or amicable route
by means of direct negotiation with the debtors (by
telephone, mail or personal contact) or by engaging the
services of prestigious collection entities.
If it is necessary to file a claim through the courts, the
procedure is as follows:
-Depending on the type of transaction, an internal or
external manager is assigned to the claim. A claim is filed,
and irrespective of whether the proceedings are handled by
an in-house or external legal practitioner, the managers
constantly monitor any positive or negative court rulings.
-For adequate management of non-performing
balances, the Group has an internal computer application,
integrated into the teleprocessing system, which permits
prompt and precise monitoring of the evolution of all
delinquent risks and, in particular, of the debt actions filed.
Total exposure to credit risk
The Group's total exposure to credit risk at 2008 year end
amounted to €112,737 million, an increase of 3.4% year
on year.
-The final court rulings by the legal practitioners will
ultimately give rise to either the recovery of the investment
or a negative ruling (leading to a loss for the Bank).
Table 23. Overall credit risk exposure
2008
Commercial banking activity:
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . .
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market activity (counterparty risk) . . . . . . . . . . . . . . . . . . . . . . . .
Total exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused portion of credit lines . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum credit risk exposure . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,452,619
15,132,009
108,584,628
4,151,980
112,736,608
17,099,900
129,836,508
%
variation
2007
88,513,558
12,314,679
100,828,237
8,192,095
109,020,332
19,707,259
128,727,591
5.6
22.9
7.7
(49.3)
3.4
(13.2)
0.9
If we add to this amount the €17,100 million of exposure
in the unused portion of credit lines, the maximum
exposure amounted to €129,836 million.
of loans and receivables and the remaining 14% related to
contingent exposures. Activities in the markets contributed
3.68% of the total exposure.
As Table 23 shows, the Group's credit risk is primarily the
outcome of commercial banking, which is its main field of
business. 86% of its exposure at 2008 year end consisted
In the commercial banking activity, as shown in Table 24,
nearly 93% of the risk exposure related to Spain, 6.4% to
Portugal and 0.9% to USA.
Table 24 Commercial banking credit risk exposure
Spain
...........................................
Businesses and individuals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In Portugall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In France
In USA
...........................................
Total commercial banking risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
100,686,736
95,129,662
5,557,074
6,901,847
996,045
108,584,628
2007
93,228,892
91,644,167
1,584,725
6,550,780
338,529
710,036
100,828,237
Weight in %
2008
2007
92.5
92.7
90.9
87.6
5.1
1.6
6.5
6.4
0.3
0.9
0.7
100.00
100.00
45
ANNUAL REPORT 2008
Table 25. Unused portion of credit lines
Weight in %
2008
In Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Businesses and individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In USA
...........................................
Total unused portion of credit lines . . . . . . . . . . . . . . . . . . . . . . .
As regards the unused portion of credit lines (see Table
25), Spain again accounted for the largest part with
93.5%, Portugal contributed 5.5% and USA 1%. Of the
business in Spain, the major portion was concentrated in
businesses and private individuals, accounting for 91.6%
of the total commercial banking risk and 53.9% of the
total unused portion of credit lines. Balances available
15,978,442
8,100,818
6,643,834
1,233,790
946,229
175,229
17,099,900
2007
2008
2007
17,741,367
9,825,738
7,040,804
874,825
1,952,087
13,805
19,707,259
93.5
47.4
38.9
7.2
5.5
1.0
100.00
90.0
49.9
35.7
4.4
9.9
0.1
100.00
through credit cards are considered to be subject to
unilateral cancellation by the Bank and therefore although
these balances figure in the tables they do not represent a
risk in and of themselves. Finally, the heading Remaining
Risks includes non-segmented customers, among which
€1,924 million in public asset repos are booked.
Table 26 Segmentation of risk based on type of counterparty
Private individuals . . . . . . . . . . . .
Total businesses . . . . . . . . . . . . . .
27,958
75,272
27,460
67,669
498
7,603
27.08
72.92
28.87
71.13
% of unused
credit
6.15
93.85
Total . . . . . . . . . . . . . . . . . . .
103,230
95,129
8,101
100.00
100.00
100.00
Limit
Direct risk
Unused credit
% of Limit
% of risk
(*) Not including unused credit card credit
Table 26 shows the segmentation of the risk in Spain of
businesses and private individuals based on the type of
counterparty. As this table indicates, 71.13% of the direct
risk relates to the businesses segment and 28.87% to
private individuals.
Having regard to the limits granted, the weight of the
businesses segment is 72.92%, since 93.85% of the
unused portion of credit lines relates to this segment.
Table 27 shows the composition of the business segment,
making a distinction between small and medium-sized
companies and large companies. Having regard to the total
risk drawn down, 62.02% relates to the small and
medium-sized business segment and the remaining
37.98% relates to large companies. If the risk limit is
taken into account, the weights are very similar, 62.30%
and 37.70%, respectively.
Table 27. Breakdown of the businesess segment
Limit
Total small and micro-businesses .
Medium-size businesses . . . . . . . .
Total SMEs . . . . . . . . . . . . . . . .
Large businesses . . . . . . . . . . . . .
Total businesses . . . . . . . . . . . . . .
46
25,719
21,177
46,896
28,376
75,272
(Amounts in € million)
Direct risk
23,092
18,879
41,971
25,698
67,669
Unused credit
% of limit
% of risk
2,627
2,298
4,925
2,678
7,603
34.17
28.13
62.30
37.70
100.00
34.12
27.90
62.02
37.98
100.00
% of unused
credit
34.55
30.22
64.77
35.23
100.00
GRUPO BANCO POPULAR
The degree of risk concentration with businesses, making a
distinction between large, medium-sized and small
companies, as well as the default rates in each sector, is
set out in Table 28. At the aggregate level, it may be
observed that the maximum concentration arises in the
service sector, which reflects 52.2% of active risks and a
default rate of 3.42%. The second largest concentration
arises in the construction sector at 24.4%, which is logical
bearing in mind its weight in the Spanish economy. This
sector, which includes both public and private works, has a
non-performing loans ratio of 3.52%. The industrial sector
accounts for 18.1%, and the primary sector for 2.0% of
the total segment risk. This distribution also holds for the
breakdown by type of business, although as the size of the
business decreases there is a lower contribution from the
construction sector, to the benefit, above all, of the retail,
hotel, transportation and industrial sectors. The nonperforming ratio is 3.49% for big companies, 2.86% for
medium-sized companies and 2.80% for micro and small
companies.
Table 28. Distribution of the business segment by activity sector
Large
Agricult.,livestock,fishing
Industry . . . . . . . . . .
Mining . . . . . . . . . . .
Manufacturing .
Energy prod. and distrib.
Construction . . . . . .
Services . . . . . . . . . .
Retail . . . . . . . . . . . .
Hotels . . . . . . . . . . .
Transport . . . . . . . . .
Fin. intermediaries . .
Other services . . . . .
Other . . . . . . . . . . . .
162
4,958
48
3,392
1,518
6,768
13,583
847
765
942
410
10,619
227
Weight
%
0.6
19.3
0.2
13.2
5.9
26.3
52.9
3.3
3.0
3.7
1.6
41.3
0.9
Total
25,698
100.0
Risk
............
Medium
500
3,108
102
2,852
154
4,678
10,037
1,866
1,188
575
158
6,250
556
Weight
%
2.6
16.5
0.5
15.1
0.8
24.8
53.2
9.9
6.3
3.0
0.8
33.1
2.9
18,879
100.0
Risk
In the business mortgage portfolio, the Bank has a high
level of over-collateralization, which is almost twice the
value of the investment as can be seen in Figure 23. In
accordance with criteria of maximum prudence, the value
of this guarantee is calculated based on the original price
and has not been updated, and therefore the realizable
value is much higher, particularly in the longest-standing
portion of the portfolio.
Micro and Small
Total
713
4,155
171
3,752
232
5,049
11,709
4,012
1,201
1,223
397
4,876
1,466
Weight
%
3.1
18.0
0.7
16.2
1.0
21.9
50.7
17.4
5.2
5.3
1.7
21.1
6.3
1,376
12,221
321
9,996
1,904
16,495
35,328
6,725
3,154
2,740
963
21,746
2,249
23,092
100.0
67,669 100.0
Risk
Risk
Weight Debtors
%
%
2.0 5.60
18.1 1.70
0.5 1.97
14.8 2.01
2.8 0.03
24.4 3.52
52.2 3.42
9.9 2.08
4.7 0.58
4.0 1.37
1.4 0.26
32.1 4.58
3.3 1.06
3.08
100
0
56.76%
58.05%
Total
LTV
LTV Private
individuals
55.87%
LTV Businesses
Fig. 23
Mortgage portfolio LTV (%)
47
ANNUAL REPORT 2008
Table 29, on mortgage loans to developers, breaks down
the total balance in order to identify the nature of some
homogeneous groups. There are 2,583 transactions, for a
total amount of €721 million, whose initial balance is less
than €1 million, which represents a large dispersal of risk.
There are loans totalling €668 million relating to assets for
the Bank's own use and not available for sale, and
therefore they are unaffected by the situation of the real
estate market. Of the rest, €5,076 are home mortgages.
The footnotes to the table indicate the extent of
construction as well as the sale of developments.
Table 29. Mortgage loans to development companies
Number of
loans
Residential(1) . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Assets available for sale . . . . . . . . .
Assets not available for sale . . . . . .
Total exceeding 1 million . . . . . . . .
Less than 1 M. of initial limit . . . .
Total Developers . . . . . . . . . . . . . .
1,882
559
2,441
252
2,693
2,583
5,276
With regard to the degree of concentration of credit risk,
the Bank of Spain regulations stipulate that no customer, or
group of customers that form an economic group, may
represent risk exceeding 25% of the Group's equity. Also,
the total of all major risks (i.e. those exceeding 10% of the
Group’s capital) must be less than 8 times its capital. The
calculations in this respect are based on the Group’s
consolidated computable capital used for the purposes of
the Bank of Spain solvency ratio.
The Group applies internal risk dispersion criteria that are
much stricter than the regulatorily stipulated ones.
Principal
balance
5,076
1,879
6,955
668
7,623
721
8,344
Average Average inteAverage residual
LTV
rest rate
life (months)
73.68
6.05
279.70
55.93
6.13
174.26
68.94
6.07
249.73
52.47
6.07
166.53
67.67
6.07
242.57
45.10
6.11
208.25
65.33
6.09
239.65
(1) More than 60% of the transactions, equivalent to 55% of the balance, are developments that have been more than 75% completed
(1) 58% of the transactions, which represents 52% of the balance, relate to developments that have been more than 50% sold.
In 2008, as in 2007, all individual and economic group
borrowers were below the stipulated 10% limit.
Accordingly, neither of the two aforementioned limits of
concentration are exceeded by the Group.
As indicated in the section on Credit Risk Analysis, the
Bank has internal credit rating models for large, mediumsized and small companies. It also has advanced models
for financial institutions and for the mortgages of private
individuals. Table 30 shows the main risk parameters of
the models used to calculate capital by the advanced
method. The probability of default (PD) is the indicator
used by the Group for its management.
In the case of severity or LGD, the figure shown is
calculated for a recessive period of the Spanish economy.
This was done taking into account not only the behaviour
of certain variables during the last cycle, but they were also
stress-tested based on their possible future evolution.
Banco Popular therefore considers that the LGD reported
are minimum amounts and expects to obtain higher rates
of recovery.
As may be observed, actual defaults are much lower than
the estimated probability of non-performance, due to the
high rates of recovery attained.
Figure 24 plots the evolution of the rates of default, based
on the time elapsed since the loans were granted, by
companies, per year over the last five years, distinguishing
between mortgage-guaranteed risks and unsecured risks.
As may be observed, the ongoing and profound
deterioration of the economy there has been since mid2007 has affected the behaviour of outstanding risk.
Table 30. . EAD-weighted average PD
EAD-weighted average PD
Medium-size businesses . . . . . . . . . . . . . . . . .
Retail mortgages . . . . . . . . . . . . . . . . . . . . . . .
48
6.34%
3.61%
Average LGD
31.70%
9.74%
GRUPO BANCO POPULAR
Unsecured transactions – companies
0,750
0,375
2007
2008
2007
2008
2006
2005
2004
2003
2002
2001
2000
0
Fig. 24
Index of non-performance based on the time elapsed since being granted
(Transactions going into default as % of total transactions arranged)
Mortgage transactions – companies
1,50
2006
2005
2004
2003
2002
2001
0
2000
0,75
Fig. 24 bis
Index of non-performance based on the time elapsed since being granted
Logically, the increase in rates of default has most effect on
transactions that are less than 2 years old, since this is
historically the term in which most defaults are
concentrated. It is noteworthy that in the unsecured
portfolio the rates of default were similar to those for the
years 2000 and 2001, even though the economic
conditions are now radically more adverse. This is mainly
due to the nature of this risk, the majority of which is
short-term and intended to finance businesses’ needs for
current assets.
As regards risks with private individuals, Table 31 shows
the breakdown of these risks by type of product, indicating
in each case the non-performing loans ratio. As may be
observed, 79.6% of the risk with private individuals is
concentrated in loans with mortgage guarantees. The
average non-performing ratio of this product is 1.83%.
49
ANNUAL REPORT 2008
Table 31. Breakdown of risk of private individuals at Group banks in Spain
Private individuals
Mortgage . . . . . . . . . . .
Consumer loans . . .. . . .
Credit Cards . . . . . . . . .
Other loans . . . . . . . . . .
Credit facilities . . . . . . .
Finance leases. . . . . . . .
Portfolio . . . . . . . . . . . .
Collateral . . . . . . . . . . ..
Other . . . . . . . . . . . .. . .
Total . . . . . . . . . . . .
Total Risk
Weight
Default
21,845,219
1,477,152
602,294
1,475,814
1,017,295
368,471
256,200
359,214
58,705
27,460,364
79.6%
5.4%
2.2%
5.4%
3.7%
1.3%
0.9%
1.3%
0.2%
100.0%
1.83%
6.27%
7.64%
2.77%
1.68%
2.20%
3.68%
0.32%
20.46%
2,28%
In the private individuals mortgage portfolio, as is the case
with corporate entities, in addition to the low probabilities
of default, the Bank also has a high level of overcollateralization in Spain, which is 1.7% times the value of
the lending. Since the value of this guarantee is calculated
based on the original price and has not been updated, the
realizable value therefore is much higher, particularly in
the longest-standing portion of the portfolio.
The quality of the private individuals mortgage portfolio
can also be seen by observing the use to which the
collateral is put. As shown in Table 32, 74.68% of the risk
is backed by a primary residence and has an average LTV
ratio of 60.1%. In addition, a further 14.73% is
guaranteed by second homes, with an LTV of 62.1%.
Overall, 89.41% of the mortgage guaranteed risk of private
individuals is backed by a residential use guarantee.
Another significant aspect that illustrates the criteria of
prudence applied by the Group in extending credit is the
average rate of effort. In the private individuals mortgage
portfolio, this indicator stands at 22.8%, which is well
below the standard for the market of 30% (see Figure 25).
Table 32 . Breakdown of mortgage portfolio by use of collateral.
% of portfolio
Primary residence .
Second home . . . .
Total residencial . .
Other . . . . . . . . . . .
50
Average LTV (%)
Rate of effort estimated as prudent
60.1
62.1
60.4
51.3
74.68
14.73
89.41
10.59
22.8%
0
Average rate of effort
Fig. 25
Rate of effort (%)
Unsecured transactions – individuals
1,50
Fig. 26
Rates of default based on time elapsed since loans were granted
50
2008
2007
2006
2005
2004
2003
2002
2000
0
2001
0,75
GRUPO BANCO POPULAR
Mortgage transactions – individuals
1,00
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
0,50
Fig. 26 bis
Rates of default based on time elapsed since loans were granted
The Group has in place credit-scoring models as tools of
analysis and support in decision making for the main types
of products for private individuals, namely mortgage loans,
consumer loans, loans for self-employeds’ businesses,
leasing and cards. Of these models, authorisation has been
obtained to use the mortgage loans model within the
framework of Basel II, and the principal parameters of this
model are shown in Table 30. The manner of calculating
follows the same methodology as that indicated in the case
of models for corporate entities.
Figure 26 plots the evolution of the rates of default, based
on the time elapsed since the loans were granted, for
private individuals, per year over the last five years,
distinguishing between mortgage-guaranteed risks and
unsecured risks. As in the case of corporate entities, the
tougher macroeconomic environment has led to an
increase in probabilities of default, although despite the
current harsh circumstances, these indicators remain at
moderate levels.
The commercial banking business in Portugal accounts for
73.9% of its balance sheet. At 31 December 2008, it
amounted to €6,902 million and consisted of €6,284
million of lending to customers and €617 million of
contingent exposures, after consolidation adjustments (see
Table 33).
The gross risk of this segment increased by 5.4%. This
growth is based on the good performance of all the
headings except for the mortgage portfolio, which is still
undergoing restructuring, with a 15.9% reduction in the
balance of loans with mortgage guarantees for property
development and construction, and a 10.4% increase in
the home purchase loans to private individuals.
The growth of the other portfolios is a result of the strategy
applied by the Group to diversify the business lines and
increase the penetration in the SMEs segment of the
Portuguese market.
40.6% of the total risk to customers has some type of
collateral: mortgage guarantee, goods under finance lease,
and recourse to the ceding entity in the case of the trade
discount portfolio.
The doubtful assets amounted to €238 million, a
significant increase deriving from Portugal's
macroeconomic situation. Credit loss allowances totalled
€216 million at the end of 2008, after increasing by €97
million during the year. As a result, the non-performing
loans coverage ratio stood at 72.73% at 31 December
2008, compared with 92.52% the previous year.
Table 33 Exposure of Banco Popular Portugal
Balances
2008
Gross Loans and advances to other debtors 6,284,426
Commercial portfolio . . . . . . . . . . . . . . .
342,178
Mortgage loans . . . . . . . . . . . . . . . . . . . 2,149,190
Term loans . . . . . . . . . . . . . . . . . . . . . 2,908,864
Finance leases . . . . . . . . . . . . . . . . . . .
212,517
On-demand and sundry loans . . . . . . .
376,220
Non-performing assets . . . . . . . . . . . . .
237,617
Contingent risks . . . . . . . . . . . . . . . . . . . .
57,840
Total gross risk . . . . . . . . . . . . . . . . . . . . .
617,421
6,901,847
Variation
2007
6,151,91
317,536
2,295,233
3,054,498
212,166
143,981
128,567
398,799
6,550,780
Absolute
132,445
24,642
(146,043) .
(145,634)
351
232,239
109,050
218,622
351,067
Weight (%)
%
2008
2007
2.2
7.8
(6.4)
(4.8)
0.2
>
84.8
100.0
5.4
34.2
46.3
3.4
6.0
3.8
0.9
100,0
5.2
37.3
49.7
3.4
2.3
2.1
54.8
5.4
51
ANNUAL REPORT 2008
Markets activity: All the credit or counterparty risk arises
from the treasury and capital market activities. For analysis
purposes, the types of products are classified in three
groups depending on the credit risk exposure
measurement: (i) principal and interest risk, which affects
deposits and fixed income instruments; (ii) risk consisting
of the market value plus a factor that reflects the estimated
future potential risk based on term and volatility, which
affects IRS, repos, FRAs, foreign currency dealing, etc.; and
(iii) other derivatives risk (exotic options, commodities,
etc.) calculated by simulating the market value in response
to an extreme variation of the risk factors.
At the end of the year this risk amounted to €4,152
million, with an overall decrease of 49.3% compared with
2007, mainly as a result of the inclusion of the €2,372
million of derivatives credit risk mitigations gains. These
mitigation gains come from the coverage provided by the
netting arrangements and the collateral deposits under the
ISDA-CSA master agreements, which hedge the net
revaluation, at market price, of all the outstanding
derivatives transactions. 2008 ended with 22 collateral
agreements concluded with the counterparties that are
most active in derivatives trading, with daily review of the
guarantee for the majority of the agreements. Without
these mitigation gains, the overall risk would be €6,915
million, a drop of 16% year on year due to the reduction
in exposure, mainly in fixed income and interbank
deposits. Excluding the mitigation effect, 50.58% of the
total exposure related to interbank deposits and fixed
income financial assets, 48.27% related to repos and
simultaneous exchanges, interest rate derivatives and
foreign currency purchase and sale, and the remaining
1.15% related to equity derivatives.
With regard to the geographical distribution, 91.37% of
the risks were concentrated in the euro area, 6.57% in
non-euro Europe, mainly the United Kingdom, and 2.06%
in the Dollar-Yen area. Figure 27 shows the breakdown of
the consumption of credit risk in treasury transactions by
internal rating (institutions rated using an internal model
replicating S&P's ratings). The exposure to financial
institutions is spread over rating levels of AA+ to A-. There
is also exposure to issuers of government debt securities,
for which there is no internal rating.
5,000
2,500
Fig. 27
Consumption by internal rating
0
AAA AA+ AA
52
AA-
A+
A
A-
NR
Analysis of credit risk quality
For credit risk analysis purposes, problematic assets are
classified on the basis of several criteria: breach of the loan
repayment schedule (past due assets); the unsatisfactory
state of the borrower's asset or financial situation
(doubtfully collectible assets); or the existence of litigation
that makes recovery uncertain (disputed assets). In the
following text, these three components are generically
classified as non-performing loans or troubled balances
receivable. Risks that it has not been possible to recover
after expiration of the regulatory term are classified as bad
debts and are removed from the balance sheet. Regardless
of whether they have been written off for accounting
purposes, the Bank maintains its collection rights against
the debtor and continues to pursue repayment of them.
As coverage for its credit risk, the Bank has credit loss
provisions booked with a charge to profit, as described
below.
First, there is a specific provision for non-performing loans
in accordance with a regulatorily established calendar and,
in the case of the doubtful or disputed balances, based on
a reasonable estimate of their recoverability.
Secondly, there is a general credit loss provision covering
all the assets not classified as non-performing. This
allowance is booked, having regard to past experience of
impairment and other circumstances known at the time of
evaluation, and reflects the inherent losses incurred at the
date of the financial statements which are pending
assignment to specific transactions. For this purpose, two
tranches of coverage percentages that rise depending on
the estimated degree of risk (no risk, low risk, medium-low
risk, medium risk, medium-high risk and high risk) are
applied for all outstanding risks segregated into
homogeneous groups. The first tranche is called the alpha
component and is applied to the variation in the balance
during the year. The second is called the beta component
and is applied to the ending balance of the period
addressed. The figure determined by these calculations,
which are performed quarterly, minus the specific
provisions booked in the period, constitutes the amount of
the allocation to this provision. The general allowance is
limited to the amount resulting from application to the
period ending balance of a parameter equal to 1.25 of the
alpha component. A change has recently been made to the
minimum amount of this provision in order to facilitate
greater use of it in response to the change in cycle.
Following this regulatory change, the minimum general
allowance is the result of applying 10% of the alpha
component to the ending balance for the period.
GRUPO BANCO POPULAR
Table 34, Risk quality
Variation
Amount
2008
2007
%
834,478
3,645,362
866,502
2,778,860
>
(570,726)
3,042,612
635,537
847,097
423,345
1,309
425,061
66,9
(226,120)
834,478
198,941
2,798,265
443,157
(1,309)
2,353,799
31.3
>
>
(100.0)
>
(344,606)
2,208,134
>
>
1,822,353
1,665,060
157,293
9.4
1,656,696
(936,843)
719,853
11,939
(332,243)
2,221,902
558,572
(184,664)
373,908
(12,954)
(203,661)
1,822,353
Nonperforming loans:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance on December 31 . . . . . . . . . . . . . . . . . . . . . . .
Credit loss allowances:
Opening balance on January . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual provision:
Gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other variations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance on December 31 . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans transferred to suspense accounts . . . . . . . . . . . . . . . . . . .
1,098,024
(752,179)
345,845
24,993
(128,582)
399,549
>
>
92.5
<
63.1
21.9
7.7
>
108,584,628
706,851
100,828,237
312,142
7,756,391
394,709
2.80
0.53
73.03
0.83
0.23
218.38
1.98
0.30
(145.35)
Risk quality measures (%):
Nonperformance (Nonperforming loans/Total risks) . . . . . . . . . .
Insolvency (Writeoffs/Total risks) . . . . . . . . . . . . . . . . . . . . . . . .
Coverage (Credit loss allowance/Nonperforming loans). . . . . . . . . .
The aggregate amount of the two provisions described
above constitutes the credit loss provision.
Over the past few years the Group has applied very
demanding credit quality criteria. At 31 December 2008,
the balance of troubled risks or non-performing loans
amounted to €3,043 million, an increase of €2,208
million in the year (see Table 34). This was the outcome,
on the one hand, of a net addition to the exposure for nonperforming loans of €2,779 million and, on the other, of
the writeoff of €571 million of non-performing balances,
of which €332 million were charged against credit loss
provisions and the remainder was charged directly against
profit.
The non-performing ratio of 2.71% for the business in
Spain was clearly better than the 3.14% figure published
in November for all Spanish banks and savings banks. The
43 basis points improvement signified an expansion of the
delinquency differential between Banco Popular and the
Spanish banking system, which in December 2007 stood
at 17 basis points.
In the consolidated balance sheet the rate was 2.80%
because of the greater delinquency in Portugal
The insolvency ratio, i.e. bad debts written off as a
percentage of total risks, was 0.53%, 30 basis points
higher than in 2007.
Of the provisions of €905 million for loans and receivables
booked in the year, €189 million related to voluntary or
precautionary provisions. The latter, as stated earlier, are a
reserve to absorb potential future needs for provisions
which may be considered to be added to the nearly
€1,300 million of general allowances. Excluding the effect
of these precautionary provisions, the risk premium was
81 basis points in 2008. Also following principles of
prudence, the Bank preferred not to release €244 million
from general allowances.
The credit loss provisions booked at the end of 2008
amounted to €2,222 million, which was €400 million
(22.0%) more than at 31 December 2007. The total
provisions are the sum of €922 million of specific
allowances for troubled risks, €1,296 million of general
allowances and €4 million to cover cross-border risk.
To face the tricky economic situation, the Group has a set
of instruments to provide coverage of its non-performing
loans. The first are the guarantees received and the second
53
ANNUAL REPORT 2008
are the provisions booked in accordance with the criteria
of prudence discussed earlier. In total, as shown in Table
35, the coverage ratio is a healthy 159.4% of the nonperforming loans, which descends to 133.4% if 30% of
the value of the guarantees is subjected to stress.
Some of them are foreclosed assets. Others are
opportunistic investments made by the Group with the aim
of obtaining capital gains in the medium- and long-term.
The remainder are assets purchased from customers in
special situations with the aim of facilitating the
continuance of their business without impairing the Bank's
position.
These assets are presented on the balance sheets at the
lower of their carrying amount and their fair value, which
is determined on the basis of the estimated amount for
which they will be sold, net of the cost of sale. Any losses
detected are recorded immediately under the Losses from
impairment of assets caption in the statement of income.
Losses of €93 million were recorded in 2008.
Non-current assets held for sale
The non-current assets held for sale, substantially all
buildings, amounted to €1,661 million at 2008 year end,
an increase of €1,433 million in the year.
Table 35 Coverage & guarantees
Non-performing loans
With mortgage guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Without mortgage guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partial coverage rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total coverage rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stressed total coverage rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CROSS-BORDER RISK
Cross-border risk, also known as country risk, is an
additional component of credit risk. It arises from the
difficulties being experienced by borrowers in certain
foreign countries in meeting their payment obligations.
Breach of these obligations may be due to the financial
situation of the borrower (in which case the risk is treated
as credit risk), or to the fact that, even though the loans
could be repaid in local currency, the funds cannot be
Value of
guarantee
1,221
1,822
3,043
2,114
518
2,632
86.5%
Specific
provisions
168
754
922
30.3%
1,296
42.6%
159.4%
133.4%
transferred abroad due to the country's economic
difficulties. Under the applicable regulations, provisions
must be recorded for these risks on the basis of the
estimated impairment.
The principles for managing cross-border risk continued to
reflect a policy of maximum prudence, with cross-border
risk being assumed very selectively in transactions that
were clearly profitable for the Group and strengthened
global relations with its customers.
Table 36 Country risk and provisions recorded
2008
Balance
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negligible risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Substandard risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coverage (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Country risk/Total risks (%) . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,343
14,566
1,702
106,611
2007
Coverage
2,607
1,255
3,862
3,62
108,584,628
0.10
Balance
Coverage
50,940
11,630
3,485
66,055
1,567
2,909
4,476
6,78
100,828,237
0.07
Table37 Country risk by balance sheet heading
2008
2007
% Coverage
Balance
Coverage
Balance
Coverage
Loans & advances to credit institutions
2,619
Loans & advances to other debtors .
61,187
Contingent liabilities . . . . . . . . . . . .
42,805
Total . . . . . . . . . . . . . . . . . . . . .
106,611
75
3,120
667
3,862
2,326
15,321
48,408
66,055
14
3,338
1,124
4,476
54
General provisions
2008
2007
2.86
5.10
1.56
3.62
0.60
21.79
2.32
6.78
GRUPO BANCO POPULAR
At the end of the year, all of the Group's risks affected by
country risk totalled €106.6 million, which was higher
than the figure recorded at the end of 2007 (€66.1
million). These figures are not significant compared with
the Group's total risk, as they represented 0.10% and
0.07% in 2008 and 2007, respectively.
The provision recorded for country risk amounted to
€3.9million (4.5% less than in 2007).
The balance of the allowance recorded represents countryrisk coverage of 3.6%, compared with 6.8% in the
preceding year. This reduction is the result of higher crossborder risk quality compared with 2007, with a higher
weighting of countries with negligible risk.
Table 36 shows the variation in country risk in 2008 and
2007, broken down by groups of countries with differing
degrees of difficulty, the related provisions and a
comparison with total risks.
Table 37 shows the distribution of cross-border risk by
balance sheet captions: loans and advances to credit
institutions, loans and receivables, and contingent
liabilities, together with the respective coverages.
STRUCTURAL BALANCE SHEET RISK
This consists of the risks arising from possible adverse
variations in the interest rates on assets and liabilities, in
the exchange rates of the currencies in which the on- (asset
and liability) or off-balance sheet aggregates are
denominated, and in the market prices of marketable
financial instruments. It also includes business risk,
defined as the possibility that the gross operating income
may not be sufficient to cover the fixed costs due to
changes in the amounts of the balance sheet items and the
fee and commission income, caused in turn by changes in
the economic conditions. .
Given Banco Popular's efficiency ratio, the risk of the gross
operating income being lower than the fixed costs is
practically impossible. Nevertheless, the estimated
variations in the gross operating income as a result of
changes in the balance sheet structure and in the amounts
of the various items based on the macroeconomic
scenarios considered are analysed periodically.
The exchange rate risk of the business in the Iberian
Peninsula is practically nonexistent as a result of the
criterion applied in this respect: cash and financial asset
positions in currencies other than the euro are confined to
the placement of surplus cash arising from the commercial
banking activities in the same currency and at similar
terms. .
The acquisition of Totalbank at the end of 2007 has given
rise to some US dollar exchange rate risk as a result of the
profits generated by the franchise. Additionally, given the
performance of the dollar in the first months of the year, it
was decided to renew in euros the financing of the
purchase amount. There is therefore an open position in
dollars for the sum of both items. This risk is monitored
constantly and is managed by carrying out partial or full
hedges based on the expected evolution of the dollar in the
short- and medium-term. As a result mainly of this
management, a positive valuation adjustment of €24
million in the net asset value of Banco Popular was
recorded in 2008.
Interest rate risk
For analysis and control of this risk, the Group has an
Assets and Liabilities Committee (ALCO), the tasks of which
include evaluation of balance sheet sensitivity to variations
in the interest rate curve in different scenarios, setting
short- and medium-term policies for managing the rates,
the spreads and the aggregates of assets and funds. For this
purpose, simulations are made using different scenarios of
growth of the balance sheet aggregates (optimistic,
pessimistic and base), of the performance of margins and
of variation in the interest rate curve in order to measure
the sensitivity of the financial margin to these variables
over a time horizon of three years.
The maturities and re-pricing gap in the consolidated
balance sheet, broken down by the sensitivity or not to
interest rates of the assets and liabilities grouped together
in different periods, is also evaluated. For sensitive assets
and liabilities that mature or change the interest rate in a
given period, regard is had only to the first contract
revision. For balance sheet items with no maturity but with
interest rate revision, albeit not on a fixed date, the
frequency of review is based on historical performance.
Finally, the Group periodically measures the effects of the
variations in interest rates on the sensitive net interest
income over different time scales, and on the economic
value. This is done by considering all of the positions
sensitive to interest rates, including both the implicit and
explicit interest rate derivatives, and excluding the
positions that form part of the held-for-trading portfolio,
the risk of which is measured separately. Also included are
the internal hedging positions taken to manage balance
sheet interest rate risk that correspond to positions of
opposite sign that form part of the held-for-trading
portfolio..
The economic value is calculated as the sum of the fair
value of the net interest rate sensitive assets and liabilities
and the net carrying amount of the asset and liability items
that are not sensitive to interest rates. The fair value of the
interest-rate sensitive items is obtained as the adjustment,
using the interest rate curve of the interbank market at the
date of reference, of the future flows of principal and
interest of all the interest-rate sensitive items, also
considering the sensitive positions that form part of the
held- for-trading portfolio.
To evaluate the potential impact of interest rate risk on the
economic value, the assumption of permanent stability of
the size of the balance sheet is considered.
55
55
ANNUAL REPORT 2008
Table38. Maturity and repricing gap in the consolidated balance sheet as of December 31, 2008
Up to 1
1 to 2
2 to 3
3 to 6
Not
Sensitive
month
months
months
months
sensitive
Loans and receivables . . . . . . . . . . . . . . . 96,606.8 3,243.4 93,363.4 19,750.7 9,923.6 14,376.5 19,792.7
Loans and advances credit inst. . . . . 4,898.0
350.0 4,548.0
3,984.6
124.7
137.8
37.6
Loans and advances to other debtors 93,273.7 4,458.2 88,815.5 15,766.1 9,798.9 14,238.7 19,755.0
Other assets and value adjustments . -1,564.9 -1,564.9
Securities market . . . . . . . . . . . . . . . . . . . 5,466.2 2,599.7 2,286.5
420.8
98.2
183.8
259.9
Other assets . . . . . . . . . . . . . . . . . . . . . . . 8,303.1 8,303.1
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 110,376.1 14,146.2 96,229.9 20,171.5 10,021.8 14,560.3 20,052.6
Total
Financial liabilities at amortized cost . . 98,957.1 13,721.5
Deposits from credit institutions . . . . . 14,123.1
526.0
Deposits from other creditors . . . . . . . 51,494.5 12,976.7
Debt certificates including bonds . . . . 29,846.3
Subordin. liab. and pref. shares . . . . . 1,622.5
Other financial liabilities . . . . . . . . . . . 1,202.9 1,167.9
Valuation adjustments . . . . . . . . . . . . .
667.8
667.8
Other liabilities . . . . . . . . . . . . . . . . . . . . . 4,361.3 4,361.3
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 7,057.7 7,057.7
Total liabilities . . . . . . . . . . . . . . . . . . . . . 110,376.1 25,140.5
Off balance sheet transactions . . . . . . . .
Gap
..........................
(10,994.3)
Accumulated Gap . . . . . . . . . . . . . . . . . .
6 to 12
months
26,248.8
263.2
25,985.6
Over 12
months
3,271.2
1,145.5
758.3
3,271.2
27,394.4 4,029.5
85,235.6 27,496.9 11,320.5 16,432.3
13,597.2 9,484.8
586.4 1,068.4
38,517.8 10,085.6 3,158.8 10,880.0
31,463.1 7,926.5 7,575.3 3,461.4
1,622.5
1,022.5
35.0
8,859.7
778.0
6,780.5
1,301.2
85,235.6 27,496.9 11,320.5 16,432.3
(1,961.4) (787.8) (1,315.5)
10,994.3 (9,286.8) (2,086.6) (3,187.5)
(9,268.8) (11,373.4) (14,560.9)
8,859.7
7,960.6 13,130.5
(2,437.1) (4,522.1) 10,988.8
8,755.8 14,911.7 1,887.8
(5,805.1) 9,106.5 10,994.4
At 31 December 2008, interest-rate sensitive assets
totalled €96,229.9 million, compared with €850,235.6
million of similarly sensitive liabilities, with an aggregate
positive gap of €10,994.3 million. For a good part of
2009 the maturities of sensitive liabilities exceed those of
7,960.6 13,130.5
883.6
796.0
5,077.7 2,535.3
1,999.4 9,199.2
600.0
14
21
sensitive assets. As a result, in the most likely scenario for
2009, i.e. the one discounted by the market, of falling
interest rates through the second quarter and a slight rise
thereafter, Banco Popular expects an improvement in the
net interest income.
Table 39. Duration report (excl hedging transactions)
Period of 365 days
Rate %
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The same conclusions can be reached by analysing the
duration of the different sensitive items of the balance
sheet in euros, distinguishing between the duration of all
the transactions and that of those maturing or being
repriced in the first year (See Table 39).
Interest rate risk is mainly managed with derivatives. The
policy is to arrange the most perfect possible hedges, and
this is why the preference is to arrange individual hedges.
As a result, most of the hedges are concentrated in
wholesale market funding operations. An exceptional case
is that of liability and interest rate derivatives sold to
56
5.89
2.73
6.24
3.96
3.45
3.04
3.24
3.99
Duration in days
249
16
258
557
348
84
302
570
Duration in days Duration in years
126
16
134
196
77
38
100
69
0.34
0.21
customers of the commercial network which, due to their
amount, are hedged by aggregates as soon as a volume
permitting this is accumulated
A special characteristic of the Group's interest rate
management is the existence of lower limits or "floors" in a
majority of the transactions that comprise the lending to
customers. At 31 December 2008, transactions with floors
accounted for 55% of the outstanding balances. Taking
into account the distribution of floors by exercise price and
the evolution of interest rates during 2008, at 31
December around 1.6% of the outstanding balances with
GRUPO BANCO POPULAR
Table 40. Breakdown of floors by type of product
Lending to customers
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
............................................
Total lending to customers, gross . . . . . . . . . . . . . . . . . . . . . . . . .
Total with interest rate floors . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance
40,078
39,959
119
11,511
7
51,596
93.,274
55.31%
Table41.Breakdown of floors by exercise price
Balance
<2.5
............................................
>2.5<3.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>3.5<4.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>4.5<5.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>5.5<6.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>6.5
............................................
Total
............................................
1,565
13,142
18,288
17,106
1,136
358
51,596
Weighted average rate of
transactions (%)
6.06
6.06
5.40
6.16
5.93
6.08
Weighted average rate of
transactions (%)
5.25
5.80
5.98
6.39
6.90
7.95
6.08
floors were operational. Taking into account the expected
evolution of interest rates as indicated in previous
paragraph, most of the floors will be exercised in 2009,
signifying a clear resistance to the lowering of interest
income which, together with the expected reduction in
costs, will boost the net interest income.
It also includes the liquidity risk associated with these
positions, i.e. the impossibility of closing out positions in
the market in a short space of time. For this purpose,
positions are valued over a time scale equal to the
estimated time it will take to close the risk.
At the end of the year, the effect of a 200 basis points shift
in euro interest rates with respect to the current implicit
rates had an impact on the income over a one-year time
scale of 1.38% of equity. With regard to the sensitivity of
the economic value, the impact of a a similar shift of 200
basis points is 4.79% on equity and 3.46% of the
economic value. The impact due to the variation in rates of
other currencies is considered to be immaterial because of
the Group's scant position at year end.
Treasury activity risk
As may be observed, the sensitivity of both the income and
the economic value to very stressed variations in interest
rates is well below the maximum thresholds recommended
by current legislation.
MARKET RISK
Market risk consists of the risks arising from possible
adverse variations in the market prices of the marketable
financial instruments managed by the Group's Treasury as
a result of adverse variations in interest rates, exchange
rates, share or commodity prices, credit spreads, or the
volatility thereof.
In order to control the market risk of the area's activity, on
a daily basis the Treasury Risks Management area monitors
the trades, calculates the impact on positions of market
performance, quantifies the market risk assumed, the
regulatory capital consumed, monitors compliance with
the limits established and analyses the ratio between the
result obtained and the risk assumed.
The Bank's Treasury activities in the financial markets are
exposed to market risk due to unfavourable variations in
the following risk factors: interest rates, exchange rates,
share prices and volatility. The indicator used to measure
market risk is Value at Risk (VaR), defined as the estimated
maximum potential loss based on historical data on price
variations, calculated with a given level of confidence and
over a given period of time. To standardise the Group's
overall risk measurement, the parametric VaR methodology
is used. It is calculated with a 99% confidence level, based
on past 75-day variations, giving greater weight to more
recent observations, taking a time period of one day to
measure the possible losses, since all the open positions
are highly liquid.
57
ANNUAL REPORT 2008
To round out the parametric VaR estimates obtained, for
trades with optionality the delta-gamma VaR is also
estimated by historical simulation. This methodology
makes it possible to capture non-linear relationships
between the risk factors. The methodology for measuring
the risks is based on analysing the sensitivity of the
Treasury activity positions to variations in interest rates and
volatilities. These sensitivities provide information about
the impact of an increase in each risk factor on the
economic value of the positions. Past variations in the risk
factors over the preceding 250 days are taken into
account, and the calculation is performed with a
confidence interval of 99%. It should be mentioned that
the risk of the trading in structured or exotic products is
very low because there is active management to hedge the
risk: in the case of smaller branch network trades, the
positions are closed on reaching the minimum amount that
can be hedged efficiently, and in the case of big custom
trades the hedging is immediate, on a trade-by-trade basis.
In 2008, the average VaR of the Treasury trading activity
was €1.73 million. Despite the prudent risk management
which characterises the Group, the risk assumed increased
in the second half of the year, triggered mainly by the
volatility prevailing in the financial markets. The variation
is show in Figure 28.
Table 42 gives an estimation of the average VaR amounts
attributable to the various Treasury trading activities:
Money Market and Capital Market, which includes interest
rate risk and exchange rate risk; Equities, which includes
share price risk, and Structured Derivatives, which includes
interest rate risk and volatility risk. The risk can be seen to
be concentrated mainly in yield curve risk.
6,000
4,500
Fig. 28
Evolution of the Banco
Popular Group´s VaR
(€ thousand)
3,000
1,500
0
31/12/07
31/12/08
Table 42 Evolution of VaR
Average VaR 2008
Money & Capital Markets
Equities
Structured Derivatives
1,397
718
71
The aggregate risk presents a substantial diversification
benefit of 29%, on average, as a result of the scant
correlation between the prices of equities and the yield
curves.
To check the suitability of the risk estimates and the
consistency of the VaR model, the daily results are
compared with the VaR estimated loss. This exercise is
called Backtesting. Following the recommendations of the
regulator and of the Basel Supervisory Committee, two
exercises are performed to validate the risk estimation
model:
- Clean backtesting: this relates the portion of the daily
result of transactions that were outstanding at the close of
the previous session with the estimated VaR amount over a
time horizon of one day, calculated on the transactions
outstanding at the close of the previous session. This
exercise is the most appropriate for self-assessment of the
methodology used for measuring market risk.
58
Aggregate
VaR
1,733
- Complementary backtesting: this evaluates the result
obtained during the day (including any intraday trades)
with the VaR amount over a horizon of one day calculated
on the transactions outstanding at the close of the previous
session. This makes it possible to evaluate the importance
of the intraday trading in the generation of earnings and in
the estimation of the total portfolio risk.
The findings in excess of VaR are tabulated by nature,
identifying those which might potentially indicate a
deficiency in the model. The results of both backtesting
models are compared and reconciled daily.
The results of the clean backtesting analysis are shown in
Figure 29, which evidences that in 2008 only two excesses
due to risk factor variations higher than those envisaged in
the model were recorded. Under the evaluation procedure
proposed by the Basel Supervision Committee, the Group’s
model would be in the green zone, indicating adequate
accuracy.
GRUPO BANCO POPULAR
In addition to calculating VaR and conducting backtesting
analysis, two types of stress tests are performed on the
value of the Treasury positions in order to estimate the
possible losses of the portfolio in extraordinary situations
of crisis:
- Analysis of theoretical scenarios (systematic stress): this
calculates the value of the portfolio in response to certain
extreme changes in the principal risk factors. According to
the composition of the Bank's portfolio, the principal risk
factors are interest rate risk and equity price risk, since
they account for more than 80% of the total VaR. In order
to reflect the possible combinations of the different
variations in risk factors, the following three scenarios are
analysed each day: greatest impact expected a priori on
earnings; most probable scenario; and maximum value of
VaR at the time of revision.
-Analysis of historical scenarios: this considers the impact
that real-life situations would have on the value of the
positions. The market conditions of the most significant
crises in the past for each group of risk factors since 1990
have been reproduced. These crises were: (i) the equity
crisis in the spring/summer of 2002; (ii) the global
consequences of the 9/11 attacks in the US in 2001; (iii)
the equity crisis in emerging markets in 1998; (iv) the
long-term bond crisis in 1994; and (v) the EMS crisis in
1992. The performance of the portfolio in each of these
scenarios is analysed monthly. In the present market
conditions, the VaR figures show a higher risk than that
obtained under some of the defined historical scenarios. As
a result, the evolution of the financial markets since the
start of the latest crisis in July 2007 is being analysed to
define a new historical crisis scenario.
4,500
2,500
Fig. 29
Backtesting Banco Popular Group
(€ thousand)
-1,500
-5,500
31/12/07
31/12/08
LIQUIDITY RISK
Liquidity risk reflects the possible difficulties for a bank to
have available, or to have access to, liquid funds of
sufficient amount and at appropriate cost for meeting its
payment obligations at all times.
Supervision of this risk is the responsibility of the Assets
and Liabilities Committee (ALCO), which has formal
procedures for analysing and monitoring the Group’s
overall liquidity, including contingency plans for possible
deviations in liquidity due to internal causes or to market
behaviour. For this purpose periodic analyses are made of
the sensitivity of liquidity in different scenarios of asset and
liability cancellation in time brackets from 1 day to 1 year
in the short term and up to 10 years in the long term. The
starting point for liquidity risk analysis is a consolidated
balance sheet broken down by the residual terms to
maturity of assets and liabilities, disclosing the positive or
negative liquidity gap in each time interval. In the case of
securities issues, the first shortest term for cancellation is
59
always used, as a measure of prudence. This balance sheet
is used to simulate situations in the face of different
liquidity scenarios in the markets, combined with
hypotheses of variations in the asset and liability
aggregates and with the use of the available liquidity
facilities. It is thus possible to estimate the sensitivity of the
balance sheet to changes in these variables, in a way
similar to that described earlier for evaluating the interest
rate risk. The simulations cover two different risks:
systemic, which would affect the entire financial system
and specific, which would only affect Banco Popular. The
assumptions on which they are based are different, as are
the consequences for the balance sheet and the liquidity
situation. The measures to be taken as defined in the
contingency plan respond in each case to the different
nature of both types of crisis. These simulations allow a
minimum amount of available assets to be quantified as a
second line of liquidity, thereby assuring that the scenarios
may be easily faced.
59
ANNUAL REPORT 2008
The sensitive assets amounted to €98,728 million,
compared with €74,575 million of sensitive liabilities,
with a positive differential of €24,153 million. As may be
observed in Table 43, the higher accumulated gap arises in
up to nine months, with a total of €14,991 million. It
should be pointed out that this information is distorted by
the current situation of the international financial markets,
which are selectively open at short terms for institutions
with high credit ratings, and at long terms for governmentbacked issues. In this environment, momentary needs for
liquidity are covered by using the second line of liquidity
available at the terms established by the respective central
banks, which in general are under one year. For this
reason, if we calculate the liquidity gap eliminating the
maturities of the financing obtained from official agencies,
which are going to be renewed upon maturity, there is a
maximum negative gap up to nine months of €11,560
million that is covered by liquid on- or off-balance sheet
assets, the maturities of which can be brought forward.
One of the successes of the liquidity management policy is
the construction over the past three years of a robust
second line of liquidity that is capable of covering not only
the negative gap but also the maturities of the current
liabilities in different scenarios of non-renewal without
affecting the growth of the loans and receivables. At 31
December 2008, the Group had available liquid assets
worth €14,640 million. The total amount of liquid assets
was €23,971 million, €9,331 million of which were
discounted at the European Central Bank or held under
repo arrangements by financial institutions and customers.
Table 43 Liquidity gap at 31 December 2008
Through
Mar-09
6,281
15,648
543
22,472
22,208
10,247
3,382
-
Money market . . . . . . . . . . . . . .
Lending to customers
Securities market . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . .
Retail liabilities . . . . . . . . . . . . .
Wholesale liabilities . . . . . . . . .
Official agencies liabilities . . . . .
Other liabilities . . . . . . . . . . . . .
Equity
35,837
Total liabilities . . . . . . . . . . . . .
(13,365)
GAP
...................
(13,365)
Accumulated gap . . . . . . . . . . .
(9,983)
Gap (excl. off. agencies liabilities)
Accum. gap (excl. off. ag. liabilities) (9,983)
Through
Jun-09
Through Through
Sep-09 Dec-09
2-5 years
75
275
102
7,208
4,870 4,880
258
49
973
7,541
5,194 5,955
6,509
3,553 3,195
2,353
1,897
638
39
10
5
5,460 3,838
8,901
(266) 2,117
(1,360)
(14,725) (14,991) (12,874)
(256) 2,122
(1,321)
(11,304) (11,560) (9,438)
Table 44 shows the breakdown of the liquid assets by
product. The off-balance sheet assets relate to own issues
retained, asset securitisations and covered bonds issued by
1,218
22,825
746
24,789
2,646
10,189
1,144
13,979
10,810
(2,064)
11,954
2,516
Over 5
No
Total
years maturities maturity
12
32,490
275
32,777
38
5,820
702
6,560
26,217
24,153
26,919
29,435
On-balance sheet
60
792
8,755
3,780
91,701
1,732
4,576
5,344
5,344
11,648 110,376
18,833
56,982
31,144
5,282
9,911
9,911
7,058
7,058
35,801 110,376
(24,153)
(24,153)
Group banks, so there is full knowledge of the underlying
risk.
Table 44. Breakdown of liquid assets by product
Balances with central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector fixed-income securities . . . . . . . . . . . . . . . . . . . . .
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,963
87,921
2,844
98,728
38,149
31,144
5,282
74,575
Total
681
917
2,463
670
4,731
Off-balance sheet
19,240
19,240
60
GRUPO BANCO POPULAR
Practically all of the liquid assets have a very high credit
rating, making them eligible both for discounting at the
European Central Bank and as collateral for transactions
with financial institutions and customers. The breakdown
of the assets by rating is shown in Figure 30.
100%
Fig.30
Liquid assets broken down by
rating
0%
The equities consist of securities listed in the main
European markets. Accordingly, in the face of liquidity
contingencies the Banco Popular Group could obtain funds
without sustaining losses in a time scale of not more than
one week.
To evaluate the adequacy of the second line of liquidity, a
scenario has been developed that assumes the nonrenewal of all the maturities of wholesale financing sources
and of large customer deposits and commercial paper
during 2009. In addition, the use as sources of liquidity
AAA
AA
A
Mar-09
With regard to its financing strategy, the Group applies
criteria of maximum prudence in managing its liquidity,
endeavouring not only to minimize the cost but also to
avoid concentration at certain terms or in certain markets.
For this purpose, it has various carefully selected sources
of retail and wholesale funding for each term, based on
cost, stability, rapidity of access and depth. However, in
2008, taking into account that the international markets
went through different phases of accessibility and were
completely closed from mid-September until November,
Banco Popular applied its policy by prioritising at all times
the availability of funds so that it could do business
Other
has been considered of liquid assets and issues not at risk
of foreclosure such as those that meet the eligibility
requirements of the Spanish Government's Financial Assets
Acquisition Fund (FAAF). As shown in Table 45, the
Group's liquidity is amply sufficient to cover the maturities
indicated and permit the normal performance of loan
extension.
Table 45 Stressed liquidity. Extreme scenario of non-renewal of wholesale liabilities
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sources of liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securitisations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FAAF funding transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available liquid assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sources of liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB
Jun-09
Sep-09
Dic-09
Total
8,214
4,900
13,114
2,353
749
3,102
1,889
296
2,185
388
129
517
12,484
6,074
18,917
1,250
655
14,640
16,545
3,431
1,250
750
1,150
3,150
3,479
1,250
1,250
2,545
1,250
1,250
3,278
5,000
750
1,805
14,640
22,195
normally, assuming at times a scenario of closure of the
wholesale markets for more than a year. In this respect, the
keystone of the financing strategy was the attraction of the
different kinds of retail liabilities, taking advantage of the
ability to access private individuals and business
customers afforded by the Group's extensive commercial
network. In addition, as the measures adopted by central
banks and governments to facilitate access to liquidity by
financial institutions gradually took shape, the Group was
adding new sources of financing to the catalogue of
alternatives in order to use those that are most appropriate
at each moment.
61
ANNUAL REPORT 2008
Table 46. Variation in sources of borrowed funds
Weight (%)
2008*
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper (ECP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interbank deposits (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euronotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset securitisation bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt & preferred stock . . . . . . . . . . . . . . . . . . . .
Official Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount at European Central Bank . . . . . . . . . . . . . . . . . . . . . .
ICO deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public Authority deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,981
18,833
25,719
5,737
6,692
29,866
4,069
4,148
8,021
9,160
2,846
1,622
5,282
3,335
1,337
610
92,129
2007*
Var (%)
53,302
20,939
18,300
10,806
3,257
36,177
5,102
3,096
12,250
9,400
4,508
1,821
1,845
1,235
610
91,324
6.9
(10.1)
40.5
(46.9)
>
(17.4)
(20.3)
33.9
(34.5)
(2.6)
(36.9)
(10.9)
>
8.3
0
0.9
2007
2008
62%
20%
28%
6%
7%
32%
4%
5%
9%
10%
3%
2%
6%
4%
1%
1%
58%
23%
20%
12%
4%
40%
6%
3%
13%
10%
5%
2%
2%
0%
1%
1%
* Unadjusted
At 31 December 2008, 62% of financing was from retail
sources: (i) 48% from demand and term accounts, (ii) 6%
from commercial paper marketed among business
customers of the commercial network, and (iii) temporary
sales of assets to customers. As a result of the strategy
described above, the retail funds performed very well in
the year, with growth of 6.9%, led by time deposits, which
were up by 40.5%. This led to a reduction in the
commercial gap of more than €2,300 million, which is
particularly significant bearing in mind that in 2007 it had
increased by nearly €5,400 million. Commercial paper is
marketed by the Bank as an alternative to time deposits
because of the tax benefits, particularly for businesses.
These are securities issued at a discount, and are
represented by book entries. Their effective value is
calculated at the time each note is issued, based on the
agreed interest rate. To issue short-term commercial paper
in the domestic market, Banco Popular and its regional
subsidiaries had six issuing programs in 2008. The
aggregate limit was €14,180 million until 19 December
2008, when the takeover of the banking subsidiaries,
Banco de Galicia, Banco de Crédito Balear, Banco de
Vasconia and Banco de Castilla by Banco Popular became
effective. At 31 December 2008 the programs of Banco
Popular and Banco de Andalucía remained in force with a
joint limit of €13,500 million. These programs, which
have a 1-year duration, have been registered with the
Spanish National Securities Market Commission (CNMV).
All the programs are listed for trading in the AIAF organized
secondary bond market. The nominal value of each note is
€3,000 and their effective value is determined depending
on the implicit interest rate and duration of each
transaction. They mature in periods of between 3 days and
18 months, as from the date of issue. In 2008 the average
maturity was 81 days and the average cost was 4.5%.
Commercial
Subordinated debt & preferred stock paper (ECP) Asset securitisation bonds
2% 4%
3%
Interbank deposits
5%
Time deposits
28%
Retail
62%
Official Agencies
Fig. 31
Structure of borrowed funds at 31
December 2008
6%
Domestic commercial
paper
6%
Asset repos
7%
Wholesale
32%
Demand deposits
20%
Euronotes
9%
Mortgage bonds
10%
62
Official agencies
6%
GRUPO BANCO POPULAR
Wholesale funding, which accounted for 32% of borrowed
funds, was diversified among a wide variety of financing
sources. As a result of the situation of the international
markets, the outstanding balance of these sources of
financing fell by €6,297 million in the year. In normal
market conditions, the Group's strategy for the different
terms is as described below. At short term (up to 18
months) it uses the money market and issues Euro notes.
At medium term (up to 5 years) it issues senior debt; and
at long term (over 5 years) mortgage bonds (“cédulas”) are
issued. The loan securitisation operations are structured in
bonds of differing maturities, which therefore constitute an
alternative to the foregoing sources at each of the terms,
thus increasing the degree of diversification.
The short-term products include particularly international
promissory notes which are issued through a program
listed and registered on the Dublin Exchange for a
maximum amount of €8,000 million. In spite of the
volatility of the international financial markets, the
outstanding balance at 2008 year end remained at similar
levels to that of the previous year. However the balance
rose significantly at different times during the year as a
result of the short-term nature of the paper and Banco
Popular's high credit quality, which gave it the nature of a
safe haven investment. The program permits issues to be
made in any currency, including the euro, with a range of
maturities that vary from 21 to 364 days. The notes were
issued at a discount for an average term of 89 days in
2008. All issues in currencies other than the euro are
covered by a swap between the issue currency and the
euro and are indexed to the Euribor. Therefore, the actual
issue cost for the Group is denominated in euros and the
average cost rate in 2008 was 4.76%.
The Group has set an internal limit for net calls for
financing in the money market which presently stands at
€7,500 million, together with other sublimits fixing the
maximum amount of maturities in the money market for
each time interval, so as to avoid their concentration in
time. The net balance in the money market at 31
December 2008 was €4,148 million, compared with
€3,096 million in 2007.
For longer terms the Group has two programs for issuing
bonds. The first was registered with the Spanish National
Securities Market Commission (CNMV) on 19 September
2008 and has an issue limit of €8,000 million. The
second was registered with the Dublin Exchange on 29
August 2008 and its limit is €12,000 million. Both
programs, each annual in duration, allow for the issue of
senior debt and subordinated debt in any currency and
using any interest rate structure. The securities are issued
in all cases by an instrumental subsidiary created for this
purpose, BPE Financiaciones, S.A, which is wholly owned
by Banco Popular and domiciled in Spain. The payments of
principal and interest on these issues is unconditionally
and irrevocably guaranteed by Banco Popular. BPE
Financiaciones has not requested ratings for the bond
issuance program, since credit ratings are requested
individually for each issue launched under the program. At
31 December 2008, the outstanding balance of the issues
outstanding was €8,021,000, a decrease of 34.52%
compared with the €12,250,000 recorded in 2007. The
average term of the outstanding transactions was 1 year
and 5 months and the average cost was 3-month Euribor +
8 bp. No new issues were carried out during the year.
Given the situation of the international capital markets, the
purpose of the issues of mortgage bonds and asset
securitisation bonds carried out in the year was to
strengthen the Group's liquid assets. This was achieved by
carrying out mortgage bond and asset securitisation
transactions for €3,000 million and €9,780 million,
respectively, which have been fully retained.
Funding from official agencies accounted for 6% of the
total and amounted to €5,282 million, €2,000 million of
which came from ICO, the European Investment Bank and
other public institutions and are to be used to finance
small and medium-sized companies in accordance with the
objectives of the various programs. The remainder came
from using the various facilities provided mainly by the
European Central Bank with the guarantee of a portion of
the available liquid assets. No use was made in 2008 of
the sources of liquidity made available by the Spanish
Government through the Financial Assets Acquisition Fund.
OPERATIONAL RISK
The Banco Popular Group has adopted the definition of
operational risk in the new Basel Accord (Basel II): “the risk
of loss arising from inadequate or failed internal processes,
people, and systems or from external events”. The Group’s
overall management of this risk includes the design of
procedures to identify, monitor and control it.
The senior management has approved the “Framework for
managing Operational Risk” which includes the design of
policies and functions for the development and
implementation of methodologies and tools that will
permit better management of the Group's operational risk.
Initially, the Group has opted for the standard method
envisaged in Basel II for calculating the capital for
operational risk, although there are plans to apply the
advanced method in the future. In this respect a historical
database is being created for operational risk events since
January 2004. In addition, in December 2006 the Group
joined ORX (Operational Risk Data Exchange Association),
an international consortium that maintains a database to
which the main financial institutions around the world
contribute events and with which data exchanges are
carried out on a quarterly basis.
63
ANNUAL REPORT 2008
Table 47. Operational risk events by amount tranches
2008
Tranches
Less than €600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Between €600 and €3000 . . . . . . . . . . . . . . . . . . . . . . .
Between €3000 and €6000 . . . . . . . . . . . . . . . . . . . . . .
Between €6000 and €20000 . . . . . . . . . . . . . . . . . . . . .
Between €20000 and €60000 . . . . . . . . . . . . . . . . . . . .
Between €60000 and €100000 . . . . . . . . . . . . . . . . . . .
Between €100000 and €600000 . . . . . . . . . . . . . . . . . .
Over €600000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
1,967.27
2,599.13
1,244.06
1,885.88
1,492.76
598.28
3,002.36
1,065.17
13,854.92
Number
21,096
2,014
309
175
47
8
10
1
23,660
2007
Amount
1,729.51
2,223.34
1,024.33
1,730.91
1,447.13
944.80
2,090.72
1,243.01
12,433.75
Table 48 Operational risk events by line of business
2008
Business line
Number
Corporate finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments and settlements . . . . . . . . . . . . . . . . . . . . . . . .
Agency services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail brokering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Group also has qualitative tools with which great
progress has been made over the past year in developing
risk maps, which are updated regularly, to measure the
frequency and impact of operational risk and improve
controls and hedges in the areas of highest exposure, as
well as to analyse the necessary contingency plans to
ensure the continuity of the Bank’s operations.
64
34
22,626
931
19
50
23,660
2007
Amount
785.41
9.986.72
2.303.55
710.76
68.49
13.854.92
Amount
14,78
10,893.99
1,331.59
15.82
177.56
12,433.75
Training courses were also run and frequent meetings were
held with all the areas to raise awareness throughout the
organisation regarding the monitoring and control of this
risk, with a view to mitigating its impact on both the
commercial activities and the operating procedures, etc.
Officers have been appointed in each of the organisation's
units for this purpose.
GRUPO BANCO POPULAR
Figure 32 shows the business areas into which the Group
has been divided for operational risk purposes and the
contribution of each calculated on the basis of the amounts
of operational risk events recorded in 2008.
Trading & sales
5.67%
Retail intermediation
0.49%
Asset management
5.13%
Fig. 32
Operational risk by business
area
Commercial banking (2)
16.63%
Retail banking (1)
72.08%
(1) Retail banking: this includes events of private individuals, small and micro businesses
(2) Commercial banking: this includes events of medium-size and big companies.
REPUTATIONAL RISK
The Regulatory Compliance Office, which reports
functionally to the Audit and Control Committee, is
responsible for identifying, evaluating and preventing
possible risks of material breaches from the economic or
reputational standpoint which might arise in connection
with laws and regulations, codes of conduct and standards
of good practice, especially as regards business activities,
prevention of money laundering and financing of terrorism,
conduct in the securities markets, data privacy and
protection and business activities. In this respect, it
identifies and assesses risks of non-compliance associated
with the development of new products and the practices of
each business area, ensuring respect for the regulations on
transparency and customer protection.
It also analyses and promotes the development of the
systems established for providing staff training on the
aforementioned areas.
65
ANNUAL REPORT 2008
BANCO POPULAR RATINGS
The ratings assigned to Banco Popular by the leading
international credit rating agencies are among the highest
in the entire Spanish and European financial system.
These ratings, which are exceptional for a bank of the size
of Banco Popular whose business focuses on regional
commercial banking in Europe, are based on levels of
excellence in all the aggregates assessed by the agencies,
which are higher than those required of other banks with
similar level ratings, but are much more diversified both
geographically and by business lines. In general terms,
Banco Popular’s ratings are based on its high profitability,
good asset quality and adequate level of solvency,
achieved through implementation of a well-defined and
coherent strategy that is consistent with the Bank’s
objectives.
These ratings constitute one of Banco Popular’s
competitive advantages, and one that can be considered of
even greater importance in an economic situation like the
present one, since customers, be they retail or wholesale,
show a clear preference for more solvent banks with a
lower risk profile, giving Banco Popular access to different
sources of financing in advantageous call and cost
conditions.
Agency
Fitch
Moody´s
Standard & Poor´s
DBRS
Individual/Financial strength
A/B
B
On 2 October 2008, Standard & Poor’s confirmed its
short-term rating of A1+ for Banco Popular. In parallel it
took the Bank's long-term rating down from AA to AA-, one
of the highest among Spanish and European banks, and
topped by only eight European financial groups at the date
of publication.
These ratings reflect the Bank’s strong financial
fundamentals - profitability, solvency and credit quality - as
well as its conservative and well-oriented management. In
the agency's opinion the Bank has adequate diversification
by type of business, by customer and by region within
Spain.
"Popular's healthy profitability and excellent operating
efficiency remain its major financial strength." The Bank
also "has the capacity to maintain strong performance
amid the downturn because of robust earnings [...], aboveaverage pricing policies, and cost flexibility". Banco
66
In 2008, Banco Popular succeeded in maintaining its
ratings at similar levels to those of 2007. This performance
is particularly noteworthy in a year in which the global
economic situation and the specific risks of many banks
led to the toughening of agency rating policies, resulting in
a significant deterioration in the ratings of financial
institutions around the world. The loss of ratings is even
more dramatic if the levels of individual financial strength,
which measure a bank's credit quality without considering
public support, are analysed.
It should be pointed out that in the case of Banco Popular,
unlike the majority of comparable institutions in Europe
and internationally by level of rating, the adjustments to
the credit rating had their origin in systemic factors relating
to the future prospects of the Spanish economy, and were
not prompted by the existence of severely impaired assets
at international level, as explained in the following
paragraphs.
The ratings at 31 December 2008 were as follows:
Short term
F1+
P1
A-1+
R-1 (high)
Long term
AA
Aa2
AAAA (high)
Popular's adequate capitalization, with a Tier 1 capital
ratio of more than 8%, "and its possibility of realizing onetime gains on the sale of selected noncore assets give the
bank additional financial flexibility"..
“From the point of view of liquidity, the Bank faces the
current market situation with "a significant volume of
liquid assets on its balance sheet", which cover 1.25 times
the maturities of wholesale funding in the last quarter of
2008 and in 2009”.
The agency expects Banco Popular to be able to easily
absorb the probable increase in nonperforming loans over
the coming quarters. "Popular's good knowledge of its
client base and close monitoring of lending will help it
cope." The Bank also has "sound reserve coverage, strong
operating profitability, and some financial flexibility to form
a cushion against an expected deterioration in its loan
book".
GRUPO BANCO POPULAR
In December 2008, Moody's confirmed its short-term
rating of Prime-1, but changed the long-term debt rating
from Aa1 to Aa2, and the financial strength rating from
“B+” to “B”. As a result, the subordinated debt was
downgraded from Aa2 to Aa3, and the preferred shares
from A1 to Aa3. The agency explains these high ratings
with the following arguments:
•The Group's “sufficient regulatory capital ratios, with
core capital at 6.78% at end-September 2008, which
compares favourably with domestic peers”. The agency
also highlights the amount of “the Bank's generic
provisions which would add an additional 150 basis
points to the core capital ratio”.
•The strong lending portfolio, with the lowest volume
concentration per customer of Spanish banking.
•Consistent strategy and the best operating efficiency in
the sector.
•Balance sheet strength, with substantial credit loss
provisions which, according to Moody's, would permit the
Bank to "absorb a 5.5 times increase in its existing
problem loans and still maintain a sound core capital ratio
above 6%".
•Adequate liquidity position with a positive financing
gap.
In a report published in June 2008, Fitch Ratings
confirmed its rating and outlook as “stable”. In the
agency's opinion, the Bank's long- and short-term ratings
"reflect its remarkable track record of strong profitability, a
good and geographically diversified domestic retail
franchise through regional banks, proactive management,
adequate capital levels and healthy asset quality".
The lowering of the individual rating from the highest level
assigned by Fitch (A) is motivated by the Bank's "challenge
of managing construction and real estate exposure and
defending asset quality amid a significant slowdown of the
Spanish housing market and economy - where most of its
activities are undertaken - while defending customer
spreads and liquidity". The growth of Spanish GDP is
estimated to be well below the average of 3.8% obtained
during the past decade. The outcome of this, together with
the tight conditions in the wholesale market, is the
deterioration of the operating environment.
The individual rating of A/B is, in any case, the highest
awarded to Spanish financial institutions, while the longterm rating of “AA” or higher is held by only 18 private
financial entities in the world.
In December 2008, Dominion Bond Rating Service (DBRS)
confirmed the long-term rating of “AA (high)”, while the
short-term rating remained at “R-1 (high)”, which is the
highest awarded by this agency. DBRS maintained the
stable trend of short-term debt and assigned a negative
trend to long-term debt.
In the agency's opinion, these "ratings are underpinned by
Banco Popular’s strong credit fundamentals, well
established position in the Spanish banking market,
consistent strategy, low expense ratio, reinforced balance
sheet with sizeable loan loss reserves, and strengthened
liquidity".
"This rating action reflects the impact on the Group’s
prospects of the rapid deterioration in the Spanish property
markets, the weakening Spanish economy and the still
disrupted financial markets."
Subsequent to year end, in January 2009, as a result of the
prospects indicated in the previous paragraph, DBRS
decided to lower the long-term rating to AA from AA (high),
while at the same time confirming the short-term rating.
67
ANNUAL REPORT 2008
SHAREHOLDERS
At 31 December 2008, Banco Popular Español, S.A. had
130,282 shareholders, compared with 121,427 at the end
of the previous year.
Tables 49 and 50 present a detail of the spread of share
ownership and of the percentages of holding in the
common stock of the Bank at the end of 2008 and 2007.
Table 49 Distribution of shareholders
Shareholders
Number of shares owned
per shareholder
Up to1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From
1.001 to
4.000 . . . . . . . . . . . . . . . . . . . . . .
From
4.001 to 10.000 . . . . . . . . . . . . . . . . . . . . . .
From
10.001 to 20.000 . . . . . . . . . . . . . . . . . . . . . .
From
20.001 to 40.000 . . . . . . . . . . . . . . . . . . . . . .
From
40.001 to 200.000 . . . . . . . . . . . . . . . . . . . . . .
From
200.001 to 400.000 . . . . . . . . . . . . . . . . . . . . . .
From
400.001 to 800.000 . . . . . . . . . . . . . . . . . . . . . .
Over 800.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
79,566
32,447
10,681
3,985
1,836
1,386
168
95
118
130,282
Percentage holding
in common stock
%
Number
2007
2008
73,753
29,447
10,461
3,962
1,913
1,456
191
119
125
121,427
2007
61,07
60.74
24.91
24.25
8.20
8.61
3.06
3.26
1.41
1.58
1.06
1.20
0.13
0.16
0.07
0.10
0.09
0.10
100.00 100.00
2008
2007
2.66
2.51
5.52
5.14
5.53
5.52
4.58
4.64
4.18
4.45
9.05
9.84
3.78
4.33
4.24
5.32
60.46 58.25
100.00 100.00
Note: Figures as of 12 December 08, taking into account the capital increase in December
The Bank’s shareholder structure remained in line with the
previous year, with an increase in the number of investors
owning a smaller numbers of shares. The majority of the
Bank’s shareholders (86%) own less than 4,000 shares.
There are 118 shareholders owning more than 800,000
shares and they control 60.46% of the capital, compared to
the 125 shareholders that represented 58.25% of the
capital at the close of the previous year. There was a slight
reversal in the trend of the last two years of the decline in
the capital owned by non-resident shareholders.
Non-Spanish shareholders held 36.69% of the capital at
the end of 2008, compared with 34.94% in 2007.
Table 50. Common stock ownership distribution
(Data in %)
Domestic
ownership
Represented by the Board of Directors*
Other: Institutional holdings . . . . . . . . . . . . . . . . . . . . . . . . . .
Individual investors** . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign
ownership
Total
2008
2007
2008
2007
2008
2007
23.80
18.92
20.59
63.31
26.34
24.01
14.71
65.06
16.82
19.44
0.43
36.69
14.82
19.72
0,40
34.94
40.62
38.36
21.02
100.00
41.16
43.72
15.12
100.00
* Directly, indirectly or habitually
** Around 122,000 shareholders in 2008 and more than 112,000 shareholders in 2007, each one owning fewer than 20,000 shares.
Shareholders who are employees of the Group numbered
1,578, representing 1.21% of the total number of
shareholders and in aggregate owned 0.51% of the
common stock.
68
The Board of Directors controls 501.9 million shares,
40.62% of the capital compared to 41.16% in the previous
year, including shares owned directly or indirectly by the
directors and those habitually represented by them. Table
51 shows an individual breakdown.
GRUPO BANCO POPULAR
Table 51 Shares controlled by the Board of Directors at the close of the year.
Name
Allianz SE
Aparicio Valls, Francisco . . . . . . . . . . . . . . . . .
Asociación de Directivos de BPE . . . . . . . . . . .
Lucía, José María . . . . . . . . . . . . . . . . . . . . . .
Ferreira de Amorim, Americo . . . . . . . . . . . . .
Gancedo, Eric . . . . . . . . . . . . . . . . . . . . . . . . .
Herrando, Luis
Higuera, Roberto . . . . . . . . . . . . . . . . . . . . . . .
Molins, Casimiro . . . . . . . . . . . . . . . . . . . . . .
Montuenga, Luis . . . . . . . . . . . . . . . . . . . . . .
Morillo, Manuel . . . . . . . . . . . . . . . . . . . . . . .
Nigorra, Miguel . . . . . . . . . . . . . . . . . . . . . . .
Osuna, Nicolás . . . . . . . . . . . . . . . . . . . . . . . .
Revoredo, Helena . . . . . . . . . . . . . . . . . . . . . .
Rodríguez, José Ramón . . . . . . . . . . . . . . . . .
Ron Güimil, Angel . . . . . . . . . . . . . . . . . . . . .
Santana, Vicente . . . . . . . . . . . . . . . . . . . . . .
Sindicatura de Accionistas de BPE . . . . . . . . .
Solís y Mtnez.-Campos, Miguel Angel de . . . .
Tardío, Vicente . . . . . . . . . . . . . . . . . . . . . . . .
Directly
10
380,560
40,000
14,108
500
229,228
3,950
67,000
22,000
83,479
50
517,003
0
0
146,364
62,554
11,000
16,236,760
763,805
15,690
Indirectly
%
%
116,197,622 9.40
0.00
- 0.00
0.03
0.00
- 0.00
- 0.00
0.00
94,177,632 7.62
0.00
0.02
131,307 0.01
4,000 0.00
0.00
- 0.00
0.01
0.00
- 0.00
- 0.00
0.01
- 0.00
0.00
0.04
2,608,747 0.21
34,218,232 2.77
0.00
5,671,840 0.46
0.00
0.01
132,402 0.01
- 0.00
0.01
1,403,140 0.11
0.00
1.31 (2) 159,682,473 12.92
308,935 0.02
0.06
- 0.00
0.00
Total (directly & indirectely) . . . . . .
18,594,061
1.50
414,536,330 33.55
Total
116,197,632
380,560
40,000
14,108
94,178,132
360,535
7,950
67,000
22,000
83,479
50
3,125,750
34,218,232
5,671,840
278,766
62,554
1,414,140
175,919,233
1,072,740
15,690
% (1)
9.40
0.03
0.00
0.00
7.62
0.03
0.00
0.01
0.00
0.01
0.00
0.25
2.77
0.46
0.02
0.01
0.11
14.24
0.09
0.00
433,130,391 35.05
68,779,024 5.57
501,909,415 40.62
Shares represented (habitually) (1)
Total shares . . . . . . . . . . . . . . . . . . . . . . .
(1) Shares represented: This table does not include the breakdown of the shares represented habitually by Members of the Board amounting to
approximately 5.57% of the capital. Within this percentage the following participations are noteworthy: 1.20% of the Gancedo family, represented by Eric Gancedo; 1.04% represented by Luis Montuenga; 0.83% of the Solís family, represented by Miguel Ángel Solís; 0.75%
represented by Vicente Santana.
(2) Indirect holding of the Sindicatura de Accionistas de BPE: includes the shares that Unión Europea de Inversiones, S.A. holds directly or indirectly syndicated, representing 5.421% of capital. 600,482 shares that are direct holdings of other Directors have been deducted. Without this
deduction the indirect holding of the Sindicatura is 160,282,955 shares and its total holding is 176,519,715 shares (14.285%).
MARKET PERFORMANCE OF THE BANK'S
SHARES
At 31 December 2008, the capital of Banco Popular
Español was represented by 1,235,740,551 ordinary
shares with a par value of €0.10 each, which are listed on
the four Spanish Stock Exchanges and traded in the Spanish
continuous market. They are also listed on the Lisbon
Exchange. Banco Popular shares are included in the Madrid
Stock Exchange general price index, with a weighting of
2.46% of the total and in the Ibex-35 index, which
comprises the thirty-five most liquid stocks in the Spanish
market, with a weighting of 2.32%.
The capital increase for the takeover of the Group banks
Banco de Castilla, Banco de Crédito Balear, Banco de Galicia
and Banco de Vasconia was completed on 19 December
2008. As a result of this increase to cover the takeover
swap equation, Banco Popular Español increased its capital
by a nominal amount of €2,030,801.10 by issuing
20,308,011 ordinary shares with a par value of €0.10
each, of the same class and series of the shares currently
outstanding, represented by book entries. Consequently,
Banco Popular Español now has capital of
€123,574,055.10 represented by 1,235,740,511 shares.
15.00
11.70
6.08
5.00
D J
2007
F M A M J
J
A S O N D
2008
Fig. 33
Banco Popular share price (€)
(Monthly high, low and closing
prices)
69
ANNUAL REPORT 2008
Table 52 Price evolution of Banco Popular common stock
Year
31.12.06* . . . . . . . . . .
Highest
Price (€)
Lowest
Closing
BPE Ind.
13.73
100.00
MSEGPI
100.00
IBEX-35
100.00
2007
January . . . . . . . . . .
February . . . . . . . . .
March . . . . . . . . . . .
April . . . . . . . . . . . .
May . . . . . . . . . . . . .
June . . . . . . . . . . . . .
July . . . . . . . . . . . . .
August . . . . . . . . . . .
September . . . . . . . .
October . . . . . . . . . .
November . . . . . . . .
December . . . . . . . .
15.04
15.65
15.55
16.07
15.32
14.95
14.16
13.88
13.69
12.61
12.27
12.53
13.73
14.60
14.00
14.50
14.22
13.55
12.80
12.98
11.27
11.44
11.30
11.55
14.68
14.87
15.44
14.59
14.88
13.82
13.23
13.39
12.05
12.05
12.10
11.70
106.92
108.30
112.45
106.26
108.38
100.66
96.36
97.52
87.76
87.76
88.13
85.21
102.87
100.72
103.50
101.61
108.36
105.27
104.64
102.36
103.04
112.32
111.40
107.32
103.61
102.23
104.35
102.64
108.62
105.20
104.89
102.58
102.96
110.90
109.86
105.60
2008
January . . . . . . . . . .
February . . . . . . . . .
March . . . . . . . . . . .
April . . . . . . . . . . . .
May . . . . . . . . . . . . .
June . . . . . . . . . . . . .
July . . . . . . . . . . . . .
August . . . . . . . . . . .
September . . . . . . . .
October . . . . . . . . . .
November . . . . . . . .
December . . . . . . . .
11.76
10.64
11.98
12.21
11.61
10.53
8.68
7.87
9.98
8.91
7.70
6.29
8.51
9.18
9.87
10.58
10.25
8.69
6.50
6.60
6.70
5.67
5.60
5.60
10.33
10.41
11.50
11.08
10.38
8.79
7.03
7.23
8.29
7.07
6.24
6.08
75.24
75.82
83.76
80.70
75.60
64.02
51.20
52.66
60.38
51.49
45.45
44.28
93.51
93.10
93.80
97.54
96.14
85.15
83.99
82.76
77.67
64.44
62.99
65.00
92.30
91.71
92.55
95.50
93.94
83.47
82.09
80.84
75.58
62.91
61.14
62.77
*Indexes at 31.12.06: Madrid Stock Exchange general price index (MSEGPI): 1,554.9 points, IBEX-35: 14,146.5 points
The new shares acquired the same dividend rights as the
old shares on 12 January 2008, after payment of the
second interim dividend for 2008. Consequently, the
holders of the 20,308,011 new shares issued on 19
December 2008 will be entitled to the corporate earnings
distributed hereafter.
The closing price of Banco Popular common stock was
€6.08 at 2008 year end, a decline of 48.03% during the
year. This decline can be compared to the 64.95% fall in
the principal European banks (Dow Jones Europe Stoxx
index). Taking into account the dividends paid during 2008,
the fall in the shares of Banco Popular is reduced to 43.8%.
Figure 33 plots the monthly variations in the share price
during 2008.
After sliding during the first two months of the year, the
share price gained ground to reach a high of €12.21 at the
close of 2 April. From then on the share price declined, in
line with the sector and the market. And although in the
month of September there appeared to be a timid recovery,
it slid again and reached the minimum for the year of
€5.60 on 5 December. It finally managed to scale ten
percentage points by the end of the year.
70
In these conditions Banco Popular shares offer a very high
intrinsic value, whether in terms of PER (7 times the EPS in
2008) or dividend yield (more than 8%, both figures at
2008 closing prices).
125
Popular
100
Banks
80
54.03
52.23
40
D
J
2007
F
M
A
M
J
J
2008
A
S
Fig. 34
Popular compared to the average for Spanish banks
Indexes December 2007 – December 2008
((Month-end data)
O
N
D
ANNUAL REPORT 2008
GRUPO BANCO POPULAR
Table 53 Market return on Banco Popular shares 1998 – 2008*
(% compound annual return)
Year-end
in
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
1999
3.0
2000
10.2
17.8
Year-end out
2001
7.4
9.7
2.0
2002
7.7
9.3
5.3
8.7
2003
11.0
13.1
11.6
16.7
25.3
2004
10.1
11.6
10.1
12.9
15.1
5.7
2005
10.0
11.2
10.0
12.0
13.2
7.6
9.5
2006
13.1
14.6
14.0
16.6
18.7
16.6
22.4
36.9
2007
9.9
10.8
9.8
11.2
11.6
8.5
9.4
9.4
(12.6)
2008
2.4
2.4
0.6
0.4
(1.0)
(5.5)
(8.1)
(13.3)
(31.0)
(45.6)
* Entry and exit at the end of the years indicated, assuming the dividends, net of withholding taxes, are
reinvested on the collection date at the rate on the close of that day.
Table 52 shows the evolution of the share price in the last
two years, compared with the variation in the Madrid
Exchange General Index and the Ibex 35.
dividends paid in the year (three out of 2007 profits and
the first interim dividend in 2008), which amounted to
€0.5006 per share.
Figure 34 shows the behaviour of the share price compared
with the average for Spanish banks in 2008.
The price of Banco Popular shares at 2008 year end
(€6.08) signified a P/E ratio of 7 times the attributable
profit for the year. Likewise it was 1.12 times the share
carrying amount.
The market return per share - capital gain plus dividends
received in the year - dropped by 43.8% in 2008. Regard
must be had to the fall in price (€5.62), plus the four
Table54 Market return on Banco Popular shares 2007-2008*
Year
Closing
price (€)
2007
2008
11.70
6.08
Price as a multiple of
Net income
attributable
Book value
P/E
P/BV
11.2
7.0
2.29
1.12
Dividend
yield
%
Earnings
yield**
%
4.20
6.80
8.86
14.26
Market
return***
%
(11.6)
(43.8)
* Relating to closing figures for the year
** Earnings per share/closing price
*** Appreciation (depreciation) plus dividends as % of initial price in the period
2004
174
2005
173
2006
158
2007
194
279
2008
0
150
Fig. 35
Liquidity of Banco Popular shares
(Shares traded as % of capital stock)
300
Table 54 presents these share valuation measures for the
last two years, and also includes the dividend yield, the
earnings capitalisation rate, and the market return as
defined above.
Table 55 and Figure 35 show the volume of trading and the
liquidity of the shares in the last five years.
The market capitalisation of Banco Popular at 2008 year
end was €7,390 million, a decrease of €6,831 million
(48%) from the 2007 figure of €14,221 million.
71
ANNUAL REPORT 2008
Table 55. Market information
Quarters
2007
1st
2nd
3rd
4th
Year total
2008
1st
2nd
3rd
4th
Year total
(Thousands of shares)
Share liquidity
(Number in thousands)
Average
shares
outstanding
Shares
traded
1,215,433
1,215,433
1,215,433
1,215,433
1,215,433
1,215,433
1,215,433
1,215,433
1,216,743
1,215,753
Share market price
(€)
%
577,638
511,582
607,837
657,763
2,354,820
998,308
805,224
944,346
638,486
3,386,364
High
47.53
42.09
50.01
54.12
193.75
81.93
66.25
77.70
52.50
278.38
15.65
16.07
14.16
12.61
16.07
11.98
12.21
9.98
8.91
12.21
Low
Closing
Dividend
paid
(€)
13.73
13.55
11.27
11.30
11.27
8.51
8.69
6.50
5.60
5.60
15.44
13.82
12.05
11.70
11.70
11.50
8.79
8.29
6.08
6.08
0.1033
0.1044
0.1057
0.1213
0.4347
0.1222
0.1234
0.1250
0.1300
0.5006
Market
return*
13.2
(9.8)
(12.0)
(1.9)
(11.6)
(0.7)
(22.5)
(4.5)
(0.3)
(43.8)
** Gain (loss) plus dividend as % of starting price in each period
Trading in Banco Popular shares in 2008 again reflected the
high liquidity of the stock. The Bank's shares were traded at
the 254 trading sessions during the year, and the 3,386
million shares traded (representing 272.2% of the total
stock outstanding) signified a daily average of 13,384,836
shares. The matching figures for 2007 were 2,355 million
shares during the year and 9,307,586 as a daily average.
During 2008 the Group notified the CNMV that it had
performed direct transactions with its own shares as a
purchaser for a total of 11,101,304 shares (0.914% of its
capital) and as a seller for 9,692,381 shares (0.08% of its
common stock).
Table 56. Treasury stock
(Thousands of shares)
Treasury Stock**
Number held
Average
2007
First quarter . . . . . . . . . .
201
Second quarter . . . . . . . .
191
Third quarter . . . . . . . . . .
647
Fourth quarter . . . . . . . . .
710
2008
First quarter . . . . . . . . . .
723
Second quarter . . . . . . . .
724
Third quarter . . . . . . . . . . 1.011
Fourth quarter . . . . . . . . . 7.323
Maximum Minimum Closing
Total
outstanding (a)
Total
traded (b)
As % of
(a)
As % of
(b)
1,946
217
781
720
64
155
213
691
167
214
697
720
1,215,433
1,215,433
1,215,433
1,215,433
577,638
511,582
607,837
657,763
0.02
0.02
0.05
0.06
0.03
0.04
0.11
0.11
724
724
2,634
10,116
720
724
724
724
724
724
2,634
10,116
1,215,433
1,215,433
1,215,433
1,235,741
998,308
805,224
944,346
638,486
0.06
0.06
0.08
0.59
0.07
0.09
0.11
1.15
** Based on quarterly average number held
In 2008 the maximum treasury stock held at the Group
was 10,116,372 shares (0.82% of the total common stock
outstanding), the average was 2,373,851 shares (0.19%),
and the minimum was 724,036 (0.06%). The average
purchase price was €8.02 compared to €13.66 in 2007.
72
The total Treasury Shares in the last two years, broken
down by quarters, are shown in Table 56. At 31 December
2008, the Group held 10,116,372 Banco Popular shares.
A year earlier, at the close of 2007, the Group held
719,473 treasury shares.
GRUPO BANCO POPULAR
INFORMATION REQUIRED UNDER ARTICLE 116 BIS OF THE SPANISH SECURITIES MARKET LAW
a.
The capital structure, including securities not
traded on a regulated EU market, with an indication, if
applicable, of the different classes of shares, the rights and
obligations that each class confers, and the percentage of
capital that each represents..
The share capital amounts to ONE HUNDRED AND
TWENTY-THREE MILLION FIVE HUNDRED AND SEVENTYFOUR THOUSAND AND FIFTY FIVE EUROS AND TEN CENTS
(€123,574.055.10), represented by one thousand two
hundred and thirty-five million seven hundred and forty
thousand five hundred and fifty-one (1,235,740,551)
shares, with a par value of ten cents (€0.10) each,
represented by book entries, fully subscribed and paid-up.
All of the shares representing the share capital are in the
same class and series, they confer identical voting and
dividend rights and the same obligations. There are no
privileged shares.
b.
Share transfer restrictions
There are no legal or bylaw restrictions on the
transferability of shares.
However, Articles 57, 58 and 60 of Law 26/1988 of 29
July 1988 on discipline and intervention in credit
institutions, establish a procedure for reporting to the Bank
of Spain before the acquisition or transfer of a significant
holding (5%) in a credit institution or the increase or
reduction thereof which amount to or exceed the following
percentages: 10%, 15%, 10%, 25%, 33%, 40%, 50%,
66% and 75%.
The Bank of Spain has a maximum of three months,
from the date on which it is informed, to oppose the
planned acquisition if it deems fit.
c.
Significant direct or indirect shareholdings.
There are no securities issued that can be converted into
Bank shares.
Banco Popular Español shares are listed on the
computerised trading system of the Spanish Securities
Exchanges, as well as on the Lisbon (Portugal) Stock
Exchange.
Name or company name of the shareholder
Sindicatura de Accionistas de BPE . . . . . . . . . . . . . . . . . . . . .
Allianz SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Américo Ferreira de Amorim . . . . . . . . . . . . . . . . . . . . . . . . .
1
Unión Europea de Inversiones, S.A
Casa Kishoo, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
direct voting
rights
16,236,760
10
500
65,876,857
59,991,556
Number of indirect
voting rights (')
160,282,955
116,197,622
94,177,632
9,975,691
780,000
% of the total
voting rights
14.29
9.40
7.62
6.14
5.07
(*) Through:
1
At 31 December 2008, of the total number of shares held by Unión Europea de Inversiones, S.A., 66,997,105 shares were syndicated and were therefore also included in the indirectly-owned shares of Sindicatura de Accionistas de BPE.
Sindicatura de Accionistas de BPE
Number of
direct voting
rights
% of the total
voting rights
Variety of private investors . . . . . . . . . . . . . . . . . . . . . . . . . .
Unión Europea de Inversiones, S.A. . . . . . . . . . . . . . . . . . . . .
93,285,850
66,997,105
7.55
5.42
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
160,282,955
12.97
73
ANNUAL REPORT 2008
Allianz SE
Number of
direct voting
rights
% of the total
voting rights
Dresdner Holding B.V. Amsterdam . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,829,354
38,368,268
6.29
3.10
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,197,622
9.40
Américo Ferreira de Amorim
Topbreach Holding, B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d.
Any restrictions on voting rights.
Article 14 of the Bylaws establishes that the maximum
number of votes that a single shareholder or companies
belonging to the same group can exercise is 10% of the
votes to be issued at the General Meeting in question.
e.
Shareholder agreements;
In accordance with Law 26/2003, of 17 July 2003, on
transparency in listed limited companies, a material event
notice was filed on 16 July 2006 disclosing information
about the Syndication Agreement of Banco Popular
shareholders.
This agreement was initially subscribed by a variety of
shareholders, on 26 July 1945, with the wish to support
and drive the Bank’s progress and thus guarantee its
continuity and permanence.
The pact currently represents a variety of minority
shareholders, 2,619 in number at 31 December 2008,
whose total shareholding represents 14.28% of the capital
stock of Banco Popular. Unión Europea de Inversiones, S.A.,
with 5.42%, is the only syndicated shareholder with a
holding of more than 3% in the capital stock
This is a “gentlemen’s agreement”, whereby the
syndicated shareholders are bound for the length of time
they choose.
74
Number of
direct voting
rights
94,177,632
% of the total
voting rights
7.62
f.
The rules governing the appointment and
replacement of the members of the board of directors and
amendments to the corporate bylaws;
1. Appointment and replacement of the members of
the Board of Directors.
The procedures for the appointment and replacement of
the members of the Board of Directors are regulated in
detail in the Bylaws and the Board Regulations.
The appointment of the Directors and the determination
of their number, between twelve and twenty pursuant to the
Bylaws, is the responsibility of the General Meeting, in such
a manner as to guarantee due representation and efficient
functionality.
If vacancies arise during the term for which directors
were appointed, the Board may designate, co-opted from
among the shareholders, the persons to occupy these
positions until the next General Shareholders Meeting takes
place.
The proposals for the appointment and re-election of
directors that the Board of Directors lays before the General
Meeting for consideration and the appointments of co-opted
directors must go to persons who, in addition to meeting
the legal and bylaw requirements that the office demands,
are of high standing and commercial and professional
repute, and possess the appropriate knowledge and
experience to fulfil their functions.
GRUPO BANCO POPULAR
There is a formal and transparent procedure for
appointing and re-electing directors. Appointment and reelection proposals must first be made by the Appointments,
Remuneration, Corporate Governance and Conflicts of
Interest Committee, in the case of independent Directors, or
be reported on by the Committee in the case of other
Directors.
In the appointment procedure the individual's
circumstances, experience and skills are taken into account,
as well as whether they are an executive or external,
independent or non-independent director.
The External Directors must constitute an ample
majority over the Executive Directors in the composition of
the Board of Directors. In any case, the number of Directors
with executive functions must not exceed a third of the
members of the Board of Directors.
The Board also endeavours to ensure that the directors
as a whole represent a significant percentage of the capital
stock.
The Board of Directors is the body responsible for
determining the grounds for removal of Directors and for
acceptance of their resignation, based on a report by the
Appointments, Remuneration, Corporate Governance and
Conflicts of Interest Committee.
2.
Amendment of the Company Bylaws
The rules governing amendment of the Bylaws are those
established in article 144 et seq. of the Spanish Public
Companies Law, requiring approval at the General
Shareholders Meeting by the majorities envisaged in article
103 of that Law.
Because of its status as a credit institution, the
amendment of the Bank's Bylaws is subject to a procedure
of authorisation and registration by the Ministry of Finance.
This is regulated by Royal Decree 1245/1995 of 14 July
1995, on the setting up of banks, cross-border transactions
and other matters related to the legal regulations governing
credit institutions.
g.
The powers of the members of the Board of
Directors and, in particular, those related to the issuance
and repurchase of shares;
Notwithstanding their own specific areas of
competence, the Chairman of the Board of Directors and the
Chief Executive Officer have all the powers of the Board
delegated to them, except those not delegable by Law or as
provided in article 5.2 of the Board of Directors Regulations.
Delegation of authority to issue shares:
At the General Shareholders Meeting held on 25 May
2005 it was agreed to delegate to the Board of Directors,
pursuant to articles 153.1.b) and 159.2 of the Spanish
Public Companies Law, the authority to increase capital
(with the waiver, if necessary, of preferential subscription
rights) by increasing the nominal value of the existing
common stock, or through the issue of new common,
preference or redeemable stock, with or without a share
premium, with or without voting rights, in line with the
classes or type admitted by law and by the Bylaws. The time
limit for exercising these delegated powers is five years.
Delegation of authority to issue fixed income securities
convertible to shares:
2005 it was agreed to delegate to the Board of Directors,
pursuant to article 319 of the Mercantile Registry
Regulation, the authority to issue fixed income securities
convertible to newly issued shares, and/or swappable for
current Bank shares, up to a maximum amount of six
hundred million euros (€600,000,000), with the
determination of the bases and types of the conversion
and/or swap, with the waiver, if necessary, of preferential
subscription rights, and the delegation of powers to
increase the capital stock by the required amount. The time
limit for exercising these delegated powers is five years.
Delegation of authority to repurchase shares:
2008 it was agreed to delegate to the Board of Directors, as
provided in article 75 of the Spanish Public Companies Law,
the powers to acquire, by the means allowed by Law, shares
in the Banco Popular Español. The time limit for exercising
this delegated power is eighteen months.
h. Any material agreements that have been reached
by the Company or that come into effect, are modified or
terminate in the case of a change of control of the company
arising from a public takeover bid, or its effects, except
when its disclosure would be seriously detrimental to the
company. This exception shall not apply when the
company is legally obliged to disclose this information;
There are no agreements made by the Bank that come
into effect, are modified or terminate in the case of a change
in control of the Bank, arising from a public takeover bid.
75
ANNUAL REPORT 2008
i.
Agreements between the Company and its
directors, managers or employees, which make provision
for compensation when they resign or are unfairly
dismissed or if their employment ends because of a public
takeover bid.
There are no agreements of this nature.
RESEARCH & DEVELOPMENT
In 2008, the Group incurred expenses in Research,
Development and Innovation in areas related to its activity.
These expenses were not capitalised
POST BALANCE SHEET EVENTS
Within the framework of a restructuring of the debts of the
Sanahuja Group, in February 2009 the Banco Popular
Group acquired 7,606,200 shares of Metrovacesa S.A.,
representing 10.92% of its capital stock.
The Board of Directors of Banco Popular Español S.A. will
propose at the General Shareholders Meeting that a portion
of the additional paid-in capital reserve be distributed in
July 2009. This pay-out will be made by delivering shares
from the Bank's treasury stock to shareholders of Banco
Popular Español S.A., in the proportion of one share for
every 50 shares held by the shareholder.
76
ENVIRONMENT
The Bank did not make any environmental investments in
2008, nor did it consider it necessary to record any provision for
environmental risks and charges since there are no contingencies
relating to environmental protection and enhancement. This point
is discussed in further detail in Note 11 to the Financial
Statements.
GRUPO BANCO POPULAR
PRINCIPAL COMPANIES IN
THE GROUP
Exhibit 1 to these consolidated financial statements
presents the consolidated public balance sheets,
statements of income, and changes in equity of the
economic group at 31 December 2008 and 2007, broken
down as follows:
a) Credit institutions sector, consisting of the entities
detailed in Note 2.c) to the consolidated financial
statements grouped together as follows:
i. Deposit-taking companies (banks)
ii. Finance companies
iii.Investment and financial service companies
iv. Instrumentality and special purpose companies.
This scope of consolidation is the basis for calculation
of capital requirements.
c) Other companies: the remaining companies in the
scope of consolidation which are listed in Note 2.c) as
non-financial companies; this group includes most
notably, because of its contribution to the consolidated
result, Popular de Renting, S.A.
d) The “Adjustments & eliminations” line shows the
amounts for relationships or adjustments between the
different sectors, since those relating to the same sector
were taken into account in the process of preparation
thereof.
The sectorial financial statements were prepared using the
same criteria of valuation, presentation and drafting as
those indicated for the economic group, except for the
investments of the credit institutions sector in the
insurance companies and other companies, for which the
equity method was used, the eliminations being recorded
in the Adjustments & eliminations line. .
Based on the data at December 2008 and 2007, the
structure, by sector, of the Banco Popular economic group
is as follows:
b) Insurance companies: at 31 December 2008 and
2007, the Banco Popular Group had 3 insurance
companies: Eurovida, S.A. (España), consolidated by
the proportional consolidation method since it is a
jointly controlled company; Eurovida, S.A. (Portugal)
and Popular Seguros, S.A. also in the Portuguese
market.
Data in %
Total assets
Net
equity
2008
Operating
income
2007
Profit
Total assets
Equity
Operating
income
Profit
Sector
Credit institutions . . . . .
Insurance companies . .
Other companies . . . . .
Adjus. & eliminations
Total
99.29
0.94
0.03
(0.26)
100.00
100.02
1.22
0.16
(1.40)
100.00
99.96
2.42
0.16
(2.54)
100.00
This table presents the fundamental items that provide an
idea of the Group’s sectorial structure. For the income
statement, the net operating income has been used so as
to include both insurance and other activities using the
present income statement presentation.
The Banco Popular Group is a financial group as
historically stated in its annual reporting documents, since
the credit institutions sector accounts for substantially all
the balance sheet and income statement figures.
Group management manages the activities at individual
level of each company in the Group. For this reason in the
respective annual reports it includes information relating to
the basic companies that constitute the Group.
99.96
2.03
0.14
(2.13)
100.00
99.14
0.99
0.09
(0.22)
100.00
100.02
1.06
0.98
(2.06)
100.00
100.00
1.71
0.13
(1.84)
100.00
99.97
1.69
0.15
(1.81)
100.00
Two groups are presented for these purposes: banks, and
financial and service subsidiaries:
Banks: The Group headed by Banco Popular comprises, in
addition, a total of 6 banking subsidiaries: 1 regional bank Banco de Andalucía -, Banco Popular Hipotecario, specializing
in property financing, bancopular-e for Internet financial
services, Popular Banca Privada for high net worth individuals
(private banking), Banco Popular Portugal S.A. in the
Portuguese market, and the United States banking entity
Totalbank, which operates in Miami Dade County, Florida,
USA.
These six banks are managed under a unified management
criterion common to the Group, since they are majority-owned
by Banco Popular, with which they are consolidated by the full
consolidation method, and all the considerations made in the
Notes to the consolidated financial statements presented in this
same document are therefore applicable to them. The holding
77
ANNUAL REPORT 2008
in Banco Popular Privada is 60%, the remaining 40% being
owned by the Belgian-Luxembourg Dexia-BIL bank. Banco
Popular also owns a majority of the capital stock of Banco de
Andalucía (80%), the remaining shares being held by
numerous shareholders through the stock exchange.
The information for TotalBank was converted to euros at
the exchange rate on the dates of closure.
This section summarizes the financial information of Banco
Popular and its 11 banking subsidiaries, and contains the
financial statements of each.
The following table shows the variation in customer funds
and lending to customers at the end of 2008 and 2007.
(€ thousand)
The public financial statements of Banco Popular are
presented in Note 1 to the consolidated financial statements.
Customer deposits*
Banks
2008
2007
Popular (1) . . . . . . . . . . . . . . . . . . . . . . . . . . 85,886,231
Andalucía . . . . . . . . . . . . . . . . . . . . . . . . . . 10,699,495
Popular Hipotecario . . . . . . . . . . . . . . . . . . .
791,517
Banco Popular-e . . . . . . . . . . . . . . . . . . . . .
496,174
Popular Banca Privada. . . . . . . . . . . . . . . . .
3,363,643
Popular Portugal . . . . . . . . . . . . . . . . . . . . .
5,264,664
TotalBank . . . . . . . . . . . . . . . . . . . . .
816,547
72,089,606
11,315,283
790,237
416,015
3,713,202
3,869,609
655,442
Lending to customers**
%
2008
2007
variation
19.14 73,300,011 51,132,008
(5.44) 11,838,067 11,493,989
2,321,207
2,375,318
0.16
19.26
1,019,483
1,096,331
(9.41)
99,213
121,749
6,237,196
6,004,309
36.05
24.58
952,674
700,400
%
variation
43.35
2.99
(2.28)
(7.01)
(18.51)
3.88
36.02
(1) In 2008, including the banking subsidiaries taken over
* Including deposits from other creditors, debt certificates including bonds, subordinated liabilities and assets managed, at gross amounts without
valuation adjustments.
** Balances of loans and receivables without valuation adjustments
The following table shows the variation in non-performing
balances, credit loss provision and the main risk quality
measurements.
(€ thousand)
Popular
Risk management for these banks in 2008 and 2007, with
the same format as for the Group as a whole, is as follows
Popular
Andalucía Hipotecario Popular-e
Popular
Banca
Privada
Banco
Popular TotalBank
Portugal
491.808
Balance at January 1 . . . . . . . . . . . . . . . . . .
Net variation for the year . . . . . . . . . . . . . . 1.839.860
% increase . . . . . . . . . . . . . . . . . . . . . . .
2.113
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . (434.110)
Balance at December 31 . . . . . . . . . . . . . . . 1.897.558
127.497
458.667
360
(59.775)
526.389
8.338
80.808
969
(1.374)
87.772
64.648
46.351
72
(52.700)
58.299
209.503
38.385
29.319
187.318
(96.110)
91.208
2.573
(41.881)
261.403
89.123
(51.421)
37.702
(267)
(940)
74.880
40.670
(6.613)
34.057
1
(40.840)
22.537
126.097
131.144
104
(21.992)
235.249
3.258
22.789
700
26.047
2.037
115.021
7.902
(169)
(216)
(385)
(1)
(27)
1.624
215.418
(123.993)
91.425
15.918
(13.818)
208.546
26.252
26.252
(4.594)
29.560
44
130
296
(41)
133
Provision for credit losses:
Balance at January 1 . . . . . . . . . . . . . . . . . . 1.392.622
Annual provision:
Gross . . . . . . . . . . . . . . . . . . . . . . . . . . .
956.361
Recoveries . . . . . . . . . . . . . . . . . . . . . . . (650.833)
305.528
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other variations . . . . . . . . . . . . . . . . . . . . .
9.152
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . (234.737)
Balance at December 31 . . . . . . . . . . . . . . . 1.607.825
Memorandum items:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . 95.019.397 13.381.939
Loans transferred to suspense accounts . . . . .
435.008
77.341
2.384.968 1.019.600
82.195
25.347
155.983
26
6.864.276
79.241
996.045
-
Nonperformance (Nonperf. loans/Total risks)
Insolvency (Writeoffs/Total risks) . . . . . . . . . .
Coverage (Credit loss provision/Nonperforming
loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
2,00
0,46
3,93
0,45
3,68
0,06
5,72
5,17
0,09
0,03
3,43
0,32
2,62
-
84,73
49,66
85,31
38,66
1221,05
88,65
113,49
GRUPO BANCO POPULAR
(€ thousand)
Banco
Popular
Portugal
Popular
Banca
Privada
Popular
Andalucía
Popular
Hipotecario
316.319
187.619
59,3
(125.173)
378.765
86.462
72.434
83,8
(31.399)
127.497
13.779
(1.775)
(12,9)
(3.666)
8.338
47.390
40.811
86,1
(23.553)
64.648
196.764
43.940
24.370
3.261
96.440
62.337
(21.806)
40.531
(746)
(27.046)
209.503
11.275
(13.754)
(2.479)
(1)
(3.075)
38.385
37.826
(10.848)
26.978
1
(22.029)
29.320
(1.155)
(67)
(1.222)
(3)
2.036
66.612
(37.369)
29.243
4.493
(15.155)
115.021
Popular-e
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . .
Net variation for the year . . . . . . . . . . . . . . . . . .
% increase . . . . . . . . . . . . . . . . . . . . . . . . . . .
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . .
88.212
53.040
60,1
(15.155)
126.097
43
4
9,3
(3)
44
Provision for credit losses:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . .
983.744
Annual provision:
Gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
290.573
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . .
(67.952)
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
222.621
Other variations . . . . . . . . . . . . . . . . . . . . . . . . .
(14.005)
Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (113.428)
Balance at December 31 . . . . . . . . . . . . . . . . . . . 1.078.932
Memorandum items:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.144.896
Loans transferred to suspense accounts . . . . . . . . .
117.852
12.854.261
26.479
2.472.487
23.948
1.096.443
20.219
179.081
28
6.353.427
93.245
0,99
0,24
164.32
0,34
0,15
460,36
5,90
2,15
45,35
0,02
4.627,27
1,98
0,24
91,22
Nonperformance (Nonperf. loans/Total risks) . . . .
Insolvency (Writeoffs/Total risks) . . . . . . . . . . . . . .
Coverage (Credit loss provision/Nonperforming loans)
0,51
0,17
284.86
(*) In 2007, the figures for TotalBank are not included because the bank was acquired in November of that year,
The main data per share of each Group bank: earnings, dividend, carrying amount and, in the case of listed banks, market price, are shown below:
The following table shows the variation in the headcount
and the number of branches of each bank.
(€ thousand)
Earnings
Banks
Popular . . . . . . . . . . . . . . . . . . . .
Andalucía . . . . . . . . . . . . . . . . . .
Popular Hipotecario . . . . . . . . . . .
bancopopular-e . . . . . . . . . . . . . .
Popular Banca Privada . . . . . . . .
Popular Portugal . . . . . . . . . . . . .
2008
0.73
6.94
9.39
0.05
0.14
0.14
2007
0.73
8.48
181.88
0.26
0.43
0.28
Dividend
2008
2007
0.33
2.92
0.49
2.78
Carrying amount *
2008
3.96
52.10
1.678.58
224
1.93
3.42
2007
2,82
49,61
1.668,94
2,19
1,79
2,39
Closing price
2008
6,08
32,87
2007
11,70
64,40
*After distribution of profit for each year
79
ANNUAL REPORT 2008
The following table shows the variation in the headcount
and the number of branches of each bank.
Headcount
Banks
Popular *. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Andalucía . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Popular Hipotecario . . . . . . . . . . . . . . . . . . . . .
bancopopular-e . . . . . . . . . . . . . . . . . . . . . . . .
Popular Banca Privada . . . . . . . . . . . . . . . . . . .
Popular Portugal . . . . . . . . . . . . . . . . . . . . . . .
Totalbank . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
10,541
1,607
12
109
185
1,276
323
Nº of branches
2007
10,545
1,615
21
131
195
1,241
267
2008
1,899
326
1
6
22
233
14
2007
1,904
311
1
7
21
218
14
* The Popular figures for both years include the figures for Banco de Castilla, Banco de Crédito Balear, Banco de
Galicia and Banco de Vasconia for comparison purposes.
Non-banking finance and service subsidiaries: The Banco
Popular Group includes other specialized companies that
cover all the financial services.
The summarized financial statements of these companies
at 31 December 2008 and 2007 are included after this
section.
The most important are two factoring companies (Popular
de Factoring, S.A. and Popular Factoring, S.A. (Portugal)),
which operate in the Spanish and Portuguese markets,
respectively; two mutual fund management companies
(Popular Gestión SGII, S.A. and Popular Gestión Privada
SGIIC, S.A.); a securities stock exchange member company
(Popular Bolsa SV, S.A.); a pension plan manager
(Europensiones EGFP, S.A.); and a venture capital company
(Popular de Participaciones Financieras S.C.R. de régimen
simplificado, S.A.).
Also included are the financial statements of the insurance
companies: the Spanish Eurovida company, in which the
Group has a 49% holding, is consolidated by the
proportional consolidation method since it is controlled
jointly with Allianz, which has a 51% holding. The
Portuguese Eurovida insurance company is 100% owned
by Grupo Banco Popular. The financial statements of each
of these companies show the total for the company,
regardless of the consolidation method used, so as to
provide an overall view of each company.
These companies are wholly-owned subsidiaries of Banco
Popular, except for the following: the Group’s stake in the
Portuguese factoring company is 99.82%; the stake in
Popular Gestión Privada is 60%, the remaining 40% being
owned by the Dexia-BIL bank; and the holding in
Europensiones, S.A. is 51%, the remaining capital being
held by the German insurance group Allianz AG. Because of
the controlling majority owned by the Banco Popular Group
or, as appropriate, under agreements with the outside
shareholders, these companies are managed under the
Group’s unified management criterion.
Finally, the financial statements of the Popular de Renting
subsidiary, included in “Other companies” are presented.
80
GRUPO BANCO POPULAR
FINANCIAL STATEMENTS OF GROUP BANKS AND COMPANIES
Banco Popular Español, S.A.
Balance Sheets
31.12.08
31.12.07
Banco de Andalucía, S,A,
Balance Sheets
31.12.08
31.12.07
Assets
Cash and balances with central banks . . . . . .
1,472,256
1,468,541
Financial assets held for trading . . . . . . . . . . .
2,044,115
1,413,148
Other financial assets at fair value through profit or
loss
.............................
Available-for-sale financial assets . . . . . . . . . .
9,918,170
6,151,125
Loans and receivables . . . . . . . . . . . . . . . . . . .
84,523,417 68,010,594
Held-to-maturity investments. . . . . . . . . . . . . .
240
428
Changes in the fair value of hedged items in portfolio hedges of interest rate risk ............................
Hedging derivatives . . . . . . . . . . . . . . . . . . . .
341,752
146,146
Non-current assets held for sale . . . . . . . . . .
272,577
45,429
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
1,941,796
1,556,079
Insurance contracts linked to pensions . . . . .
83,163
82,200
Reinsurance assets . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
405,787
348,623
Intangible assets . . . . . . . . . . . . . . . . . . . . . . .
32,835
17,430
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
386,793
319,276
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
160,321
71,853
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
101,583,222 79,630,872
Assets
162,970
168,119
333,165
107,468
loss
.............................
72,496
99,784
12,748,012 11,815,883
147,856
616
73,833
32,191
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
361
361
5,389
7,447
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
62,380
60,466
13
81
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
58,308
60,746
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
17,484
13,726
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
13,682,267 12,366,888
Liabilities
Financial liabilities held for trading . . . . . . . .
1,649,928
810,065
Other financial liabilities at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities at amortised cost . . . . . .
93,385,315 73,883,360
Liabilities associated with non-current assets held
382,341
687,176
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contract liabilities . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
337,735
247,391
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
118,711
118,364
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . .
394,917
146,344
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . .
96,268,947 75,892,700
Shareholders’ Equity. . . . . . . . . . . . . . . . . . . .
5,314,275
3,738,172
Total equity & liabilities . . . . . . . . . . . . . . . . .
101,583,222 79,630,872
Liabilities
326,849
102,076
12,045,622 10,950,232
28,048
104,098
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
33,497
36,744
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
16,160
29,387
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
36,389
36,147
12,486,565 11,258,684
1,195,702 1,108,204
13,682,267 12,366,888
Memorandum Items:
Contingent exposures . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . .
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Income statements
22,927,081
14,228,668
10,377,113
2008
Interest and similar income . . . . . . . . . . . . .
4.987.953
- Interest expense and similar charges . . . . . .
3,388,557
= Net interest income . . . . . . . . . . . . . . . . . .
1,599,396
+ Return on equity instruments . . . . . . . . . . .
145,994
+ Share of results of entities accounted for using
the equity method . . . . . . . . . . . . . . . . . .
+ Fee and commission income . . . . . . . . . . .
690,373
- Fee and commission expense . . . . . . . . . .
110,102
+ Gains or losses on financial assets and liabilities
(net)
.........................
45,860
+ Exchange differences (net) . . . . . . . . . . . . .
43,779
+ Other operating income . . . . . . . . . . . . . . .
50,506
- Other operating expenses . . . . . . . . . . . . . .
19,469
= Gross operating income . . . . . . . . . . . . . . .
2,446,337
- Administrative expenses . . . . . . . . . . . . . . .
751,313
- Depreciation & amortisation . . . . . . . . . . .
69,117
- Provisions to allowances (net) . . . . . . . . . . .
21,818
- Asset impairment losses (net) . . . . . . . . . . .
645,874
= Net operating profit . . . . . . . . . . . . . . . . . .
958,215
- Losses for impairment of other assets (net) . .
+ Gains/(Losses) on disposal of assets not class.
as non-current assets held for sale . . . . . . . . .
204,920
- Negative difference on consolidation . . . . .
+ Gains/(Losses) on non-current assets held for
sale not classified as discontinued operations ..
(21,008)
= Profit before tax . . . . . . . . . . . . . . . . . . . .
1,142,127
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
250,391
- Mandatory transfer to welfare funds . . . . . .
= Profit for the period from ongoing operations . . . 891,736
- Profit/Loss from discontinued operations (net) . . .
= Consolidated net profit for the year . . . . . .
891,736
23,335,410
11,324,777
9,539,793
2007
3,543,889
2,306,268
1,237,621
207,192
610,967
107,779
41,283
38,212
40,094
16,766
2,050,824
602,525
59,789
14,126
182,796
1,191,588
129
6,731
24,821
1,223,011
332,040
890,970
890,970
Income statements
(net)
.........................
- Losses for impairment of other assets (net). .
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
= Profit for the period from ongoing operations . . .
1,559,548
1,426,048
984,991
1,377,830
1,642,767
1,321,574
2008
2007
792,311
455,442
336,869
756
664,805
348,133
316,672
701
117,162
13,245
118,163
14,361
6,531
4,268
8,336
3,315
457,362
136,229
7,522
2,763
104,271
206,577
-
14,283
4,424
10,006
3,614
446,274
129,147
7,426
(270)
31,368
278,603
85
12,820
-
4
-
(7,212)
212,185
61,490
150,695
150,695
(3,599)
274,923
90,111
184,812
184,812
81
ANNUAL REPORT 2008
Banco Popular Portugal, S,A,
Balance Sheets
Assets
loss
.............................
Loans and receivables. . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity . . . . . . . . . . . . . . . . . . . .
31.12.08
Balance Sheets
31.12.07
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
194,530
14,586
97,080
7,498
31,568
355,486
7,284,615
-
30,851
153,859
6.560,127
-
7
170,987
44,517
93,234
119,334
1,557
45,845
100,278
8,456,544
84,935
50,414
90,242
120,060
1,134
25,334
16,069
7,237,603
9,533
1,055
7,684,275
6,678,250
-
-
98,579
9,630
13,471
7,815,488
641,056
8,456,544
101,783
24,012
11,658
6,816,758
420,845
7,237,603
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
629,314
927,288
814,693
398,799
1,764,704
563,723
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
82
Banco Popular Hipotecario, S,A,
2008
2007
442,190
292,193
149,997
3,121
381,609
228,552
153,057
2,732
38,620
6,079
43,519
6,811
(8,829)
3,118
1,689
2,029
179,608
93,047
7,977
738
91,641
(13,795)
1
56,435
(738)
1,777
1,160
1,053
193,643
83,133
9,619
535
30,666
69,690
-
(6,904)
(5,903)
35,735
9,485
26,250
26,250
63,787
13,715
50,072
50,072
Income statements
31.12.08
31.12.07
107
-
109
-
2,075
2,259,337
-
2,032
2,364,632
-
37,206
520
98
17,016
7,688
2,324,047
348
229
135
10,740
4
2,378,229
-
-
2,083,110
2,119,634
142
19,014
3,407
549
1,593
2,088,801
235,246
2,324,047
1,233
4,123
272
2,144,276
233,953
2,378,229
64,526
220,478
890
98,315
310,634
1,058
2008
2007
140,481 127,456
100,186
91,172
40,295
36,284
1,316
2,181
10
19
(net)
.........................
(4)
183
282
36
79
41,748
38,645
1,835
2,155
37
39
2,178
(26)
35,739
(1,856)
1,959
38,333
(26)
13
1,933
38,346
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
581
12,863
1,352
25,483
1,352
25,483
GRUPO
GRUPO
BANCO
BANCO
POPULAR
POPULAR
bancopopular-e, S,A,
Popular Banca Privada, S,A,
Balance Sheets
Balance Sheets
31.12.08
Assets
loss
.............................
Changes in the fair value of hedged items in portfolio hedges of interest rate risk............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
Changes in the fair value of hedged items in portfolio hedges of interest rate risk............................
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
+ Gains/(Losses) on disposal of assets not class,
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
3,459
20
4,389
8
6,684
1,117,923
-
6,047
1,069,890
-
8,381
679
5
1,403
283
1,138,837
802
27
266
42,200
1,123,629
18
6
1,067,278
1,006,354
149
5,414
164
110
1,631
1,069,350
69,487
1,138,837
162
255
43,416
1,055,607
68,022
1,123,629
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
169
1,887,745
7,395
172
2,204,872
8,582
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
103,001
46,294
56,707
-
95,905
39,059
56,846
-
17,459
7,565
15,119
9,177
(1)
11
313
329
66,595
20,517
179
(1)
43,720
2,180
-
1
18
551
306
63,052
25,741
192
100
25,350
11,669
1
Income statements
-
-
2,180
654
1,526
1,526
11,668
3,733
7,935
7,935
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.07
11,978
3,461
6,281
-
7,082
27,734
1,713,372
185,403
61,961
1,356,786
-
4,670
4,133
3,366
1
2,489
13,448
1,977,137
16,986
4,127
3,719
7
1,350
22,007
1,473,224
2,751
-
1,667,986
1,354,553
257,266
68,015
306
68
4,745
1,933,122
44,015
1,977,137
302
1,405
8,116
1,432,391
40,833
1,473,224
59,274
18,883
2,121,721
58,010
86,128
2,568,845
2008
2007
80,892
70,546
10,346
982
41,511
31,482
10,029
508
22,487
7,156
(3,848)
31,504
11,278
199
467
105
1,125
22,258
17,573
929
34
(373)
4,095
-
770
90
672
31,150
17,354
766
43
(1,156)
14,143
-
-
-
4,095
893
3,202
3,202
14,143
4,447
9,696
9,696
83
ANNUAL REPORT 2008
TotalBank (*)
Balance Sheets
31.12.08
Assets
13,845
loss
.............................
338,250
954,312
136
113
256
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
16,481
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
28,217
4,732
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
7,132
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
1,363,474
Liabilities
1,205,258
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
2,575
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
2,722
1,210,671
152,803
1,363,474
Memorandum Items:
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
9,828
299,044
698,314
134
108
256
7,292
9,309
2,305
1,520
1,028,110
932,022
145
4,375
2,907
939,449
88,661
1,028,110
43,371
175,229
9,458
170,525
2008
71,106
27,307
43,799
313
2007
10,371
4,738
5,633
77
5,344
20
728
2
13
3
59
28
6,483
3,919
128
2,436
-
(21)
-
-
(9,315)
(4,147)
(5,168)
(5,168)
2,436
884
1,552
1,552
(*) The 2007 income statement includes the results generated from the date of
acquisition.
84
Balance Sheets
31.12.07
(404)
(6)
492
482
49,036
27,077
5,001
26,252
(9,294)
-
Popular de Factoring, S,A,
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
426
-
418
-
510,374
-
364,769
-
4,225
23
41
1,190
927
517,206
4,225
26
52
1,103
2
370,595
-
-
456,524
-
318,894
-
500
1,931
1,199
460,154
57,052
517,206
633
656
75
320,258
50,337
370,595
5,521
11,402
2008
20,774
13,800
6,974
-
2007
12,130
7,424
4,706
-
5,796
1,784
6,086
1,518
(6)
286
23
11,243
2,765
55
(133)
1,355
7,201
-
(5)
154
37
9,386
2,148
30
72
531
6,605
-
36
-
(48)
-
7,237
2,167
5,070
5,070
6,557
2,205
4,352
4,352
GRUPO BANCO POPULAR
Popular Factoring, S,A (Portugal)
Balance Sheets
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
Popular de Renting, S,A,
Balance Sheets
31.12.08
31.12.07
-
-
188,984
193,144
-
306
8
218
30
189,546
323
336
12
311
40
194,166
-
-
146,301
152,554
-
-
354
741
147,396
42,150
189,546
285
103
658
153,600
40,566
194,166
121,372
187,383
2008
31.12.07
31.12.08
2007
13,341
6,326
7,015
-
12,571
5,906
6,665
-
56
485
40
574
148
18
6,716
2,550
56
13
4,097
-
241
55
6,317
2,398
132
190
3,597
-
-
165
-
4,097
1,003
3,094
3,094
3,762
748
3,014
3,014
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
-
-
-
-
7
1,391
30,539
31,937
8
2
2,474
33,769
36,253
-
-
23,556
27,245
-
-
7
308
606
24,477
7,460
31,937
21
949
711
28,926
7,327
36,253
Income statements
2008
2007
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
3,165
1,637
1,528
-
4,550
1,316
3,234
-
-
-
9,048
9,887
689
589
100
-
5,425
7,480
1,179
488
691
-
95
-
12
-
195
83
112
112
703
284
419
419
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
85
ANNUAL REPORT 2008
Popular Bolsa, SV, S,A,
Balance Sheets
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
86
31.12.08
Popular Gestión SGIIC, S,A,
Balance Sheets
31.12.07
-
-
1
8,857
-
1
18,824
-
19
1,473
63
10,413
32
9
41
18,907
-
-
677
1,541
-
-
1
122
800
9,613
10,413
1,233
1,323
4,097
14,810
18,907
3,483
3,490
2008
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
579
579
-
1,021
1,021
98
8,431
3,870
14,565
6,327
7
5
66
5,086
1,437
13
3,636
-
3,544
46
12,855
1,364
13
11,478
-
-
-
3,636
1,091
2,545
2,545
11,478
3,714
7,764
7,764
31.12.07
-
-
187,910
-
9,849
172,700
-
7,640
121
232
31
36
2,535
198,505
7,640
259
29
39
14,236
204,752
-
-
4,764
13,569
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
-
-
121
1,592
357
6,834
191,671
198,505
3
4,297
52
17,921
186,831
204,752
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
415,582
154,357
2008
2007
Income statements
2007
31.12.08
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
8,174
3
8,171
-
6,976
3
6,973
-
96,236
77,566
132,502
106,147
(256)
15
574
26,026
4,380
48
(15)
21,613
6
98
24
33,408
3,960
49
29,399
-
-
21,613
6,475
15,138
15,138
29,399
9,555
19,844
19,844
GRUPO BANCO POPULAR
Popular Gestión Privada, SGIIC, S,A,
Eurovida, S,A,
31.12.,07
Balance Sheets
Balance Sheets
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum Items:
Assets managed . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
-
-
7,535
-
7,940
-
44
22
13
1,307
8,921
6
22
13
1,928
9,909
-
-
1,593
958
-
-
45
186
1,824
7,097
8,921
971
289
2,218
7,691
9,909
59,278
67,387
2008
2007
258
258
-
293
293
1
9,388
7,065
13,819
10,470
1
2,580
2,017
13
550
-
28
3,615
1,990
7
1,618
-
-
(4)
-
550
165
385
385
1,614
526
1,088
1,088
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
29,824
56,249
31,182
572,837
280,012
-
2,594
656,836
95,067
-
3,473
5,194
73
86
5,302
2,027
930,010
4,593
89
15
6,875
2,314
824,632
-
-
27,973
347
24,085
321
-
-
793,518
157
10,824
3,753
836,572
93,437
930,009
722,219
157
8,847
3,679
759,308
65,324
824,632
Income statements
2008
40,402
40,402
8
16
(298)
(net)
.........................
251,794
234,469
57,421
6,857
31
50,533
50,533
15,139
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
35,394
35,394
2007
38,860
1,879
36,981
267,961
245,936
59,006
8,087
25
50,894
50,894
16,451
34,443
34,443
87
ANNUAL REPORT 2008
Eurovida (Portugal), S,A,
Balance Sheets
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
88
Balance Sheets
31.12.07
31.12.08
7,826
323,790
306,459
32,615
109,889
-
154,230
127,498
17,676
-
12,530
2,447
119
253
3,299
113,949
589,386
12,530
1,511
199
170
2,196
4,314
644,114
-
-
120,813
4,217
-
265,683
4,172
-
428,723
2,188
6,151
562,092
27,294
589,386
338,573
4,484
5,311
618,223
25,891
644,114
2008
2007
16,954
489
16,465
4,854
7,515
179
7,336
3,322
6,310
209
8,846
2,328
(16,018)
340
18,392
14,835
15,299
5,183
166
3,254
6,696
-
(6,591)
520
17,028
15,024
13,109
5,165
283
7,661
-
-
-
6,696
1,800
4,896
4,896
7,661
2,135
5,526
5,526
Europensiones, EGFP, S,A,
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
31.12.07
31.12.08
-
-
374
51,604
-
465
51,969
-
158
105
265
248
4,017
56,771
110
304
122
4,856
57,826
-
-
851
1,099
-
-
294
4,247
1,207
6,599
50,172
56,771
220
4,886
786
6,991
50,835
57,826
Income statements
2008
2007
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
2,142
2,142
-
1,915
1,915
38
51,630
9,085
54,987
10,944
44,687
4,690
108
(9)
39,898
-
936
46,932
4,448
93
42,391
-
-
-
39,898
11,969
27,929
27,929
42,391
13,778
28,613
28,613
GRUPO BANCO POPULAR
Popular de Participaciones Financieras
S,C,R, de régimen simplificado, S,A,
Balance Sheets
Assets
loss
.............................
Investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk provisions . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Welfare fund . . . . . . . . . . . . . . . . . . . . . . . .
Income statements
(net)
.........................
- Income tax . . . . . . . . . . . . . . . . . . . . . . . . .
31.12.08
31.12.07
1
-
20,276
17,413
-
11,095
25,799
-
8,950
71
46,711
8,950
45,844
-
-
135
233
-
-
629
764
45,947
46,711
424
657
45,187
45,844
2008
759
759
434
2007
986
986
261
-
-
1,193
109
1,084
-
1
1,246
117
1,129
-
-
551
-
1,084
207
877
877
1,680
295
1,385
1,385
89
ANNUAL REPORT 2008
90
BANCO POPULAR GROUP
2008 CORPORATE GOVERNANCE REPORT
91
CORPORATE GOVERNANCE REPORT FOR 2008
92
BANCO POPULAR GROUP
BANCO POPULAR ESPAÑOL, S.A.
A STRUCTURE OF OWNERSHIP
A.1. Complete the following table on the capital stock of the company:
Date of last change
11-10-2008
Capital stock (€)
Number of shares
Number of voting rights
1,235,740,551
1,235,740,551
123,574,055.10 €
Indicate whether or not there are various classes of stock with different associated rights:
Yes
Number of shares
Class
No
Unit number of
voting rights
Unit par value
Different rights
The economic rights corresponding to the 20,308,011 shares issued to cover the swap ratio for the absorption of Banco de Castilla, S.A., Banco de
Crédito Balear, S.A., Banco de Galicia, S.A. and Banco de Vasconia, S.A. by Banco Popular Español, S.A. have been made equal to those
corresponding to the remainder of the shares making up capital stock as from January 12, 2009.
A.2. Detail the direct and indirect owners of significant shareholdings in the company at year end, excluding the directors:
Name of shareholder
Number of direct
voting rights
Topbreach Holding, B.V.
Unión Europea de Inversiones, S.A.
Casa Kishoo, S.A.
94,177,632
65,876,857
59,991,556
Number of indirect
voting rights (*)
9,975,691
780,000
% of total
voting rights
7.621
6.138
5.066
(*) Through:
Detail the most significant changes in the shareholder structure during the year:
Name of the shareholder
Transaction date
Transaction
description
Casa Kishoo, S.A.
07-23-2008
5% of voting rights exceeded
Invernima, S.L.
10-31-2008
Stake reduced to under 3%
of voting rights
93
A.3. Complete the following tables on directors of the company that hold voting shares in the company:
Name of the director
Number of direct
voting shares
Number of indirect
voting shares (*)
Allianz, SE
Aparicio, Francisco
Asociación de Directivos de BPE
Ferreira de Amorim, Americo
Gancedo, Eric
Herrando, Luis
Higuera, Roberto
Lucía, José María
Molins, Casimiro
Montuenga, Luis
Morillo, Manuel
Nigorra, Miguel
Osuna, Nicolás
Revoredo, Helena
Rodríguez, José Ramón
Ron, Ángel
Santana, Vicente
Solís, Miguel Ángel
Tardío, Vicente
10
380.560
40.000
500
229.228
3.950
67.000
14.108
22.000
83.479
50
517.003
0
0
146.364
62.554
11.000
16.236.760
763.805
15.690
116.197.622
0
0
94.177.632
131.307
4.000
0
0
0
0
0
2.608.747
34.218.232
5.671.840
132.402
0
1.403.140
159.682.473 (1)
308.935
0
0,03
0,00
7,62
0,03
0,00
0,01
0,00
0,00
0,01
0,00
0,25
2,77
0,46
0,02
0,01
0,11
14,24
0,09
0,00
Total (direct and indirect)
18,594,061
414,536,330
35.05
% of total voting
9,40
Voting rights habitually represented (2)
5.57
Total rights
40.62
(1) Indirect shareholding owned by Sindicatura de Accionistas de BPE: This includes the shares held at December
31, 2008 by Unión Europea de Inversiones, S.A. which are either directly or indirectly syndicated, representing
5.421% of capital stock. 600,482 shares held directly by other Directors have been deducted. Without this
deduction, Sindicatura’s indirect shareholding amounts to 160,282,955 shares and its total shareholding to
176,519,715 shares (14.285%).
(2) Shares represented: This table does not include the breakdown of shares habitually represented by Board
Members, which amount to approximately 5.57% of capital stock. This percentage includes most notably the
following shareholdings: 1.20% owned by the Gancedo family and represented by Mr. Eric Gancedo; 1.04%
represented by Mr. Luis Montuenga; 0.83% owned by the Solis family and represented by Mr. Miguel Ángel de
Solís; 0.75% represented by Mr. Vicente Santana.
94
BANCO POPULAR GROUP
(*) Through:
Director’s name:
Allianz, SE
Name of the direct
owner of the shareholding
Number of direct
voting rights
Dresdner Holding B.V. Amsterdam
Otros
Total:
% of total voting rights
77,829,354
38,368,268
116,197,622
6.298
3.105
9.403
Director’s name:
D. Americo Ferreira de Amorim
Name of the direct
Number of direct
voting rights
Total:
94,177,632
94,177,632
7.621
7.621
Director’s name:
SINDICATURA DE ACCIONISTAS DE BPE
Name of the direct
Number of direct
voting rights
92,685,368
66,997,105
159,682,473
7.500
5.421
12.921
Pluralidad de inversores particulares
Total:
% Total voting rights held by the Board of directors
35.05% (**)
(**) This percentage does not include the shares habitually represented by Board Members, amounting to
approximately 5.57% of the capital stock.
Total capital stock represented by the Board of Directors, taking into account directly and indirectly owned and
habitually represented shares, amounts to 40.62%.
95
Complete the following tables about Board members holding rights on company shares:
Director’s name
Number of
direct
option rights
-
Number of
indirect
option rights
-
-
Equivalent
number
of shares
% of total
voting rights
-
-
A.4. If there are family, commercial, contractual or corporate relationships between owners of significant shareholdings, to
the extent that the company has knowledge of them, detail them below unless they are scantly relevant or arise from
ordinary commercial transactions:
Related entity’s name
Topbreach Holding, B.V. y Unión Europea
de Inversiones, S.A.
Type of
relationship
Corporate
Brief description
Topbreach Holding, B.V. owns a significant stake
in Unión Europea de Inversiones, S.A.
A.5. If there are commercial, contractual or corporate relationships between the owners of significant shareholdings and
the company, detail them below unless they are scantly relevant or arise from ordinary commercial transactions:
Related entity’s name
96
Type of
relationship
Brief description
Popular de Mediación, S.A. (wholly
owned by BPE) and Allianz
Contractual
Marketing of Allianz’s general
insurance policies through the banks
pertaining to Banco Popular Group.
Banco Popular - Allianz
Contractual
Contractual Externalization of pension
commitments to serving and retired
staff.
Grupo Banco Popular - Allianz
Contractual
Contractual Externalization of pension
commitments to serving and retired
staff.
Banco Popular - Allianz
Corporate
Eurovida, S.A., Cía Seguros y
Reaseguros, a life insurance company
in which the stake held is 49%–51%
and Europensiones, S.A., a pension
fund, in which the stake is 51%-49%.
BANCO POPULAR GROUP
A.6. Indicate whether any pact between shareholders affecting the company have been reported in accordance with the
provisions of Article 112 of the Stock Market Act. If any, provide a brief description and list the shareholders bound by
the pact:
Yes
No
% of capital stock
affected
Parties to the pact
Multiple minority shareholders
(2,619 a 31-12-2008)
14.285
Brief description of the pact
A gentleman’s agreement by
which the syndicated shareholders are bound for such
time as they freely decide
Indicate whether or not there are any pacts regarding shares between shareholders of the company of which the
company is aware:
Yes
No
% of capital stock
affected
Parties to the pact
-
Brief description of the pact
-
-
State below any change in or termination of such pacts or agreements or share pacts during the year:
A.7. State whether there is any individual or legal entity that exercises or may exercise control over the company in the
terms of Article 4 of the Securities Market Law. If so, indicate them:
Yes
No
Name
Observations
-
-
A.8. Complete the following tables about the company’s treasury stock:
At year end:
Number of directly
owned shares
Number of indirectly
owned shares (*)
% of total capital stock
1,987
10,114,385
0.82
97
(*) Through:
Name of the direct owner
of the holding
Number of directly owned
Finespa, S.A.
Inmobiliaria Viagracia, S.A.
Gestora Popular, S.A.
Total:
277,332
640,610
9,196,443
10,114,385
Detail the significant variations, as defined in Royal Decree 1362/2007, during the year:
Date reported
16-10-2008
Total direct shares
acquired
11,101,304
Total indirect shares
acquired
1,139,207
Capital gain/(Loss) on treasury stock sold during the
period
% total of
capital stock
1%
957,130.02 €
Treasury stock transactions are normally of minor amounts and form part of the ordinary operations of the Bank’s
Treasury area.
A.9. Detail the conditions and the period(s) of the authorization(s) granted by the Shareholders’ Meeting to the Board of
Directors for the purchases or sales of treasury stock.
The General Shareholders’ Meeting held on May 30, 2008 authorized the Bank’s Board of Directors to acquire treasury
stock, in the forms permitted by law, subject to the limits and requirements stated below:
* That the face value of the shares acquired, when added to that of those already owned by the Bank and its
subsidiaries, does not at any time exceed 5% of the capital stock.
* That the Bank and, where appropriate, the acquiring subsidiary, have the capacity to record the restricted reserve
prescribed by law for such cases without reducing the capital or the legal reserve or the reserves which are restricted
pursuant to the bylaws.
* That the shares acquired have been fully paid.
* That the acquisition price is not lower than the face value or 20% higher than the market price at the Stock
Exchange session on the day of purchase.
This authorization, which is granted for the maximum legal period of 18 months, is without prejudice to the application
of the cases addressed in the law as of free acquisition.
The Board of Directors is further authorized to dispose of the treasury stock acquired or that may be acquired in the
future and to cancel the shares of treasury stock against equity and to make the consequent capital reduction and
bylaw amendment, for such amount as may at any time be desirable or necessary, up to the maximum of the treasury
stock held at any time, on one or several occasions and always within a maximum period of 18 months from the date
of the Shareholders’ Meeting.
98
BANCO POPULAR GROUP
A.10. Indicate the legal and bylaw restrictions, if any, on the exercise of voting rights and the legal restrictions on the
purchase or sale of ownership interests in the capital stock.
Indicate the legal and bylaw restrictions, if any, on the exercising of voting rights:
Yes
No
Maximum percentage of voting rights that may be
exercised by a shareholder due to legal restrictions
Indicate whether or not there are legal and bylaw restrictions on the exercising of voting rights:
Yes
No
Maximum percentage of voting rights that may be
exercised by a shareholder due to bylaw restrictions
10%
Describe any legal and bylaw restrictions on the exercising of voting rights
The Bylaws state that the maximum number of votes that may be cast by any one
shareholder or companies belonging to any one group is 10% of the votes to be cast at the
Shareholders’ Meeting concerned.
Indicate whether or not there are legal restrictions on the purchase or sale of ownership interests in capital stock:
Yes
No
Describe the legal restrictions on the purchase or sale of ownership interests in capital
stock
Legal restrictions on the purchase or sale of ownership interests in capital stock.
Articles 57, 58 and 60 of Law 26/1988 on Discipline and Intervention of Credit Institutions
establishes a procedure for prior reporting to the Bank of Spain of the acquisition or sale of
a significant holding in a Spanish credit institution or the increase or decrease thereof in
excess of the percentages of capital stated in Article 57.2. The Bank of Spain will have a
maximum period of three months from the date of its being notified to oppose, if
appropriate, the intended acquisition.
A.11. Indicate whether or not the Shareholders’ Meeting has adopted any measures to neutralize any public acquisition offer
in accordance with the provisions of Law 6/2007:
Yes
No
Explain any measures approved and the terms under which the restrictions would become inefficient:
99
B STRUCTURE OF GOVERNANCE OF THE BANK
B.1
Board of Directors
B.1.1. Maximum and minimum number of directors per the bylaws:
Maximum number of directors
Minimum number of directors
20
12
B.1.2. Complete the following table with information regarding members of the Board:
Name
Allianz, SE
Aparicio, Francisco
Ferreira de Amorim, Americo
Gancedo, Eric
Herrando, Luis
Higuera, Roberto
Title
First appointed
Herbert Walter
Director
Secretary
Director
Director
Director
Vicepresident
Vicepresident and
CEO
Director
Director
Director
Director
Director
Director
Director
Director
Chairman
12-15-2008
12-18-2003
11-27-1980
05-27-2003
06-20-2002
06-21-2001
05-30-2008
12-15-2008
Board
05-30-2007 Shareholders Meeting
05-30-2008
“
05-30-2008
“
05-30-2008
“
05-30-2007
“
09-11-2008
“
07-18-2007
11-24-1987
12-01-1987
06-23-1999
12-19-1974
05-30-2007
05-30-2007
12-01-1987
Consejero
03-14-2002
Presidente
10-19-2004
05-27-2003
06-28-1988
12-18-1996
12-19-2007
05-30-2008
05-30-2008
05-30-2008
05-30-2008
05-30-2008
05-30-2007
05-30-2007
05-30-2008
05-30-2008
“
“
“
“
“
“
“
“
“
05-30-2008
05-30-2007
05-30-2008
05-30-2008
“
“
“
“
Roberto Higuera
Lucia Aguire, José María
Molins, Casimiro
Montuenga, Luis
Morillo, Manuel
Nigorra, Miguel
Osuna, Nicolás
Revoredo, Helena
Ron, Ángel
Santana, Vicente
Tardío, Vicente
Director
Director
Director
Director
José María Mas
Total number of directors
Last appointed
20
Directors who left the Board during the year:
100
Election
procedure
Representative
Name
Board position at the time
Herbert Walter
Domanial
Date of
departure
12-15-2008
BANCO POPULAR GROUP
B.1.3. Complete the following tables about Board members and their classification:
EXECUTIVE DIRECTORS
Commission proposing
Appointment
Name
Profile
Ron, Ángel
Appointments, Remuneration, Corporate
Governance and Conflicts of Interest
Committee
Chairman
Degree in Law.
Has held various posts in the Bank and at Spanish
financial entities since 1984; appointed General
Manager of the Bank in 1998, CEO in March 2002.
On October 19, 2004 he was appointed Chairman.
Higuera, Roberto
Committee
Vice-chairman and CEO
Aeronautical engineer
Professional activity has been mainly with the
Banco Popular, where he has held, among other
positions, those of Manager of International
Activities, General Manager of Banco Popular
Hipotecario, and Chief Financial Officer. He was
appointed Vice-chairman in May 2008 and CEO in
September 2008.
(representative Roberto Higuera)
Committee
Director
Associate. It gathers those employees part of the
management team who have decided to join the
association.
Aparicio, Francisco
Committee
Total number of Executive Directors
% of the total Board
Secretary
In practice since 1979.
On joining the Bank he ceased to be a partner of
an international law firm, of which he is still “off
counsel” but unpaid.
4
20%
101
EXTERNAL DOMANIAL DIRECTORS
Name
Appointment
Name of significant
shareholder or proposed
appointment
Profile
Ferreira de Amorim,
Americo
Appointments,
Remuneration, Corporate
Governance and Conflicts of
Interest Committee
Topbreach Holding,
B.V.
Businessman.
Chairman of the Amorim Group, founded in 1870, world
leader in the cork industry, with substantial
investments in the property, tourism and financial
areas. The Amorim Group operates in 32 countries.
Montuenga, Luis
Appointments,
Interest Committee
Unión Europea de
Inversiones, S.A.
Businessman.
He has held executive and corporate posts at chemical
and pharmaceutical companies Ibérica, Naarden
Internacional y Productos Orgánicos, S.A. He plays and
active role in social-cultural projects such as the Youth
Foundation.
Osuna, Nicolás
Appointments,
Interest Committee
Invernima, S.L.
Businessman.
He is the Chairman of Noga Group, which is active in
the real estate, hotel, agriculture and forestry sectors. It
is one of the top three real estate development
companies in Spain and through its subsidiary Hoteles
Center; it has built and directly manages a hotel chain.
Sindicatura de
Accionistas de BPE
(representative José Mª
Mas)
Appointments,
Interest Committee
102
Association. Groups together small Bank shareholders,
which allows them to be represented on the Board of
Directors.
José María Mas is the founding partner of MC&Co
Asesores Legales, and has formed part of the Board of
Directors of several companies such as, Banco
Zaragozano and the Secretary to the Board of
Telefónica. Among other companies, he is currently a
Director of SOS Cuétara, Autopistas Aumar and Realia.
BANCO POPULAR GROUP
EXTERNAL DOMANIAL DIRECTORS
Name
Appointment
Name of significant
shareholder or proposed
appointment
Profile
Tardío, Vicente
Appointments,
Interest Committee
Grupo Allianz
Degree in Economics and Actuary, received from
the University of Barcelona. He is the Chairman and
CEO of Allianz Seguros and a member of the
International Executive Committee of Allianz Group.
Previously he held the position of CEO at Allianz
Ras (1995-1998) and Vice Chairman and CEO of
Allianz Seguros (1999-2005).
Allianz, SE
(representative Herbert
Walter)
Appointments,
Interest Committee
Grupo Allianz
Allianz SE is one of the world’s largest insurers and
providers of financial services, in addition to being
one of the first S.E. (Societas Europaea) companies.
Founded in 1890, it currently has a presence in
over 70 countries, with more than 170,000
employees. Allianz offers its customers worldwide which number more than 80 million - a broad
range of services in the Non-life, Life and Health
insurance, banking and Asset management areas.
Mr. Walter has a PhD in Business Administration
Since 1982 he has held several management
positions in various companies, and at Deutsche
Bank AG.
Since March 2003 he has been a member of the
Board of Directors of Allianz AG in Munich and
Chairman of the Board of Directors of Dresdner
Bank AG. He is also a Director of Banco Portugués
de Investimento.
Total number of Independent Directors
% of total Board
6
30%
103
EXTERNAL INDEPENDENT DIRECTORS
Name
Profile
Gancedo, Eric
Degree in Law. Businessman.
Active in the fields of trade, wine-making and property.
He is a member of the Bank’s founding family which has always been represented on the Board.
Herrando, Luis
Vice-chairman. Doctorate in industrial engineering and economics degree.
He commenced his professional career at Babcock & Wilcox, and ion 1967 he joined Induban
(Banco Vizcaya). He was CEO at Aurora Group (78-93), now AXA. Director of companies in the
insurance, property and venture capital fields. Honorary President of the Asociación para el
Progreso de la Dirección (APD) in northern Spain. Chairman of the Fundación del Instituto de
Educación e Investigación and of the Fundación de la Escuela de Ingenieros de Bilbao.
Morillo, Manuel
Professional
With long business experience, particularly in the textile, real estate and construction sectors, he
has played a relevant role to develop assistance projects in co-operation with the Generalitat de
Cataluña and the national government. He habitually represents the holding in Banco Popular’s
capital stock of 0.31% of the Carmen y Mª José Godó Foundation, of which he is Chairman.
Revoredo, Helena
She holds a degree in Business Administration from Universidad Católica de Buenos Aires and a
PADE masters from IESE in Madrid. From 2004 she is the Chairwoman of the Security Company
Prosegur and Euroforum, and since 2006 she is a member of the International Consultation
Committee at IESE. She is also the Chairwoman of the Prosegur Foundation since it was founded
in 1997. Between 1997 and 2004, she was the Vice Chair of Prosegur and a member of the
Executive Board at the Family Business Institute, and between 2002 and 2005 she was the Chair
of Adefam (Family Business Development Association in Madrid).
Rodríguez, José
Ramón
Engineer and Businessman.
In addition to his professional activity as a Civil Engineer, he has held several executive posts
and directorships at companies in the textile, food and construction sectors.
Santana, Vicente
Businessman.
Degree in Law. Stockbroker. He commenced his career in 1971 as a stockbroker at the Barcelona
Stock Exchange and between 1983-1989 continued as a stockbroker at the Madrid Stock
Exchange. Director of Sociedad Rectora de la Bolsa de Madrid 1991-1994.
Solís, Miguel A. de
Businessman.
Very active business involvement, particularly in the real estate, agriculture/livestock and
tourism industries.
% of total Board
104
7
35%
BANCO POPULAR GROUP
OTHER EXTERNAL DIRECTORS
Name
Appointment
Profile
Molins, Casimiro
Appointments, Remuneration,
Businessman.
Corporate Governance and Conflicts of In addition to his activity at Cementos Molins, S.A. and at
Interest Committee
various real estate and construction companies in Spain and
America, between 1962 and 1983 he was the Chairman of
Banco Atlántico.
has a degree in Business Studies. He is coordinating Lecturer
Corporate Governance and Conflicts of of the “Risks Analysis” course in the CUNEF Master’s Degree
Interest Committee
programme. He joined Banco Popular in 1965 and has held a
variety of positions as Investments Director of the Subsidiary
Banks, Assistant Director General of Banco de Andalucía, head
of the Treasury area in Banco Popular and General Risks
Manager for the Group. He held office as the Bank’s CEO from
July 2007 through to September 2008.
Nigorra, Miguel
Businessman and professional
Corporate Governance and Conflicts of Qualified Property Registrar; apart from posts in the Group,
Interest Committee
has been active in public bodies (Palma de Mallorca Harbor
Works Board) and in companies (Mare Nostrum and
Inmobiliaria Urbis).
% of total Board
3
15%
State the reasons why they may not be regarded as domanial or independent directors and their relations with the
company, its directors or its shareholders:
Name
Reasons
Associated company, executive or
shareholder
Molins, Casimiro
His shareholding percentage is not sufficient to make him a Unión Europea de Inversiones, S.A.
Domanial director. He cannot be classed as an independent
director in view of his family tie to a Director of Union
Europea de Inversiones, S.A., which is a significant
shareholder of the bank.
Nigorra, Miguel
Owing to the absorption of Banco de Crédito Balear, S.A. by Unión Europea de Inversiones, S.A.
Banco Popular Español, S.A., Mr. Nigorra no longer owns
the significant interest which he held in that company; at
the same time, his holding in the capital of Banco Popular
is not sufficient to make him a domanial director.
He cannot be classed as an independent director in view of
his family tie to a Director of Union Europea de
Inversiones, S.A., which is a significant shareholder of the
entity, and because his directly-owned shares are
syndicated within Syndicatura de Accionistas de BPE.
Mr. Lucía has resigned from his position as CEO, does not
perform senior management duties and is not an employee
of the Bank, and for these reasons cannot continue to be
classed as an Executive. His shareholding percentage is not
sufficient to make him a Domanial director.
105
State any changes that have taken place during the period in status of each director:
Name
Nigorra, Miguel
Date of change
Prior status
Current status
12-15-2008
09-11-2008
Domanial
Executive
Other External
Other External
B.1.4. State any reasons for which domanial directors have been appointed at the request of shareholders with less
than a 5% stake in capital stock.
Reason
Name
State whether or not there have been formal requests for positions on the Board from shareholders whose
interest is equal to or exceeds that of others who have been designated Domanial Directors. If appropriate,
explain why such requests were denied.
Yes
Name of the shareholder
Ramchand Wadhumal Bhavnani
No
Explicación
At the date of the application, in September 2008,
there were no vacancies on the Board and the
request could not be met for this reason.
B.1.5. State whether or not any Director has left the position before the end of the term, if the Director provided an
explanation, and how, to the Board and, in the event this was done in writing to the entire Board, explained at
least the reasons provided:
Name
Walter, Herbert
Reason
Internal restructuring in the Allianz Group. He continues to be the natural person representing the
Director Allianz SE.
B.1.6. State the powers, if any, delegated to the CEO:
Name
Ron Güimil, Angel
Higuera, Roberto
Brief description
President
Vice-chairman and CEO
Without prejudice to the differing scope of action corresponding to them in the Board, each of them exercises
his powers jointly and severally. For details of the attributional scope of the Chairman of the Executive
Committee and of the CEO, see point B.10.21.
The powers delegated include all the faculties of the Board of Directors, except those which cannot legally be
delegated and those that cannot be delegated in accordance with Article 5.2 of the Board Regulations.
106
BANCO POPULAR GROUP
B.1.7. List the Board members, if any, that are directors or executives of other companies included in the group of the
listed company:
Name of the Group
company
Name
Title
Aparicio, Francisco
Banco de Andalucía
Director
Gancedo, Eric
Bancopopular-e
Non-Executive Chairman
Herrando, Luis
Popular Banca Privada
Higuera, Roberto
Banco Popular Hipotecario
Popular de Mediación
Popular de Factoring
Totalbank
Director
President
President
Director
Director
Montuenga, Luis
Banco de Andalucía
Director
Santana, Vicente
Director
Banco de Andalucía
President
Tardío, Vicente
Eurovida
President
B.1.8. Indicate whether or not any Directors at your company are members of the Board of Directors at other nongroup companies listed on the official stock exchanges in Spain, as reported to the Company:
Name
Name of the Group company
Title
Ferreira de Amorim, Américo
Director
Mas Millet, José Mª (representative of
Sindicatura de Accionistas de BPE)
Realia, S.A.
Director
Molins, Casimiro
Cementos Molins, S.A.
President
Montuenga, Luis
President
Revoredo, Helena
Prosegur, S,A.
President
107
B.1.9. State and, if appropriate, explained that whether or not the Company has established rules regarding the
number of Boards to which its Directors may pertain:
Yes
No
Explanation of the rules
The Appointments, Compensation, Corporate Governance and Conflicts of Interest Committee, in
accordance with Article 25.4 of the Board Regulations, verifies compliance with internal rules that
have been established regarding the number of Boards to which Directors may form part, which
are those established by Law 31/1968 (27 July) on the incompatibilities and limitations of senior
management at private banks.
In addition, as it is stipulated by Article 18.2 of the Board Regulations, during the time the post is
held a rector may accept any appointment as Director or Executive of another bank, Investment
Services Company, insurance Company or any other financial entity without the express and prior
authorization of the Full Board of Directors, when such an entity carries out its activities, in full or
in part, within the area in which Banco Popular or its subsidiaries operate.
B.1.10. With regard to Recommendation 8 of the Unified Code, indicate the general policies and strategies at the
Company which must be approved by the full Board:
The policy of investments and financing
The definition of the structure for the group of companies
The corporate governance policies
The corporate responsibility policy
The strategic or business plan, as well as management and annual budget targets
The policy for evaluating senior management performance and compensation
The risk management and control policy, as well as regular monitoring of internal
information and control systems
The policy for dividends, as well as treasury stock and, in particular, their limits
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
B.1.11. Show in the following tables the aggregate compensation of the directors earned during the year.
The aggregate information provided in this section does not include that corresponding to Mr. José María Lucía
Aguirre, who held office as CEO up to September 2008.
Note 10 of the Notes to the Financial Statements contained in the Annual report (page 235) provides
individualised data on all remunerative items corresponding to the Board members, the remuneration of Mr.
José María Lucía Aguirre being reported separately.
108
BANCO POPULAR GROUP
a) At the Company covered by this report:
Compensation category
Fixed remuneration
Variable remuneration
Per diems
Directors’ fees
Stock options and/or other financial instruments
Other
TOTAL:
Other benefits
Advances
Loans granted
Pension plans and funds: Contributions
Pension plans and funds: Obligations
Life insurance premiums
Guarantees secured by the Company in favor of Directors
Thousand euros
2,116
851
0
0
0
4
2,971
Thousand euros
0
1,575
5,391
16,889
10
103
Mr. José María Lucía Aguirre resigned from his position as CEO and from his executive positions in the Group in 2008
for health reasons. During 2008 he received remuneration amounting in total to €754k, which is the amount of his
retirement pension; he therefore received no variable remuneration. He is the beneficiary of life insurance premiums
amounting to a total of €5k.
Mr. Roberto Higuera Montejo has held office as CEO since September 10, 2008. He has been Board Member and Vicechairman of the Board of Directors since May 30, 2008. Prior to this, his participation in the Board had been limited
to acting as the natural person representing the Bank’s Asociación Profesional de Directivos. The preceding section
indicates his overall remuneration for the entire year, although up to the time of his appointment as Board Member
and Vice-chairman, he received his remuneration as General Finance Director and not as Board Member.
The figure of €5,391k includes the amounts corresponding to Executive Directors Messrs. Ron, Higuera and Aparicio.
The breakdown of contributions to Pension Funds and Plans corresponding to current Directors, including that
corresponding to Mr. José María Lucía Aguirre which amounts to €2,070k, are detailed in Note 10 of the Annual
Report and amount to a total of €7,461k. The figure of €16,889k corresponds to vested rights and mathematical
reserves linked to the pension rights of Directors Messrs. Ron, Higuera and Aparicio. A breakdown of these amounts is
also provided in the Annual Report and makes up an aggregate sum of €25,294k, including the amounts
corresponding to Mr. José María Lucía Aguirre which total €8,405k. The overall total corresponding to current and
former Directors - who number 11 in total is €56,132k.
109
b) For membership by Board members of other boards of directors and/or of senior management of Group
companies:
Thousand euros
Compensation category
0
0
0
56
0
0
56
Fixed Remuneration
Per diems
Directors’ fees
Stock options and/or other financial instruments
Other
TOTAL:
Thousand euros
Other benefits
Advances
Loans granted
Pension plans and funds: Contributions
Pension plans and funds: Obligations
Life insurance premiums
Guarantees secured by the Company in favor of Directors
0
8
0
0
0
102
c) Total remuneration by type of director:
Type of director
Executive
External domanial
External independent
Other external
Total
By company
By group (€000)
2,971
0
0
0
2,971
0
0
0
56
56
d) With respect to the attributed income of the parent company:
110
Total Director Compensation
(thousand euros)
3,027
Total Director Compensation
Profit attributed to the Parent
Company (expressed in %)
0.2877%
BANCO POPULAR GROUP
Note 10 of the Annual Report sets the total remuneration figure at €3,023k, the sum of €19k corresponding to
“life and health insurance premiums” being included separately. This Corporate Governance report breaks
this amount of €19k down into: €15k corresponding to “life insurance”, including the €5k corresponding to
the Director Mr. José María Lucía, and €4k for “other remunerative items”, which correspond to health
insurance. In this Corporate Governance report, the sum of €4k is included in the total figure for
remunerations (B.1.11.d), which therefore amounts to €3,027k.
B.1.12. List the members of senior management who are not executive directors and show the total remuneration
earned by them during the year:
Name
José Ramón Alonso Lobo
Jesús Arellano Escobar
Juan Echanojáuregui Soloaga
Antonio Férez Pérez
Francisco Gómez Martín
José Fernando Martínez Isach
Rafael de Mena Arenas
Eutimio Morales López
Alberto Muñoz Fernández
Tomás Pereira Pena
José Manuel Piñeiro Becerra
Antonio Pujol González
Ernesto Rey Rey
Fernando Rodríguez Baquero
Ángel Rivera Congosto
Jorge Rossell Granados
Francisco J.Safont Marco
Francisco Sancha Bermejo
Fernando de Soto López-Doriga
Carlos Velázquez Gaban
Title
Sales Management
General Directorate of Support Activities
Business Development
Southern Management Office
Risk Management
Network Address Bank of Castile
Technical Secretariat
Comptroller
Chairman's Office
Legal Office
Asset Management
Central Management Office
Financial Management
Technical Resources
Sales Network Management
Totalbank
Director for Cataluña, Aragón, Navarra and Rioja
Investor Relations
Institutional Relations
Director for Mediterranean Area (Levante)
Total remuneration of members of senior management (€K)
7,066
This amount includes the cost of life and health insurance premiums, as disclosed in Note 10 to the
2008 Consoli¬dated Financial Statements.
111
B.1.13. State, on an aggregate basis, whether there are guarantee or protective measures in the event of dismissal or
changes of control for members of the senior management, including executive directors, of the company or of
its group. State whether these contracts have to be notified to and/or approved by the governing bodies of the
company or of its group:
Number of beneficiaries
Body that approves the
clauses
Board of Directors
Shareholders Meeting
-
-
Is the general Meeting informed of clauses?
YES
NO
-
-
B.1.14. Describe the process for setting Board members’ remuneration and the relevant Bylaw articles:
Process for establishing remuneration for the Members of the Board of Directors and the bylaws
Article 17 of the bylaws stipulates that the policy for remuneration of directors shall conform to the Bank’s
traditional criterion of not remunerating discharge of the office of Board Member.
The foregoing rule is compatible with receipt of such fees or salaries as may correspond to Board members
that render professional or employment services, for other executive, advisory or representation functions, if
any, which they perform other than those of supervision, deliberation, and adoption of resolutions that are
proper to their status as directors.
Directors with no professional or employment relationship with the Bank shall have no remuneration except
for group and third-party liability insurance for their actions as Directors.
Article 21 of the Board Regulations establishes that the Board of Directors shall review the policy of directors’
remuneration, adopting such measures as it deems appropriate for the maintenance, correction or
improvement thereof and, in particular, to conform it to the principles of moderation and relation to the
earnings of the Bank. When establishing this policy, the Board will follow the recommendation of the Unified
Code of Good Governance.
Remuneration and consultation policy for the Board of Directors
At the proposal of the Appointment, Remuneration, Corporate Governance and Conflict of Interest Commission,
the Board of Directors shall approve the remuneration policy for Directors, which must cover at least the
following matters: the amount of fixed components, broken down if appropriate, regarding the per diems paid
for participation on the Board and its Commissions, and an estimate of the fixed annual remuneration they
represent; variable remuneration, including in particular the main characteristics of the applicable retirement
plans and the conditions that the agreements with those exercising these senior management duties of
Executive Directors must meet.
The report approved by the Board of Directors regarding Director’s remuneration policy is submitted by the
Board to a vote by the General Meeting as a separate point of the agenda and on a consultation basis. This
report is made available to shareholders, either separately or in any other manner that the Company considers
advisable.
112
BANCO POPULAR GROUP
This report particularly focuses on the remuneration policy approved by the Board for the year already in
progress, as well as any expected to be in force in future years. It covers all matters regarding the
compensation policy, except for any that could involve the revelation of sensitive business information. It
emphasizes the most significant changes in these policies compared with the policy applied last year to which
the General Meeting refers. It also includes an overall summary of how the compensation policy was applied
last year. The Board will also provide information of the role played by the Appointments, Compensation,
Corporate Governance and Conflicts of Interest Commission when preparing the compensation policy and, if
any external advisory services were used, the identity of the external consultants will be revealed.
Information regarding Compensation.
This report particularly focuses on the remuneration policy approved by the Board for the year already in
progress, as well as any expected to be in force in future years. It covers all matters regarding the
compensation policy, except for any that could involve the revelation of sensitive business information. It
emphasizes the most significant changes in these policies compared with the policy applied last year to which
the General Meeting refers. It also includes an overall summary of how the compensation policy was applied
last year. The Board will also provide information of the role played by the Appointments, Compensation,
Corporate Governance and Conflicts of Interest Commission when preparing the compensation policy and, if
any external advisory services were used, the identity of the external consultants will be revealed.
Application of the Code of Good Governance
The rules regarding compensation set out in the Board Regulations and the General Meeting Regulations are
applied and interpreted in accordance with the recommendations established in the chapter regarding
compensation in the Unified Code of Good Governance dated May 22, 2006.
Indicate whether the Full Board approves the following decisions:
Yes
At the proposal of the Chief Executive Officer, the appointment and dismissal of
senior executives, as well as their indemnities.
Yes
Compensation for Directors, as well as additional compensation for executive
duties, in the case of Executive Directors, and any other conditions that their
contracts must respect.
Yes
No
B.1.15. Indicate whether or not the Board of Directors approves a detailed compensation policy and specify the matters
it covers:
Yes
No
Yes
A breakdown of any fixed components of the per diems paid for participation on
the Board and its Commissions and an estimate of the fixed annual compensation
they represent.
Any variable compensation
Main characteristics of retirement plans, including an estimate of their amount or
equivalent annual cost.
The conditions that must be respected by the contracts for members of senior
management such as executive Directors, including the term, advance notice
requirements and any other clause relating to contract bonuses such as
indemnities or “golden parachutes” invoked upon early completion or
termination of the contractual relationship.
No
Yes
Yes
Yes
Yes
113
B.1.16. Indicate whether or not the Board submits a report regarding the compensation policy for Directors to a vote by
the General Meeting. If so, explain the content of the report regarding the compensation policy approved by the
Board for future years, the most significant changes in these policies compared with the policy applied during
the year and an overall summary of how the compensation policy was applied during the year. Provide details
of the role played by the Compensation Commission and whether or not external advisory services were used
and if so, reveal the identity of the external consultants that rendered these services:
Yes
No
Matters covered by the compensation policy report
In line with the corporate culture at the Bank, the compensation policy for the year followed these principles:
1. No compensation is paid for the position of Director, but rather for the performance of other duties and
services rendered to the bank that are performed by Executive Directors.
2. Transparency regarding compensation paid to Board Members.
3. Application of the principles of moderation and alignment with the performance of the Bank when
establishing compensation for Executive Directors, which are reflected in the Bank’s compensation policy
for Senior Management.
4. Variable compensation must maintain a relationship with the professional performance of its beneficiaries
and not be derived merely from the general development of markets or the sector, or other similar
circumstances.
5. No compensation plan will be established that includes the delivery of shares in the Company or its Group
of Companies, nor options or any other instruments indexed to the value of shares to Directors or the
members of Senior Management.
6. No per diems will be established for participating in the Board of Directors and its Commissions.
No relevant changes in the compensation policy are expected to take place in future years.
Role played by the Compensation Commission
The Appointments, Compensation, Corporate Governance and Conflict of Interests Commission prepares the
Report on the Compensation Policy for Directors and presents it to the Board of Directors so that it may be
submitted to the General Meeting, as a separate point on the Agenda so that a consultation vote may be
taken.
Yes
No
Were external advisory
-
No
Identity of the external consultants
-
-
B.1.17. State the names of Board members, if any, that are also Board members or executives of companies with
significant shareholdings in the listed company and/or in its Group companies:
Director’s name
Ferreira de Amorim, Américo
Montuenga, Luis
Tardío, Vicente
114
Name of the
significant shareholder
Allianz, S.A., Cía.Seguros yReaseguros
Allianz Group
Title
Director
Chairman
Chairman-CEO
Member of International
Executive Committee
Director
BANCO POPULAR GROUP
State the relevant relationships, if any, other than those addressed above, of Board members linking them with
the significant shareholders and/or Group entities:
Name of the relevant
associated
share of holder
Name of the Associated
Director
Ferreira de Amorim,Américo
Molins, Casimiro
Nigorra, Miguel
Relationship
Controlling shareholder
Related to a Director
Related to a Director
B.1.18. Indicate whether or not there has been any modification made to the Board Regulations during the year.
Yes
No
Description of modifications
In its meeting of September 11, 2008, the Board of Directors approved the amendment of Article 18 relating to
the duties of Directors.
Specifically, stricter requirements relating to the Directors’ duty of loyalty have been imposed, with new
communication obligations in respect of operations involving the Bank’s shares performed by the Directors, as
well as new requirements relating to their duty of secrecy, concerning the external disclosure of the Bank’s
institutional information.
B.1.19. Indicate the procedures for appointing, reelecting, evaluating and removing Directors. List the competent
bodies, the procedures to be followed and the criteria to be employed within the each procedure.
The procedures for the appointment, re-election, evaluation and dismissal of Directors are regulated in detail
in the Bylaws and Board Regulations.
Appointment
The Appointment of Directors and the determination of their number, between twelve and twenty in
accordance with the bylaws, is the responsibility of the General Meeting, such that due representation and
efficient operations are guaranteed.
If, during the term for which Directors were appointed any vacancy arises, the Board may designate from
among shareholders the person that will occupy this post until the next General Meeting is held by
Shareholders.
Furthermore, the full Board of Directors retains the authority to approve the Appointment of the Bank’s CEO.
Requirements for appointment
Directors must necessarily be shareholders.
115
B.1.18. Indicate whether or not there has been any modification made to the Board Regulations during the year.
Yes
No
Description of modifications
In its meeting of September 11, 2008, the Board of Directors approved the amendment of Article 18 relating to
the duties of Directors.
Specifically, stricter requirements relating to the Directors’ duty of loyalty have been imposed, with new
communication obligations in respect of operations involving the Bank’s shares performed by the Directors, as
well as new requirements relating to their duty of secrecy, concerning the external disclosure of the Bank’s
institutional information.
Director nomination and reelection proposals submitted by the Board of Directors for the consideration of the
General Meeting and Directors appointed through designation must involve individuals that not only meet legal
and statutory requirements for the position concerned, but they also must be of recognized prestige and have
professional and commercial honor as well as possess the knowledge and professional experience that is
adequate to fulfilling their duties.
Procedure for appointment and re-election
The nomination and reelection of Directors is done through a formal and transparent procedure. Proposals to
nominate or reelect Directors made by the Board of Directors to the General Meeting, as well as the
appointment of Directors through designation, must be covered by a prior proposal from the Appointments,
Compensation, Corporate Governance and Conflicts of Interest Commission, in the case of independent
Directors, or a report from that Commission in the case of all other Directors.
The Appointments, Compensation, Corporate Governance and Conflicts of Interest Commission ensures that
new vacancies are filled:
a) By ensuring that selection procedures do not have any implicit bias that could raise obstacles to the
selection of women Directors;
b) By ensuring that the Company deliberately seeks, and includes among potential candidates, women that
have the target professional profile.
Consideration shall be had in the appointment of directors to the conditions, experience and skills and,
accordingly, the executive or external, independent or domanial nature of the Director appointed.
The Board of Directors shall exercise its powers of proposing appointments to the Shareholders’ Meeting and
of appointment by co-option in such a way that the external directors constitute an ample majority over the
Executive Directors on the Board. The number of directors with executive functions shall not exceed one third
of the members of the Board.
Also, the Board shall endeavor to ensure that the directors as a whole represent a relevant percentage of the
capital stock.
Term of office, re-election and evaluation
The term of office of the directors is six years. At the end of this term, the directors may be re-elected for one or
more periods of the same maximum duration, at the proposal of the Appointments, Remuneration, Corporate
Governance and Conflicts of Interest Committee, evaluating the work done by the director and his effective
commitment to the office during the latest period.
116
BANCO POPULAR GROUP
The Board may contract external consultants to carry out this evaluation process.
Removal
The Board of Directors is the competent body to determine the cause of termination of Directors and to accept
resignations.
The Board of Directors will not propose the removal of any independent Director prior to the end of the
statutory period for which they were appointed, unless there is just cause appreciated by the Board after
having received a report from the Appointments, Compensation, Corporate Governance and Conflicts of
Interest Commission, or as a result of public share offerings, mergers or other similar corporate transactions.
B.1.20. Indicate cases in which Directors are obliged to resign.
Directors shall resign when the term of office for which they were appointed has elapsed or when the
Shareholders’ Meeting so decides, and in all such other cases as may be applicable by law or under the
Bylaws.
Article 16 of the Board Regulations states that Directors must offer to resign and, if the Board considers it
advisable, must formally submit their resignation in the following cases:
a) In the case of executive directors, when they cease to occupy the posts to which their appointment as
directors was connected.
b) When they are affected by any of the legally envisaged situations of incompatibility or prohibition.
c)
If their continuation as Board members may negatively affect the functioning of the Board or the standing
and reputation of the Bank in the marketplace, or may jeopardize its interests.
If a Director is prosecuted or if the opening of oral proceedings takes place with respect to any of the
crimes indicated under Article 1 to four of the Spanish Companies Act, the Board will examine the case as
soon as possible, and in the light of the specific circumstances at hand must reach a decision as to
whether or not the Director will remain on the Board. Any such action will be explained by the Board in
the Annual Corporate Governance Report.
d) In the case of a domanial Director, when the shareholder whose interests are being represented on the
Board disposes of its stake in the Company or significantly reduces that shareholding or reduces it below
the percentage that the Board determines at any given moment, or to the point at which a reduction in the
number of its domanial Directors is required, notwithstanding their possible reelection as Executive
Director, independent Director or domanial Director representing another shareholder.
When a Director leaves the Board before the end of his/her term, whether due to resignation or any other
reason, the reasons must be explained in a letter sent to all of the members of the Board of Directors.
In all cases in which a Director resigns or leads before the end of his/her term for any other reason, the Bank
will report this decision under Relevant Events in the Annual Corporate Governance Report.
117
B.1.21. State whether the Bank’s chief executive is also Chairman of the Board of Directors. If so, describe the
measures taken to limit the accumulation of powers in a single person:
Yes
No
Measures to limit risks
Mr. Ángel Ron Güimil, Chairman of the Board of Directors, is the Bank’s CEO.
The bylaws attribute different authorities to the Entity’s governing bodies. On the one hand, the day-to-day
management of the Bank is encharged to the General Management, a body headed by the CEO. The
governance of the Bank is the responsibility of the Board of Directors.
There is a clear distribution of authority between the Chairman and the CEO, Francisco Fernández Dopico. In
the split of functions between the Chairman and the CEO, regard was had to the nature of Banco Popular’s
business and the increasing complexity and specialization demanded by the Group’s financial activity and
international presence. The commercial business and the directly related support units report to the CEO, who
is also a member of the Executive Commission. All strategic, institutional and external representation areas are
the responsibility of the Chairman.
The bylaws stipulate that in the event of the absence, illness, resignation or force majeure the Vice-Chairman,
or one of them if there are more than one, will stand in for the Chairman. If no Vice-chairman has been
appointed, or in the event of absence or impossibility of that or those appointed, the Chairman shall
successively be replaced by the Chairman of the Appointments, Remuneration, Corporate Governance and
Conflicts of Interest Committee and the Chairman of the Audit and Control Committee, who are independent
directors.
Indicate and explain, if appropriate, whether or not rules have been established to facilitate the calling of a
Board meeting or adding new points to the agenda by and Independent Director in order to coordinate and
express the concerns of external Directors and to direct evaluations by the Board of Directors
Yes
No
Explanation of the rules
Article 7 of the Board Regulations stipulates that when the Chairman of the Board is also the Bank’s CEO, the
Board of Directors will authorize one of the independent Directors to call a meeting of the Board and include
new points in the agenda in order to coordinate and express the concerns of external Directors and to direct
evaluations by the Board of its Chairman. In the event that an independent Director has not been expressly
authorized to exercise these powers, they will fall to the Vice-Chairman of the Board or, successively, the
Chairman of the Appointments, Compensation, Corporate Governance and Conflicts of Interests Commission
and the Chairman of the Audit and Control Commission, in the case of an absence of the first party.
B.1.22. Is a reinforced majority, other than those legally stipulated, required for any kind of decision?:
Yes
No
State how the Board adopts resolutions, indicating at least the minimum quorum and types of majority for
adoption of resolutions:
Quorum of attendance
118
BANCO POPULAR GROUP
Article 17 of the Bylaws states that: The Board of Directors will be validly called to order when half plus one of
its members are present or represented at the meeting.
In addition, Article 12 of the Board Regulations states that: “For the Board of Directors to be validly convened,
half plus one of the Board members must be present or represented at the meeting, unless the meeting has not
been formally called, in which case the attendance of all Board members is required. If the number of
directors attending is uneven, a sufficient quorum will be deemed to exist if those present are more than half of
the Directors.”
Quorum for the passing of resolutions
Article 16 of the Bylaws states that resolutions are to be adopted by an absolute majority of Directors present.
Article 22 of the Bylaws, in turn, states that the valid delegation on a permanent basis of any power of the
Board of Directors to the Chairman, to the Executive Committee or to the CEO, and the valid appointment of
directors to these offices, shall require the vote in favour of two thirds of the Board members.
The Board Regulations state that resolutions are to be adopted with the vote in favour of an absolute majority
of Directors present or represented at the meeting, except in those cases in which a higher quorum is required
by law or by the Bylaws; voting without an actual session being held, whether in written form, by videoconference or any other electronic distance communications system, is acceptable only when there is no
Director who opposes such procedure and the requirements of the Spanish Companies Law and Mercantile
Registry Regulations are met.
B.1.23. State whether there are specific requirements, other than those relating to directors, for appointment as
Chairman.
Yes
No
Description of requirements
In accordance with Article 17, the Chairman of the Board must be a Director definitively ratified or elected as
such by the General Meeting.
B.1.24. State whether the Chairman has a casting vote:
Yes
No
Matters for which there is a casting vote
B.1.25. State whether the Bylaws or the Board Regulations set any age limit for Directors:
Yes
No
Age limit for Chairman
Age limit for CEO -
-
Age limit for director -
119
B.1.26. State whether the Bylaws or the Board Regulations set a limited term of office for independent directors:
Yes
Maximum years of term of office
No
Article 15 of the Board Regulations stipulates that in the event a Director
holds his/her position for 12 or more years the Board of Directors, based
on a Report from the Appointments, Compensation, Corporate Governance and Conflicts of Interests Commission will decide, at the time the
Annual Corporate Governance Report is issued for the period in which
this deadline is reached, whether or not circumstances are in place that
make it advisable to change the category of that Director or whether it
is appropriate for that Director to maintain his/her classification as Independent. When evaluating independence the Director’s dedication
and performance in the post without receiving any compensation whatsoever, maintaining a continuous and considerable stake in capital
stock as compared with all of his/her financial investments and precise
compliance with all other independence conditions mentioned in this
Article will all be taken into consideration.
B.1.27. In the event that there are few or no women Directors, explain the reasons and the initiatives taken to correct
this situation:
Explanation of the reasons and the initiatives
Article 14.5 of the Board Regulations stipulates that the Appointments, Compensation, Corporate Governance
and Conflicts of Interests Commission will ensure that selection procedures to fill vacancies will not be biased
in such a way that raises obstacles for the selection of women which the Company deliberately seeks to
include, and does include among potential candidates women that meet the target professional profile.
During 2008 no vacancies have been created within the independent Directors that would have allowed the
appointment of woman Directors.
In particular, indicate whether or not the Appointments, Compensation, Corporate Governance, and Conflicts
of Interest Commission has established procedures to prevent selection processes from being implicitly biased
and raising obstacles for the selection of women Directors and that it deliberately seeks candidates that meet
the required profile:
Yes
No
Indicate the main procedures
In accordance with Articles 14 and 25 of the Board Regulations, the Appointments, Compensation, Corporate
Governance and Conflicts of Interest Commission assists the Board with its duties to nominates and reelect
Directors and therefore it must ensure the integrity of the process for selecting Directors, and ensure that
candidacies are offered to persons that meet the profile of the vacancy.
The directors must be persons of recognized commercial and professional honorability with the appropriate
knowledge and experience for the discharge of their duties.
This Commission evaluates the knowledge and experience of Directors and defines the duties and aptitudes
that are necessary for candidates, evaluates the time and dedication necessary for the tasks to be successfully
discharged and ensures that the procedures established for the selection process do not have any implicit
biases that could raise obstacles against the selection of women Directors and that the Bank deliberately seek
and include women that meet the desired professional profile among the potential candidates.
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BANCO POPULAR GROUP
B.1.28. State whether or not there are formal processes for delegating votes within the Board of Directors. Briefly
explain any that exist.
Article 17 of the Bylaws envisages the possibility for Directors to appoint another Director to represent them at
Board meetings.
Article 12 of the Board Regulations stipulates that: Directors will make all efforts to attend Board meetings and
ensure that any absences are absolutely essential, and that all such absences be reported in the Annual
Corporate Governance Report. If a meeting cannot be attended, another member of the Board may be
appointed representative and communicate all relevant instructions. Notification of representation may be
given in writing by any means, including telegram, fax or e-mail, to the Chairman or Secretary of the Board.
B.1.29. Indicate the number of meetings that have been held by the Board of Directors during the year. Also indicate
any meetings that were held in the absence of the Chairman:
Number of Board meetings
9
Number of meetings held in the absence of the Chairman
0
State how often the various Board committees met during the year:
Meetings of the Executive Committee
Number of meetings of the Audit Committee
Number of meetings of the Appointment, Remuneration,
Corporate Governance and Conflicts of Interest Committee
30
7
11
B.1.30. Indicate the number of meetings held by the Board of Directors during the year that were not attended by all
members. The calculation will take into consideration all representation without specific instructions as
absences:
Number of absences of Directors during the year
% of absences compared with total votes during the year
2
1,14
B.1.31. State whether the individual and consolidated financial statements submitted to the Board for approval are
previously certified:
Yes
No
The Bank’s general management, as its technical and executive governance body, pursuant to Article 25 of the
bylaws, is responsible for the preparation and submission of all the financial documentation included in the
financial statements. Also, the Chief Financial Officer, as the person with maximum responsibility for financial
reporting, signs and certifies the accuracy of the financial statements.
The Audit and Control Committee assists the Board of Directors with supervising the financial statements and
the Bank’s internal control systems in place within its Financial Group and the Board of Directors prepare the
financial statements that are signed by all Directors.
State, if appropriate, the person(s) that certified the company’s individual and consolidated financial
statements for formulation by the Board:
Name
Title
Ernesto Rey
Finance Director
121
B.1.32. Describe the mechanisms, if any, established by the Board of Directors to prevent the individual and
consolidated financial statements prepared and submitted to the Shareholders’ Meeting from containing
qualifications in the auditors’ report.
The Board of Directors tries to ensure that the individual and consolidated financial statements that it prepares
and submits to the General Meeting do not contain any reservations or qualifications in the Audit Report, and
when it must be so both the Chairman of the Audit and Control Committee and the external auditor will clearly
explain to shareholders the content and scope of the discrepancies and these reservations or qualifications.
The mechanisms established by the Board of Directors are, among others, the following:
1.With respect to the Bank’s Internal Services.
The Bank’s Internal Services will prepare the individual and consolidated financial statements with rigor and in
accordance with generally accepted accounting principles and standards, ensuring:
a) That the financial statements give a true and fair view of the net worth, financial position and results of
operations and contain the necessary information sufficient for understanding thereof.
b) An adequate definition of the scope of consolidation and the proper application of accounting standards.
c) That they clearly and simply explain economic, financial and legal risks that may be incurred.
d) That the principles and standards applied are in line with those applied in the previous year.
2. With respect to the Audit and Control Committee.
That the Audit and Control Committee assist the Board of Directors with its duties to supervise and control the
Bank through:
a) The review of the individual and consolidated financial statements prepared by the Bank’s Internal Services
and the monitoring of the operation of procedures and internal financial control manuals adopted by the Bank.
b) Regular reviews of the Bank’s internal control and risk management systems, so that the main risks are
identified, managed and adequately reported.
c) Hold meetings with the external auditor to receive any information relating to the audit process that is
necessary, as well as to analyze and review any matters that are considered to be of special importance.
B.1.33. Is the Secretary of the Board a Director?:
Yes
No
B.1.34. Explain the procedures for appointing and removing the Secretary to the Board, indicating whether or not the
appointment and removal have been reported by the Appointments Committee and approved by the full
Board of Directors.
Procedure for appointment and removal
The position of Secretary is regulated by Article 9 of the Board Regulations, which establishes the authorities granted and procedure for the appointment of a Secretary.
122
BANCO POPULAR GROUP
To safeguard the independence, impartiality and professionalism of the Secretary, the appointment to
and removal from this position must be the subject of a prior report from the Appointments, Compensation, Corporate Governance and the Conflicts of Interest Committee. When the Board does not
follow the recommendations of this Committee, reasons for justifying this action must exist and be formally stated in the minutes to the meeting concerned.
Proposals for nominations or reelections must involve candidates holding a Degree in Law and they
must also comply with the legal and statutory requirements for the position, be of recognized prestige
and possess the knowledge and professional experience that are adequate to discharging the duties of
Secretary.
Annually with occasion of the evaluation of the Council of Administration, evaluate equally the exert
of the Secretary of the Council.
No
Yes
Does the Appointments Committee report nominations?
Does the Appointments Committee report removals?
Does the full Board approve nominations?
Does the full Board approve removals?
Yes
Yes
Yes
Yes
Is the Secretary to the Board entrusted with the duty, in particular, to follow good governance
recommendations?
Yes
No
Observations
B.1.35. Describe the mechanisms, if any, established by the Bank to safeguard the independence of auditors, financial
analysts, investment banks and rating agencies:
Articles 24 and 30 of the Board Regulations identify the mechanisms established to preserve the independence
of the external auditor.
The relationship between the Board of Directors and the external auditor are channeled through the Audit and
Control Committee, which is the competent body for:
a) Proposing to the Board of Directors for submission to the Shareholders’ Meeting the appointment of external
auditors, the conditions of hiring, the scope of the professional mandate and, when appropriate, the revocation
or non-renewal of such mandate and replacement of the auditor.
b) Supervising fulfillment of the audit contract, endeavoring that the auditors’ opinion on the financial
statements and the main contents of the auditors’ report are drafted clearly and accurately.
c) Receive regular information from the external auditor regarding the audit plan and the results of
management, evaluate the results of each audit and verify that senior management takes into account the
auditor’s recommendations, as well as mediate in any case of discrepancy between these parties and with the
auditor with respect to the principles and standards applied when preparing the financial statements.
d) Liaise with the external auditors to receive information about any issues potentially jeopardizing the
auditors’ independence and any other issues connected with the process of performance of the audit, as well
as the other communications stipulated in audit legislation and technical auditing standards.
e) Ensure that the financial statements that the Board of Directors submits to the General Meeting do not
contain any reservations or qualifications in the Audit Report and, when this must be the case, ensure that
123
both the Chairman of the Committee andthe auditors provide clearer explanations to the public and, in
particular, to shareholders, including the content and scope of the discrepancies and any reservations or
qualifications.
Furthermore, to ensure the independence of the external auditor:
a) Any change in the auditor will be reported as a Relevant Event to the Spanish Securities and Exchange
Commission and indicate any disagreements with the exiting auditor and any discrepancies with the content of
the Report.
b) The Committee will ensure that the Bank and the auditor respect current regulations regarding the rendering
of services other than audit, limits to the concentration of the Auditor’s business and, in general, any other
regulation established to ensure the independence of auditors;
c) Should the external auditor resign, the Audit and Control Committee will examine the reasons for doing so.
Finally, in accordance with the provisions of Board Regulations, under the heading B.1.37 below information is
provided of the overall fees paid during the year to the audit firm for services other than audit.
The Bank has contracted the services of the three main international rating agencies. The Group’s Financial
Management is the competent body for maintaining contacts with the auditors.
B.1.36. State whether or not the Company changed its external auditor during the year. If so, identify the exiting and
entering auditor:
Yes
Exiting auditor
No
Entering auditor
If there were any disagreements with the exiting auditor, explain:
Yes
No
Explanation of disagreements
B.1.37. State whether the audit firm has done work for the Bank and/or its group other than audit work and, if so,
state the fees received by it for such work and the amount of such fees as a percentage of the fees billed to the
Bank and/or its group.
Yes
No
Amount (€k) of work other than audit work
Amount of non-audit work / Total amount
invoiced by audit firm (%)
124
Company
Group
287
58
Total
345
28.2%
8.5%
20.3%
BANCO POPULAR GROUP
B.1.38. State whether the audit report for the financial statements for the preceding year contain any reservations or
qualifications. If appropriate, state the reasons given by the Chairman of the Audit Committee to explain the
content and scope of any such reservations or qualifications.
Yes
No
Explanation of the reasons
B.1.39. State the number of years that the current audit firm has performed the audit of the company’s and/or its
group’s financial statements without interruption. In addition, state the percentage that the number of years
audited by the current audit firm represents with respect to the total number of years that the financial
statements have been audited:
Number of uninterrupted years
Number of years audited by the present
audit firm as a % of the years for which
audits have been performed
Company
Group
27
27
Company
Group
93.1%
93.1%
B.1.40. Indicate the holdings by members of the Bank’s Board of Directors in the capital of companies engaging in
activities identical, similar or supplementary to those of the corporate purpose of the Bank or of its group
which have been reported to the Bank. Furthermore, indicate the positions or duties that are fulfilled at these
companies:
Name of the Director
Aparicio, Francisco
Asociación de Dir. BPE
F. de Amorim, Américo
Gancedo, Eric
Herrando, Luis
Higuera, Roberto
Molins, Casimiro
Montuenga, Luis
Morillo, Manuel
Name of the Company
Banco de Andalucía
-
Millenium bcp
Banco BIC (Angola)
Banco BIC Portugués
Banco LJ Carregosa
Bancopopular-e
Totalbank
Banco de Andalucía
BBVA
Banco de Andalucía
-
% interest
0.00
0.00
25.00
25.00
9.08
-
0,00
0.00
0.00
-
Position or
functions
Director
Director
Director
Director
Director
-
125
Nigorra, Miguel
Osuna, Nicolás
Revoredo, Helena
Ron, Ángel
Santana, Vicente
Sindicatura de Accs. BPE
Solís, Miguel Ángel de
Tardío, Vicente
Allianz, SAE
Name of the Company
Position or
functions
% interest
Banco de Andalucía
Banco Santander
Banco Sabadell
Bankinter
Banesto
BBVA
BBVA
BBVA
0.01
0.00
0.27
0.00
0.00
0.00
0.00
-
Banco de Andalucía
Banco de Santander
BBVA
Unicrédito Italiano
Dresdner Bank AG
Bulbank AD
Zagrebacka banka d.d.
Oldenburgische Landesbank AG
Gruppo Banca Leonardo S.p.A.
0.03
0.00
0.00
0.00
100,00
3,50
11,7
64,3
2,9
Director
-
B.1.41. State and, if appropriate, indicate if there is a procedure enabling directors to obtain external advice:
Yes
No
Description of the procedure
All the directors have the right and the duty to request and obtain information and advice appropriate for
discharge of their functions of supervision, in the broadest terms, routing their requests in this respect through
the office of the Secretary of the Board, which will act by either directly furnishing the information, or by
naming the appropriate interlocutors or arranging the measures enabling them to conduct examination in situ.
Article 20 of the Board Regulations establishes the right to receive expert assistance. In order to facilitate the
work of the Directors, the Board guarantees them access to the services of the Bank’s in-house experts. The
Directors have the authority to propose to the Board of Directors the engagement, at the Bank’s expense, of
such external advisers as they may consider necessary to advise them on issues arising in the performance of
their duties, when these issues are of a specific nature and are of a certain importance and complexity. The
proposal must be conveyed to the Chairman through the Secretary of the Board. The Board may veto its
approval by majority vote if it considers the proposal unnecessary, if its cost is disproportionate considering the
level of importance of the issue in question and the assets and revenues of the Bank, or if there exists the
possibility of such technical assistance being adequately provided by the Bank’s own experts and technical
staff.
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BANCO POPULAR GROUP
B.1.42. State and, if appropriate, detail if there is a procedure enabling directors to obtain the necessary information to
prepare with sufficient time for meetings of the governing bodies:
Yes
No
Description of the procedure
The directors receive specifically prepared and focused information in good time to enable them to prepare on
a timely basis for Board meetings, provided that the urgency and nature of the matter make this possible, with
no limitations other than those imposed by the current legal and regulatory framework covering privileged
information.
Since April 2007 the members of the Board of Directors have had an Internet portal through which they have
exclusive access to documentation and information reserved for the Board, such as the Agenda for meetings,
presentations and other documentation prepared for meetings, as well as the minutes to meetings once they
have been held.
Furthermore, the Secretary’s Office has established a permanent channel of communication with Directors
through a text-messaging system, through which they are informed of the public dissemination of information
regarding the Bank, the posting of information and documentation of their interest to the aforementioned
portal, etc.
Article 19 of the Board Regulations regulates the Directors’ right to information in the following terms: The
Directors have the broadest of powers to demand information on any aspect of the Bank, to examine its books,
records and documents, to contact those in charge of the various departments, and to visit the Bank’s
installations and facilities, provided that this is necessary for the performance of their duties. This right to
information is to be channelled through the Chairman or the Secretary of the Board, who are to deal with such
requests from the Directors either by furnishing the information required directly, or by indicating the
appropriate interlocutors, or by arranging such measures as may be necessary so that the information
requested may be examined. The Board may refuse to grant the request for information if it feels the disclosure
could be harmful to the Bank’s corporate interests, without prejudice to the provisions of the Spanish
Corporations Law.
B.1.43. State and, if appropriate, indicate whether the Company has established rules that require Directors to report
and, if appropriate, resign, cases in which the credit and reputation of the Bank may be damaged:
Yes
No
Explain these rules
Article 16.3.c) of the Board Regulations establishes the requirement that Directors make their post available to
the Board of Directors and to prepare, if deemed advisable by the Board, their resignation in cases in which
their remaining on the Board may negatively affect its operation or the credit and reputation of the Bank in the
market or may endanger the interests of the Bank.
If a Director is prosecuted or if the opening of oral proceedings takes place with respect to any of the crimes
indicated under Article 124 of the Spanish Companies Act, the Board will examine the case as soon as possible
and in the light of the specific circumstances at hand, must reach a decision as to whether or not the Director
will remain on the Board.
127
In all cases in which a Director leaves his/her post before the end of the relevant term, whether through
resignation or for any other reason, the reasons behind in this action must be explained in a letter that will be
sent to all members of the Board of Directors, and the Bank will report this decision through the
communication of a Relevant Event, indicating the aforementioned reasons in the Annual Corporate
Governance Report.
B.1.44. State whether or not any member of the Board of Directors informed the Company of any prosecution or the
start of any oral proceedings with respect to any of the crimes indicated under Article 124 of the Spanish
Companies Act:
Yes
No
Criminal Proceeding
Observations
State whether or not the Board of Directors has analyzed the case. If yes, explain the decision taken as to
whether or not the Director will remain on the Board.
Yes
No
Decision taken
Remain/Not remain
128
Reasoned explanation
BANCO POPULAR GROUP
B.2.Board of Directors Committees
B.2.1.
State all the committees of the Board of Directors and the members thereof:
EXECUTIVE COMMITTEE
Name
Ron, Ángel
Higuera, Roberto
Gancedo, Eric
Herrando, Luis
Santana, Vicente
Aparicio, Francisco
Title
Type
President
Vocal
Vocal
Vocal
Vocal
Vocal
Secretary
Executive
Executive
Independent
Independent
Independent
Independent
Executive
AUDIT & CONTROL COMMITTEE
Name
Santana, Vicente
Gancedo, Eric
Title
Type
President
Vocal
Vocal
Vocal
Independent
Independent
Independent
Independent
APPOINTMENTS, COMPENSATION, CORPORATE GOVERNANCE AND CONFLICTS OF
INTEREST COMMITTEE
Name
Herrando, Luis
Gancedo, Eric
Montuenga, Luis
Title
Type
President
Vocal
Vocal
Independent
Independent
Domanial
RISK COMMITTEE
Name
Gancedo, Eric
Higuera, Roberto
Herrando, Luis
Montuenga, Luis
Santana, Vicente
Aparicio Francisco
Gómez, Francisco
Title
Type
President
Vocal
Vocal
Vocal
Vocal
Vocal
Secretary
Spokesman
Independent
Executive
Independent
Domanial
Independent
Independent
Executive
-
129
B.2.2. State whether or not the following duties fall to the Audit Committee:
Yes
Supervise the preparation and the integrity of financial information relating to
the Company and, if appropriate, to the Group, reviewing compliance with
legislative requirements, adequate definition of the scope of consolidation and
the proper application of accounting standards.
Yes
Regular reviews of the Bank's internal control and risk management systems, so
that the main risks are identified, managed and adequately reported.
Yes
Ensure the independence and efficiency of the internal audit function; proposed
new selection, nomination, reelection and removal of the person responsible for
internal audit; propose the budget for this service; receive regular information
regarding its activities; and verify that senior management takes into account the
conclusions and recommendations and its reports.
Yes
Establish and supervise a mechanism that allows employees to confidentially,
and if considered appropriate, anonymously, report any potentially significant
irregularities, particularly those of a financial or accounting nature, observed
within the company.
Yes
Bring to the Board proposals for selecting, nominating, re-electing and replacing
the external auditor and establish the conditions of the auditor’s contract.
Yes
Regularly receive information from the external auditor regarding the audit plan
and the results of execution, and verify that senior management takes the
recommendations made into account.
Yes
Ensure the independence of the external auditor.
Yes
In the case groups, ensure the group’s auditor takes responsibility for the audit of
group companies.
Yes
No
B.2.3. Describe the rules of organization and operation and the responsibilities of each of the Board committees.
Executive Committee
The Executive Committee is formed by the number of Directors designated by the Board of Directors at any
given moment. The Chairman of the Bank and the CEO are standing members of this Committee.
The Board of Directors decides the composition of the Executive Committee and the appointment and removal
of its members. The Members of the Committee cease to hold this position when they cease to be Directors of
the Bank, or when so decided by the Board of Directors. The resolutions appointing members of the Executive
Committee require the votes in favor of at least two thirds of the members of the Board of Directors.
130
BANCO POPULAR GROUP
The Chairman of the Board of Directors presides over the Committee, the CEO is the spokesman and the
Secretary is the Secretary to the Board. The Secretary may be replaced by the Committee member chosen at
the start of any meeting, or by one of the Vice-Secretaries to the Board of Directors.
The Executive Committee holds ordinary meetings regularly on a bimonthly basis and the meetings are
considered to be validly convoked when half plus one of its members are present or represented. Its
resolutions are adopted by absolute majority of the directors present or represented at the relevant meeting.
The resolutions adopted by the Executive Committee are valid and binding without any need for subsequent
ratification by the full Board, although the Board must be informed of the issues discussed and the decisions
taken at its meetings, and the minutes to those meetings must be made available to the Board.
The Board of Directors has currently delegated to the Executive Committee all its powers except those that
pursuant to the law and to Article 5.2 of the Board Regulations cannot be delegated.
Audit and Control Committee
The Audit and Control Committee must consist of a minimum of three (3) and a maximum of five (5) Directors,
designated by the Board of Directors, bearing in mind their knowledge, aptitudes and experience in the areas
of accounting, audit and risk management, as well as the other tasks assigned to the Committee.
The Committee is composed of four independent Directors.
The Board of Directors designates the Chairman of the Committee from among the Committee Members, as
well as the Secretary, who does not necessarily have to be a member of the Committee. When the
appointment of a Secretary is not necessary, the Secretary to the Board of Directors will assume this position.
If the Chairman is absent the meeting is presided by the Director designated by the Committee and in the
absence of the Secretary, these duties will be performed by the Committee member so designated, or the Vice
Secretary or one of the Vice Secretaries to the Board of Directors.
The Members of the Committee cease to hold this position when they cease to be Directors of the Bank or
when so decided by the Board of Directors.
Notwithstanding the above, the Chairman must be replaced every four years and may be reelected once one
year has passed since leaving the office, and may remain as a member of the Committee if so agreed by the
Board of Directors.
The Audit and Control Committee must meet as often as may be necessary for the proper performance of its
functions and whenever called to meet by its chairman or requested to do so by any of its members; it must
hold at least two meetings a year and in any case whenever the Board requests the issuance of reports, the
presentation of proposals or the adoption of resolutions within the sphere of its functions.
The proposals made by the Committee must be approved by the vote of a majority of the Members attending
the meeting.
The Committee may request the attendance of the Group's external Auditors at its meetings in which their
report on the financial statements and the management report of the Bank and of its consolidated group are to
be examined. Furthermore, this Committee may request the attendance for reporting purposes of the Group's
senior management, other Group directors and personnel, as well as other advisors or consultants, as
appropriate. Any of the persons mentioned in this paragraph who are asked to attend the meetings shall be
under the obligation to do so, offering their full cooperation and making all information they hold available.
The Committee may seek the cooperation of these same persons to carry out work which it considers
necessary for the performance of its duties, and may seek the advice of external professionals. In addition, the
Committee may, in the performance of its duties, request the collaboration of the Board of Directors and its
other Committees, the Directors and the Secretary and Vice- Secretaries of the Board.
131
The Committee may request the Group's external auditors to attend its meetings when the report on the
financial statements and Directors' Report for the Bank and its consolidated group are examined. Furthermore,
this Committee may require the Group's senior management, Directors and personnel to provide reports, as
well as other advisors or any consultants involved in this area. Any of the persons mentioned in this paragraph
that are requested to attend are obliged to attend the meetings, offer all collaboration and make all information
held available. The Committee may call for the cooperation of these same persons to carry out work which it
considers necessary for the exercise of its functions, and may seek advice from external professionals. In
addition, the Committee may call for the collaboration of the Board of Directors and its Committees, Directors
and the Secretary and Vice Secretaries to the Board of Directors during the performance of its duties.
The principal task of the Committee is to assist the Board of Directors with its duty to supervise and control the
Bank by evaluating the system of accounting verification of the Group, by verifying the independence of the
external auditors and by reviewing the internal control system. The Committee will keep the Board of Directors
permanently informed of the performance of the duties for which it is responsible.
Notwithstanding other duties assigned by the Board of Directors, the Committee will have the following
competencies:
a) Supervise the process of preparing financial information, verify its integrity and that all periodic information
offered to markets is prepared in accordance with professional practices and principles applicable to financial
statements, supervise this information and report to the Board of Directors prior to the Board adopting any
relevant decisions and before being published for public use.
b) Inform the Shareholders’ Meeting about issues raised by shareholders regarding matters within its sphere of
competence.
c) Propose to the Board of Directors, for submission to the Shareholders Meeting, the appointment of external
auditors, the conditions of hiring, the scope of the professional mandate and, when appropriate, the revocation
or non-renewal of such mandate and replacement of the auditor. Supervise the fulfillment of the audit
contract, endeavoring that the auditors’ opinion on the financial statements and the main contents of the
auditors’ report are drafted clearly and accurately.
d) Supervise internal audit services and, in this respect, ensure its independence and efficiency; propose the
selection, nomination, reelection and removal of the person responsible for internal audit; propose its budget;
receive periodic information regarding its activities; and verify that senior management takes into consideration
the conclusions and recommendations set out in its reports.
e) Serve as a channel of communication between the Board of Directors and the auditor and receive regular
information from the external auditor regarding the audit plan and the results of management, evaluate the
results of each audit and verify that senior management takes into account the auditor's recommendations, as
well as mediate in any case of discrepancy between these parties and with the auditor with respect to the
principles and standards applied when preparing the financial statements.
f) Liaise with the external auditors to receive information about any issues potentially jeopardizing the auditors’
independence and any other issues connected with the process of performance of the audit, as well as the
other communications stipulated in audit legislation and technical auditing standards.
To ensure independence:
1. Any change in the auditor will be reported as a Relevant Event to the Spanish Securities and Exchange
Commission and indication will made of any disagreements with the exiting auditor and any discrepancies
with the content of the Report;
132
BANCO POPULAR GROUP
2. The Committee will ensure that the Bank and the auditor respect current regulations regarding the
rendering of services other than audit, limits to the concentration of the Auditor's business and, in general,
any other regulation established to ensure the independence of auditors;
3. In the event that the external auditor withdraws from the mandate, it will examine the circumstances
giving rise to this situation.
g) Endeavor that the financial statements submitted by the Board of Directors to the Shareholders’ Meeting do
not contain any reservations or qualifications in the auditors’ report; if this is not possible, the auditors must
clearly explain to the public, and to shareholders in particular, the content and scope any such reservations or
qualifications.
h) Perform regular reviews of the Bank's internal control and risk management systems, so that the main risks
are identified, managed and adequately reported.
i) Review the accounts for the Bank, supervise compliance with legal requirements and the proper application
of generally accepted accounting principles and the adequate definition of the scope of consolidation. Monitor
the operation of internal financial control procedures and the use of manuals adopted by the company, check
compliance therewith and review the appointment and replacement of those responsible.
j) Consider the suggestions that may be made to the Committee by the Chairman or other members of the
Board, senior executives or shareholders of the company, as well as report and submit proposals to the Board
of Directors about measures that the Committee considers appropriate.
k) Establish and supervise a mechanism that allows employees to report, on a confidential basis and, if
deemed advisable, anonymously, any irregularities that are potentially important, particularly those of a
financial and accounting nature, that are observed within the Company.
l) Detect and manage conflicts of interest that may arise between Group entities.
m) Inform the Board of Directors, prior to the adoption of the relevant decisions, of the creation or acquisition
of shares in special-purpose vehicles or any domiciled in countries or territories classified as tax havens, as
well as of any other transactions or operations of a similar nature that could harm the transparency of the
Group due to their complexity.
n) Evaluate its operation on an annual basis and present the Board of Directors with a report on the activities
carried out during the year.
ñ) All others established by Law or in Board Regulations.
The Appointments, Compensation, Corporate Governance and Conflicts of Interest Committee
The Appointments, Compensation, Corporate Governance and Conflicts of Interest Committee must consist of a
minimum of three (3) and a maximum of five (5) Directors, designated by the Board of Directors, bearing in
mind the knowledge, aptitudes and experience of the Directors and the tasks assigned to the Committee.
The Committee must be made up exclusively of External Directors, mainly independent, and chaired by an
independent Director. The Committee is currently formed by three Directors, two of which are Independent,
including its Chairman, and one domanial Director.
133
The Board of Directors designates the Chairman of the Committee from among the Committee Members, as
well as the Secretary, who does not necessarily have to be a member of the Committee. When the
appointment of a Secretary is not necessary, the Secretary to the Board of Directors will assume this position.
If the Chairman is absent, the meeting is presided by the independent Director designated by the Committee,
and in the absence of the Secretary these duties will be performed by the Committee member so designated,
or the Vice Secretary or one of the Vice Secretaries to the Board of Directors.
The Members of the Committee cease to hold this position when they cease to be Directors of the Bank or
when so decided by the Board of Directors.
The Committee must meet as often as may be necessary for the proper performance of its functions and
whenever called to meet by its chairman or requested to do so by any of its members and, in any case,
whenever the Board requests the issuance of reports, the presentation of proposals or the adoption of
resolutions within the sphere of its functions.
The proposals made by the Committee must be approved by the vote of a majority of the Members attending
the meeting.
This Committee may require the Group's senior management, Directors and personnel to provide reports, as
well as other advisors or any consultants rendering services to the Group. Any of the persons mentioned in this
paragraph that are requested to attend are obliged to attend the meetings, offer all collaboration and make all
information held available. The Committee may call for the cooperation of these same persons to carry out
work which it considers necessary for the exercise of its functions, and may seek advice from external
professionals. In addition, the Committee may call for the collaboration of the Board of Directors and its
Committees, Directors and the Secretary and Vice Secretaries to the Board of Directors, during the performance
of its duties.
The main task of the Committee is to assist the Board of Directors in its functions of appointing, re-electing,
dismissing and compensating Directors and senior management, endeavoring to ensure that the Directors
receive all the necessary information for the proper performance of their duties, and keeping a close watch on
compliance with the company’s rules of governance and periodically reviewing the results. The Committee will
keep the Board of Directors permanently informed of the performance of the duties for which it is responsible.
Notwithstanding other duties assigned by the Board of Directors, the Committee will have the following
competencies:
134
a)
Keeping a close watch on the integrity of the process of selection of directors and senior executives of the
Bank, endeavoring to ensure that candidates are persons who conform to the profile of the vacancy.
b)
Formulating and reviewing the criteria to be followed as regards the composition of the Board of Directors
and the selection of candidates. In this respect, the competencies, knowledge and experience that is
necessary on the Board must be evaluated and the necessary duties and aptitudes for candidates that
cover each vacancy must be determined, while bearing in mind the time and dedication that are
necessary to adequately perform the duties of the position.
c)
Examine or organize, in the manner deemed most adequate, the succession of the Chairman and the CEO
and, if appropriate, make proposals to the Board so that said succession takes place in an ordered and
well-planned fashion.
d)
Make proposals to the Board of Directors regarding the nomination, reelection and removal of
Independent Directors or issue a Committee Report in the case of other Directors, so that the Board may
proceed directly to the appointment of these directors or submit their nominations to be General Meeting,
providing information regarding the Directors in all cases.
BANCO POPULAR GROUP
e)
Submitting to the Board of Directors the proposals for appointment, re-election and termination of the
members who should form part of each of the Board Committees.
f)
Report proposals to appoint or remove the Secretary or Vice Secretaries to the Board of Directors.
g)
Submitting to the Board of Directors proposals for the appointment and re-election of members of the
senior management and of the supervisory body stipulated in the internal regulations of conduct in the
sphere of securities markets.
h) Examining any suggestions for appointments sent to it by the Chairman, the members of the Board,
executives or shareholders of the Bank, evaluating them and reporting on them with criteria of objectivity
and impartiality so that the Board may act in full knowledge of all the relevant information.
i)
Report to the Board of Directors regarding any gender diversity matters indicated in its Regulations.
j)
Review, on an annual basis, the classification of each Director when preparing the Corporate Governance
Report.
k) Propose a compensation policy for Directors and senior management to the Board of Directors, the
individual compensation for Executive Directors and other contractual conditions and the basic
conditions for contracts extended to senior executives.
l)
Ensure compliance with the compensation policy established for the Board of Directors and make
proposals to the Board of Directors regarding the measures deemed most advisable to maintain, correct
or improve this policy, in particular to adjust the policy to meet the principle of moderation and to match
the Bank’s performance.
m) Provide guidance to the new directors, warn them of their legal obligations, inform them of the
company’s rules of governance, and familiarize them with the characteristics, situation and environment
of the company.
n) Examine the information sent by Directors regarding their other professional obligations and evaluate
whether or not they could interfere with the dedication required to properly carry out their duties, as well
as to verify compliance with the rules established regarding the number of Directors that form part of the
Board.
o) Taking care to ensure that the directors receive information of sufficient quantity and quality to enable
them to adequately perform their functions.
p) Endeavoring to detect cases in which the relation of a director to the Bank may negatively affect its
functioning or its standing and reputation.
q) Detect and manage possible conflicts of interest between Directors or senior executives and the Bank,
ensuring fulfillment of the obligations of discretion and passivity and of the duties of confidentiality,
diligence and loyalty of the directors and, if appropriate, any such issues that arise between significant
shareholders and the Bank.
r)
Inform the Board of Directors of associated transactions, prior to its taking any decisions in this respect.
s)
Propose the Annual Corporate Governance Report to the Board of Directors.
t)
Propose and verify compliance with the Group's Corporate Responsibility Policy and the preparation of
the Annual Report on Corporate Responsibility.
u) Supervise compliance with the Bank’s Regulations and, in general, internal codes of conduct and the
rules of Company governance, and make all necessary proposals for improvement.
135
v)
Evaluate the Board of Directors on an annual basis, as well as the Chairman and the Bank's CEO.
w) Evaluate its operation on an annual basis and present the Board of Directors with a report on the activities
carried out during the year.
x)
All others established by Law or in Board Regulations.
Risk Committee
The Board of Directors is responsible for establishing the number of members, which will include the CEO,
appointing and removing members and to determine, ask the proposal of the Chairman, the presiding Director.
The Director General for Risk is the spokesman and, if appropriate, other members of senior management
designated by the Board of Directors. The Chairman and other members of the Board of Directors may also
attend. In the event that the Chairman of the Board of Directors attends, he may preside at a meeting. The
Secretary to the Board of Directors will serve as the Secretary to the Committee, or this position may be taken
by the member elected by the Committee or, if none of the above are available, the Vice-Secretary or one of the
Vice-Secretaries to the Board of Directors. The Committee meets once per week.
The Committee supervises the market and operational credit risks affecting the Group's activity and
permanently evaluates overall risk assumed, its industry and geographic diversification and the hedges that are
deemed advisable to preserve the solvency level considered necessary, proposing the most adequate policies
to obtain these objectives at any given moment.
The Committee proposes the Group's risk control and management policy to the Board of Directors, which
must identify at least:
a) The various types of risk (operational, technological, financial, legal, reputational and others) faced by the
Company, including financial or economic risks, contingent liabilities and other off-balance-sheet risks;
b) The establishment of the risk level that the Company considers acceptable;
c) The measures established to mitigate the impact of identified risks should they materialize;
d) The information and internal control systems that will be used to control and manage these risks.
The Committee analyzes and reaches a decision regarding requests for credit and guarantees that exceed the
risk authority delegated to other units within the Group that have signature or a group of signature authority. A
list of the competencies delegated to the Risk Committee is set out under the chapter on Risk Management in
the Directors' Report. At its meetings policies regarding risk, general business and industry issues are also
discussed.
B.2.4. Indicate, where appropriate, the faculties of advice, consultation and delegation, if any, of each of the
Committees:
136
Committee
Brief description
Executive Committee
Audit and Control Committee
Appointments, Remuneration, Corporate Governance
and Conflicts of Interest Committee
Risk Committee
See section B.2.3.
See sections B.2.2. and B.2.3.
See section B.2.3.
See section B.2.3.
BANCO POPULAR GROUP
B.2.5. State whether there are regulations, if any, for the Board Committees, wherein the regulations can be
consulted, and any amendments thereto during the year. Indicate whether any annual report has voluntarily
been prepared on the activities of each Committee.
The Board Regulations contain the rules of internal procedure and functioning of the Board committees. The
regulations can be consulted at the Bank’s headquarters and on its website www.bancopopular.es.
At the meeting held on 11 September 2008, the Board of Directors amended article 18 of the Board Regulations,
regarding the Directors’ duties.
Finally, the Audit and Control Committee and the Appointments, Remuneration, Corporate Governance and
Conflicts of Interest Committee reported on functions and activities carried out during the year.
B.2.6. State whether the composition of the Executive Committee reflects the participation in the Board of the various
directors depending on their category:
Yes
No
If this is not the case, explain the composition of the Executive Committee
The Board of Directors ensures that the composition of the Executive Committee, together with the Executive
Directors, reflects a number of independent Directors that is congruent with the structure of the participation of
external Directors in the Board of Directors.
The Board of Directors currently has nineteen members, four of whom are Executive Directors, six are
Domanial Directors, seven are Independent Directors and three is an External Director. The Executive
Committee comprises seven members, three Executive Directors and four Independent Directors.
Given that this is a delegate body pertaining to the Board of Directors with decision-making authority, three of
the four Executive Directors form part of the Committee. In addition, for the proper performance of its duties it
is necessary that the non-executive Directors who form part of this Committee should be appointed in all cases
from among the Independent Directors, without any Domanial Directors forming part of the Executive.
As a result, the percentage of Independent Directors on the Executive Committee (57%) is higher than the
percentage on the Board of Directors (35%).
The relations between the Board and the Committee are governed by the principle of transparency. At each of
its meetings, the Board has full knowledge of all the matters discussed and the decisions adopted by the
Executive Committee.
137
C ASSOCIATED TRANSACTIONS
C.1. State whether or not the full Board has reserved approval, until a report from the Audit Committee or any other
Committee to which this responsibility has been delegated has been received, the transactions that the Company
carries out with Directors, significant shareholders or parties represented on the board, or associated persons:
Yes
No
C.2. List the material transactions involving a transfer of resources or obligations between the Bank or its group entities and
the Bank’s significant shareholders:
Name of the
Name of the
Company or entity in Company or entity in Nature of the
its group
its group
relationship
-
-
Type of
operation
Amount (€k)
-
-
-
With respect to significant shareholders, the transactions of this kind by Banco Popular during 2008 were confined to
those with Allianz that, in any case, were performed on an arm’s length basis.
C.3. List the material transactions involving a transfer of resources or obligations between the Bank or its group entities and
the Bank’s directors or executives:
Name of the
Company or entity in Naturaleza de
its group
la operación
Name of
administrators or
executives
-
-
-
Type of
operation
Amount (€k)
-
-
Transactions with members of the Board of Directors and the senior management of the Bank were performed in the
ordinary course of business and at arm’s length.
The overall amount of direct risks assumed by the Group in favour of all directors, as of December 31, 2008, was
€1,575k, of which €1,473k correspond to loans and credits, and €102k to suretyships. The interest rates on the loans
and credits range from 4.53% to 5.38%, and surety fees are 0.40% per quarter.
The overall amount of risks assumed by the Group in favour of each of the members of the Board of Directors is
indicated in Note 10 to the Financial Statements in the Annual Report.
The risks contracted with management personnel listed in Section B.1.12 conform to the general criteria for the
assumption of risks with Group employees, and in all cases form part of the Bank’s ordinary business and have been
contracted on an arm’s length basis.
C.4. List the material transactions by the Bank with other companies in its group which are not eliminated in the process of
preparation of the consolidated financial statements and were not performed in the ordinary course of the Bank’s
business as regards their purpose and conditions:
Name of the Group
company
Brief description of
the transaction
Amount (€k)
-
-
-
No such transactions have taken place.
138
BANCO POPULAR GROUP
C.5. State whether or not the members of the Board of Directors came under any of the conflict of interest situations during
the year, in accordance with Article 127 ter of the Spanish Companies Act.
Yes
No
Description of the conflict of interest
On a general basis, no situations of conflict were observed involving directors of the Bank that might affect the discharge of their
office. However, in cases in which transitory conflict of interest situations arose (appointments, re-elections, loans to directors, etc.)
the directors concerned refrained from intervening in the deliberations and from participating in the voting by the Board of
Directors or its Committees.
C.6. Detail the mechanisms in place for detecting, determining and solving possible conflicts of interest between the
company and/or its group and its directors, executives or significant shareholders.
Among the competencies of the Appointments, Compensation, Corporate Governance and Conflicts of Interest
Committee listed under Article 25 of the Board Regulations is the authority to detect and manage any possible conflicts
of interest between Directors or Senior Management and the Bank, ensuring compliance with their obligations of
discretion and passivity, as well as their duties of confidentiality, diligence and loyalty, as well as any that may arise
between significant shareholders and the Bank.
In accordance with the provisions of Article 24 of the Board Regulations, the Audit and Control Committee has the
authority to detect and manage any conflicts of interest that may arise between the Company and its Group.
1. Conflicts of interest between the Company and/or its Group:
In accordance with Recommendation two of the Unified Code, and in line with the corporate Governance principles
established by the Basel Bank Regulatory Committee, Banco Popular and listed banks pertaining to its financial Group,
Banco de Andalucía, Banco de Castilla, Banco de Crédito Balear, Banco de Galicia and Banco de Vasconia, have agreed
to a protocol under which they define their respective areas of activity and business relationships that establishes a
framework for resolving potential conflicts of interest. For more information, see Heading C.6.
2. Conflicts of interest affecting Directors and Executives:
In accordance with the Board Regulations, the Directors must notify the Board of any situation of direct or indirect
conflict that they might have with the interests of the Bank. In the case of a conflict, the Director concerned must
refrain from intervening in the transaction to which the conflict refers.
In any case, situations of conflict of interest involving Directors of the Bank must be disclosed in the annual corporate
governance report.
In turn, the Internal Regulations of Conduct for Banco Popular Group entities in the sphere of securities markets details
the information that must be provided by the Directors and Executives to the IRC Supervisory Body with respect to
conflicts of interest:
a) In order to control possible conflicts of interest and, to the extent possible, prevent them, Directors and Executives
will present and update statements of their ties—financial, family or of any other type—with customers of the Bank
with respect to services relating to the stock market or with companies listed on the stock exchange.
b) The statement will also include any other ties that, in the opinion of an external unbiased observer, could
compromise the impartiality of the Director or Executive.
c) Directors and Executives must endeavor to avoid conflicts of interest and, if they are personally affected thereby,
must refrain from deciding or, if appropriate, casting their vote in such situations as may arise.
d) The oversight body may at any time, either occasionally or periodically, call for any information it considers
necessary about the links of the persons subject hereto in order to make it possible for it to comply with its
reporting or other obligations pursuant to the Securities Market Law and implementing regulations.
139
3. Conflicts of interest with significant shareholders:
In accordance with the provisions of Article 28 of the Board Regulations, the Board of Directors formally reserves to
itself cognizance of any direct or indirect transaction between the Bank and a significant shareholder, giving due value
to the equal treatment of the shareholders and market conditions.
The Board of Directors must adopt the necessary measures to avoid significant shareholders making use of their
privileged position to obtain special advantages.
C.7. Is more than one Group company listed on a stock exchange in Spain?
Yes
No
Identify the subsidiaries that are listed on a stock exchange in Spain:
Listed subsidiaries
Banco de Andalucía, S.A.
State whether or not the respective areas of activity and any business relationships between them have been precisely
and publicly defined, as well as those of the listed subsidiary with other group companies:
Yes
No
Define any business relationships between the parent company and the listed subsidiary, and between the latter and
other group companies.
Banco Popular and Banco de Andalucía compete freely in the banking and financial areas. The respective spheres of
activity of Banco Popular and of Banco de Andalucía are the same. The expansion of their respective commercial
networks is normally based on geographic and business criteria, although there are offices of both Banks to be found
within the same territorial areas. Banco Popular and Banco de Andulucía market the same range of products under
the same or different brand names and use the same marketing channels, with such local adjustments as may be
necessary.
Identify the mechanisms in place to resolve any conflicts of interest between the listed subsidiary and other group
companies:
Mechanisms to resolve conflicts of interest
On December 19, 2007, Banco Popular Español, S.A. and Banco de Andalucía, S.A., signed a protocol which
established a framework for the resolution of possible conflicts of interests.
In their respective areas, the Audit and Control Committee of Banco Popular and the Audit Committee of Banco de
Andalucía are the bodies responsible for resolving any conflicts of interests which may arise between Banco Popular
and Banco de Andalucía.
This protocol states that the General Control Department at Banco Popular is to keep a register of services common to
Banco Popular and Banco de Andalucía, and of business operations taking place between them and which could give
rise to conflicts of interest. In any event, these services and business operations are required to be rendered or
performed in strict compliance with internal regulations in force at each given moment in time, particularly those
established by the Internal Code of Conduct of the Group Companies in relation to the stock market, where applicable.
The monitoring and evaluation of transactions are to be undertaken when preparing the Notes to the Financial
Statements, the Annual Corporate Governance Report or any other Financial Reports required to include this
information, in accordance with the rules in force at each given moment in time. The Register is required to include
information relating to the type of service rendered or business transaction executed, the identity of the Group
Companies involved, the identity of the persons or Group Companies which may be affected by a conflict of interests,
and the reason for the emergence of a conflict, and a detailed description of how it was resolved.
140
BANCO POPULAR GROUP
D RISK CONTROL SYSTEMS
D.1. General description of the risks policy of the company and/or its group, detailing and evaluating the risks covered by
the system and justifying the adequacy of the systems for the profile of each type of risk.
The various different risks implicit in the banking activities conducted by the Grupo Banco Popular are
managed based on criteria of prudence, in such a way as to safeguard at all times the basic objectives of
solvency, profitability, efficiency and adequate liquidity.
The risk policy is a synthesis of strictly professional criteria for the study, assessment, assumption and
monitoring of risks by all the entities comprising the financial group, the aim of which is to optimise of the
risk/return relationship inherent in credit and market risk, and to minimize all other risks (operational,
liquidity, interest rate, concentration, business, reputational and other).
Internal policies, which are known and applied by all of the Group's business areas for an integral
management and control of risks, are set out in an Investment Policies Manual.
Risk Management is characterised by the following key points and criteria:
a) Involvement of Senior Management
b) Separation of risk and commercial areas
c) Formal system of attributions for the granting of risks
d) Priority of risk policies aimed at guaranteeing the Group’s stability, and its viability in the short,
medium and long terms, and at maximising the risk/return relationship.
e) Strict compliance with current legislation, in all aspects, particular attention being paid to
compliance with current instructions for the Prevention of Money Laundering and Financing of Terrorist
Activities.
f) Tailoring. Terms are negotiated with the customer based on its bond with the entity, the risk it
assumes and the return it offers.
g) Speed in deciding upon and responding to transaction proposals, as a basic competitive instrument,
without detriment to thoroughness in analysis.
h) The aim to establish an optimum balance between loans and receivables and equity.
i) Diversification of the risk inherent in loans and receivables, setting or adjusting the limits set for
borrowers, sectors, and for distribution by terms.
j) Profitable quality investment, focus on profitable, balanced and sustained growth at global level
and on returns adjusted to the risk level of each borrower.
k) Objective-oriented flexibility of the organizational structure.
l) Thorough assessment and documentation of risks and guarantees.
m) Application of automatic internal systems based on rating or scoring.
n) Monitoring of risk from analysis through to cancellation.
The Group has risk control systems in place covering the entire range of its activities, which basically consist
of the commercial banking business. These systems address credit or counterparty risk, including
concentration risk, market risk, liquidity risk, interest risk, operational risk, business risk and reputational
risk, and include formal procedures for analysis, authorization, monitoring and control, which are applied in
a manner consistent with the nature and number of the risks and under the supervision, as appropriate, of
collegiate decision-making bodies, specifically the Delegate Risks Committee, the Management Committee
and the Assets and Liabilities Committee.
In accordance with the new framework for the International Convergence of Capital Measurement and Capital
Standards (Basel II), integral management of the various different risks and their coverage in terms of
regulatory and financial capital are undertaken by the General Risks Management based on premises defined
by the Board of Directors through its Delegate Risk Committee.
141
Seven major categories of risk are addressed for the purposes of the analysis set out below. These are: credit
risk, cross-border risk, structural balance sheet risk, market risk, liquidity risk, operational risk and
reputational risk.
Credit risk
Credit risk arises from possible losses triggered by the breach of contractual obligations by the Bank’s
counterparties. In the case of refundable financing granted to third parties (in the form of credits, loans,
deposits, securities and other), credit risk arises as a consequence of non-recovery of principal, interest and
other items in the terms - regarding amount, period and other conditions - stipulated in the contracts. In the
case of off-balance sheet risks, it arises from the failure by counterparties to fulfil their obligations vis-à-vis
third parties, thus forcing the Bank to assume them by virtue of the commitment formalised.
For the correct management of credit risk, the Group has established a methodology whose main features are
described in the following paragraphs.
Analysis of credit risk
The Group has established a formal system of attributions for the extension of credit, under which the
various hierarchical levels in the organization are assigned delegated powers for the authorization of
transactions which vary depending on various factors, such as: probability of default according to BISII
internal models/Technical Alerts, amount, rate, maximum term, title-holder, business sector and profitability
of the operation.
For these purposes, the tiers in the organization with delegated powers to authorise operations are, firstly, the
Branch, then the Regional Management to which the branch belongs in the case of Banco Popular, the Area
Management in the case of Group Banks and Companies, or the Retail Risks Office, followed by the Delegate
Management (in the case of Banco Popular) and General Managements (in the case of Group Banks and
Companies). The final tiers would be the Commercial Network/Corporate Risks Investments Office, the
General Risks Management, the Delegate Risks Committee, and finally, the Board of Directors or Executive
Committee.
The initiative for a new transaction always comes from a Branch. This may be for decision-making if this is
within its attributions, or it may be for reporting and passing on to the next higher tier, if the operation
exceeds its attributions. The same rule applies at the following levels, and thus the largest transactions will
have been evaluated all along the chain of attributions. No other office or area in the Group, regardless of the
hierarchical level of its management personnel, is empowered to make, nor even to propose, risk
transactions outside the established circuit. The following offices constitute exceptions to this principle:
International Financial Institutions and the Treasury area which, through their directly dependent units, can
propose to the General Risks Management the acceptance of Risks corresponding to Financial Entities, or
issues made by the Public and Private Sector of the various kinds of financial assets traded on capital
markets. Wholesale banking is able to propose to the General Risks Management, through the Commercial
Network/Corporate Risks Investments Office, the acceptance of risks which, in view of the complexity of their
structure and design, require such a procedure.
In the other business areas, the procedure is similar: risk assumption proposals originate in the relevant
operating office, which likewise has decision-making powers delegated to it. Above this level, the transaction
is referred, along with the pertinent preliminary reports, to the General Risks Management and, if it is outside
the scope of its powers, is passed on to the Delegate Risks Committee.
Risks with related parties, such as transactions with significant shareholders, members of the Board, General
Managers or similar, or with companies related to these persons, and with Group companies, are expressly
excluded from the aforementioned delegated powers, and can only be authorized by the Board of Directors or
the Executive Committee, following a report from the Delegate Risks Committee. Exceptions are made when
such operations are formalised through standardized contracts or with generally-stipulated conditions or
involve very minor amounts, and in certain other cases established by the Regulations.
142
BANCO POPULAR GROUP
For the acceptance of risks and the rating of customers based on their credit profile, and as support for
decision-making, the Group has internal credit risk analysis and measurement (rating and scoring) models.
For the retail segment, credit scoring models adapted to each kind of product are used. For the businesses
segment, the internal rating is calculated based on the analysis of variables representative of economic and
financial position and sector. The Group has replica models for the large companies and financial institutions
segments.
At December 31, 2008, Banco Popular received the authorisation from the Bank of Spain enabling it to use
advanced models for risk management within the Basel II framework for its portfolios of medium-sized
companies and retail mortgages.
Lastly, the entity has developed its own complete model for the measurement of credit and concentration risk
to estimate the financial capital appropriate to the Entity’s risks profile and comply with the Capital selfassessment obligations detailed in Pillar II of the Accord. Support is provided by integrated applications
developed for the estimation of risk parameters which are included in these models.
To increase permanent internal transparency, in line with the standards of Pillar III of the New Capital
Accord, the Network has carried out numerous training activities focusing on the philosophy and objectives of
Basel II in order to adapt to its requirements and to the new concepts, tools and management models.
The new Investment Policies Manual has also been authorised and published. This manual covers the
following areas:
- The Entity’s risk profile.
- Rules of action in relation to credit risk.
- Policies for the Analysis, Acceptance and Monitoring of risks.
- System of attributions and delegation process.
- Credit rating models.
- Definition of and exposure to other risks.
Monitoring of risk
The monitoring of operations makes to possible to assess their quality at borrower level and establish
mechanisms for the special surveillance of their progress and react to avoid possible situations of default.
The Group has a surveillance system in place based on “Technical Alerts” and “Information alerts” which
monitors trends in rating levels. This makes it possible to anticipate problematic situations through
preventative measures in respect of current risks.
This system is based primarily on the analysis of a set of variables relating to transactions and to customers,
in order to detect anomalous deviations in their behaviour and situation alerts.
Technical alerts are monitored from the Risk Monitoring offices located within each of the Area Managements
and subsidiary Banks, as well as within Central Services. Risk Monitoring carries out thorough monitoring of
certain risks corresponding to customers and financial groups with a high level of assumed risk, or in which
certain incidents have been observed. There are three types of monitoring activity, based on intensity, i.e.
intensive weekly review of the status of risks; periodical or monthly review; or occasional quarterly review.
The Control and Audit Area performs each month several analyses of customers in respect of whom incidents
have been reported. Based on this information, plus additional financial or other kinds of documentation
relating to the customer, Risks Monitoring prepares a borrower classification.
This classification system functions at two levels: on the one hand, an evaluation is made of the overall
quality of the customer risk, and on the other hand, a proposal is formed as regards the policy to be followed
in relation to the risks contracted. This two-fold classification, based on the circumstances of each case
analyzed, is introduced graphically into the borrower’s electronic case file by means of a teleprocessing
application which includes all the customer information and positions, for consideration in risk-related
decision-making.
143
On the other hand, this alerts system is supplemented by the “analyst’s report”, also included in the
customer’s electronic case file, which, by means of a questionnaire regarding the evolution of the customer,
of the customer’s risks and incidents, assets position, guarantees, etc., summarizes the policy to be followed
and identifies the measures required to ensure the satisfactory outcome of risks. This report, in its
preparation and definition, also takes into consideration default probability parameters based on BISII.
In the event of there being more than one classification and one risks policy for a single customer, the
classification and policy to be applied are those assigned by the Risks Monitoring Office, which prevail over
those assigned by the Branch or Area Management.
In addition, there is constant monitoring of concentration risk, involving the ongoing analysis of the structure
of loans and receivables, taking into consideration their distribution by amount, term, activity sector, type of
transaction, geographical area and any other factors considered relevant.
Management of nonperforming operations and recovery of impaired assets
The Group has an office which undertakes this function in each of the Area Managements and Subsidiary
Banks, as well as at headquarters. The fundamental objective of these offices is to recover balances classed
as nonperforming as quickly as possible and in the best possible conditions.
The Default Analysis and Claims Centre is responsible, initially, for the handling of defaults; it analyzes risks
in irregular situations and identifies, based on individual analyses of the particular circumstances of each
customer or transaction, the most effective claim strategies. It also implements, in coordination with the
Group branches, appropriate measures for regularization.
Initially, an out-of-court or amicable approach is adopted, by means of direct negotiation with the debtors (by
telephone, postal correspondence or personal contact), or by engaging the services of reputable debt
collection firms.
If legal action through the courts is required, the procedure is as follows:
Depending on the type of operation, an internal or external manager is assigned to the case. A statement of
claim is generated and irrespective of whether the case is handled by an internal or external solicitor, there is
ongoing monitoring by managers of the related favourable or unfavourable court rulings.
Final resolution of a case handled by solicitors may imply either the recovery of the investment or a negative
ruling (in which case the Entity incurs a loss).
For the adequate management of non-performing balances, the Group has an internal computer application,
integrated in the teleprocessing system, which permits timely and precise monitoring of the evolution of all
delinquent risks and, in particular, of the legal proceedings initiated for the recovery of receivables.
CROSS-BORDER RISK
Cross-border risk, also referred to as country risk, is an additional component of credit risk. It derives from
the difficulties which may be encountered by borrowers in certain foreign countries in meeting their debt
repayment obligations. The default may be attributable to the financial position of the actual debtor (in which
case the treatment is as for credit risk) or it may arise because the debtor, despite being able to repay its
loans in the local currency, is unable to transfer funds abroad in view of economic difficulties in its country of
residence. Applicable rules require that these risks be provided for based on the estimated impairment.
STRUCTURAL BALANCE SHEET RISK
This risk category covers risks deriving from possible adverse changes in interest rates corresponding to
assets and liabilities, in the exchange rates for currencies in which asset and liability groups or off-balancesheet items are denominated, and in the market prices of negotiable financial instruments. Also included
under this heading is business risk, defined as the possibility that the gross margin may prove insufficient to
cover fixed costs owing to changes in volumes of balance sheet items and fee revenues, generated in turn by
changes in economic conditions.
144
BANCO POPULAR GROUP
Interest rate risk
The analysis and control of interest rate risk within the Group is undertaken by the Assets and Liabilities
Committee (ALCO), which, among other tasks, assesses the sensitivity of the balance sheet to variations in
the interest-rate curve in various scenarios, establishing short- and medium-term policies for the management
of rates, spreads and application and equity aggregates. To do this, it prepares simulations, using different
scenarios in terms of the growth of assets and liabilities (optimistic, pessimistic and base), trends in margins
and changes in the interest-rate curve, the aim being to measure the sensitivity of the financial margin to
these variables over a three-year time span.
MARKET RISK
This risk category covers the risks deriving from possible adverse changes in the market prices of negotiable
financial instruments managed by the Group’s Treasury area as a result of adverse changes in interest rates,
exchange rates, prices of shares or raw materials, credit spreads, or volatility levels.
Also included is the liquidity risk linked to these positions. This is understood to refer to the impossibility of
clearing positions in the market within a short period of time. For this, an evaluation is made of positions
over a time span coinciding with the estimated time for closure of the risk.
Risk of Treasury area operations
The Treasury Risk Management area, for the purpose of controlling the market risk in this area’s activity,
undertakes daily monitoring of operations contracted, calculation of the result implied by the impact of
market trends on positions, quantification of market risk assumed, calculation of regulatory capital
consumed, monitoring of compliance with established limits, and analysis of the relationship between the
result obtained and the risk assumed.
The activity of the Treasury area in financial markets is exposed to market risk resulting from unfavourable
trends in the following risk factors: interest rate, exchange rate, share prices and volatility. The indicator used
to measure market risk is the so-called Value at Risk (VaR) indicator, which is defined as the maximum
potential loss estimated based on historical data with respect to price trends, calculated based on a specific
confidence level and specific term. The parametric VaR methodology is used in order to standardise the
Group’s overall risk measurement. Calculations are made with a 99% confidence level, considering historical
variations over 75 days, greater weight being given to those observations which are most recent, and
considering a 1-day period for the measurement of possible losses in view of the high level of liquidity of
open positions.
LIQUIDITY RISK
The liquidity risk reflects the possibility of a credit institution encountering difficulties in disposing of liquid
resources, or of accessing liquid resources, of a sufficient amount and at adequate cost, in such a way that it
is able to meet its payment obligations at all times. This risk is supervised by the Assets and Liabilities
Committee (ALCO), which has formal procedures for the analysis and monitoring of the Group’s liquidity,
including contingency plans envisaging possible deviations caused by internal factors or by the behaviour of
markets. For this purpose, periodic analyses are made of the sensitivity of liquidity in a variety of asset and
liability cancellation scenarios, in periods which range from one day (short term) through to ten years (long
term). Liquidity risk analysis is based on a breakdown of the consolidated balance sheet, considering the
residual maturity terms of assets and liabilities; the result is the positive or negative liquidity gap for each
time interval. For issues of securities, and for reasons of prudence, the shortest cancellation period is
considered in all cases. The balance sheet in question is used to simulate situations arising in different
scenarios in terms of market liquidity, combined with assumptions with respect to changes in application
and equity aggregates and with the use of available liquidity lines. It is possible in this way to estimate the
sensitivity of the balance sheet to changes in these variables, in a manner similar to that described above for
the evaluation of interest rate risk. The simulations envisage two different risks: systematic risk, which would
affect the entire financial system, and specific risk, affecting only Banco Popular. The assumptions on which
these are based differ, as do the impacts on the balance sheet and on the liquidity position. The measures to
145
be adopted, which are defined in the contingency plan, take into consideration the particular natures of each
of these types of crisis. These simulations make it possible to quantify a minimum amount of assets available
as a second liquidity line, ensuring that the scenarios envisaged can be comfortably weathered.
OPERATIONAL RISK
The Banco Popular Group has adopted the definition of operational risk established in the new Basel Capital
Accord (Basel II): “the risk of loss resulting from inadequate or failed internal processes, people, and systems
or from external events”. The overall management of this risk includes the design of procedures for its
identification, assessment, monitoring and control. Senior Management has approved the “Operational Risk
Management Framework” for the design of policies and functions for the development and implementation of
methodologies and tools for the improved management of Operational Risk within the Group.
Initially, the Group has opted for the Standard method envisaged in Basel II for calculating capital for
operational risk, although it plans to apply the advanced method in the future. In this respect, a database
with historic data on operational risk events as from January 2004 is being generated. Similarly, since
December 2006 the Group has been a member of the Operational Riskdata Exchange Association (ORX). This
is an international consortium entrusted with the custodianship of a database of events reported by leading
financial entities from around the world, with which we exchange information on a quarterly basis.
The Group also has qualitative tools and has advanced a great deal over the past year in the drawing up of
Risk Maps - which are periodically updated and are used to measure the frequency and impact of this type of
risk and to improve controls and coverage in the areas of greatest exposure -, as well as in the study of
contingency plans required to guarantee the continuity of operations.
REPUTATIONAL RISK
The Regulatory Compliance Office, which reports from the functional perspective to the Audit and Control
Committee, identifies, evaluates and prevents possible risks of material breach - from the economic or
reputational standpoints - which might arise in relation to laws and regulations, codes of conduct and
standards of good practice, especially as regards the prevention of money laundering and financing of
terrorism, conduct in the securities markets, data privacy and protection and business activities. In relation to
this latter aspect, it identifies and assesses the risks of non-compliance linked to the development of new
products and practices in each business area, overseeing compliance with transparency and customer
protection rules.
It also analyses and promotes the development of systems for the training of the workforce in relation to
these areas.
The Risk Management section of the 2008 Management Report describes the management of the
aforementioned risks in greater detail.
D.2. State whether or not any of the various types of risk has materialized (operational, technological, financial,
legal, reputational, tax, etc.), affecting the company and/or its group.
Yes
No
If yes, indicate the causing circumstances and whether or not the established control systems worked.
146
Risk arising during the year
Causing circumstances
Operation of control systems
The risks affecting the Group which are broadly
described in the preceding section are those
corresponding to the normal activities carried out by
Group companies
Circumstances deriving from
the activity
Established control systems
have functioned adequately
throughout the year
BANCO POPULAR GROUP
D.3. State whether there is any committee or other governance body responsible for establishing and supervising these
control mechanisms.
Yes
No
If yes, provide details of their functions.
D.4.
Name of the Committee or Body
Description of duties
Board of Directors
Executive Committee
Audits and Control Committee
Risk Committee
Assets and Liabilities Committee – ALCO
See Section B.1.10
See Section B.2.3
See Section B.2.3
See Section B.2.3
See section D.1
Identification and description of the processes for compliance with the regulations affecting the company and/or its
group.
The Bank has in place a set of internal standards and procedures for action in all its fields of activity that
conform to current legislation and to the ethical and corporate governance standards applicable in its environment. The Bank has three different areas which are all involved in verifying compliance with these rules
and procedures.
The Regulatory Compliance function within the Group is assumed primarily by the Regulatory Compliance
corporate unit; there are also other control areas or units within the Group which may be involved for operational reasons or owing to the field in which they specialise. The Regulatory Compliance Unit is responsible
for identifying, assessing and preventing possible risks of non-compliance which are significant from the economic or reputational perspectives, and which could arise in relation to laws and regulations, codes of
conduct and standards of good practice, especially as regards the prevention of money laundering and financing of terrorism, conduct in securities markets, data privacy and protection and business activities. The
Money Laundering Prevention Office reports to the Regulatory Compliance Unit, the task of this office being to
prevent, investigate and, where appropriate, report suspicious operations.
In the securities markets area, it collaborates with the Surveillance Body responsible for overseeing compliance with the Group’s Internal Code of Conduct, to ensure that the Group’s employees and management
personal adhere to internal rules on operations in the securities markets. It also contributes to the supervision of internal procedures established to guarantee the correct processing of personal data bases managed
by the Group. Finally, it identifies and assesses risks of non-compliance linked to the Bank’s business activities, including risks related to the development of new products and business practices, overseeing
compliance with transparency and customer protection rules.
On the other hand, in relation to the management of and compliance with internal operational control procedures and the conformity thereof to applicable regulations, the Bank also has an Internal Audit Area which
comprises the following Units: Branches Audit, Companies and Central Services Audit, IT Audit, and Risks Management Audit. It also has an Operational Control area, the functions of which are the verification of
compliance with accounting regulations and of the conformity of the Bank’s internal procedures to such regulations, detecting possible deviations therefrom and cases of fraud.
The persons in charge of the abovementioned areas submit their reports to the Audit and Control Committee.
Finally, the Delegate Risks Committee pertaining to the Board of Directors controls credit risk and proposes to
the Board the overall market risk policy. The Committee assesses the global risk assumed, its sectorial and
geographical diversification, and the level of coverage advisable in order to maintain the solvency level considered appropriate, and proposes as required the most effective policies for ensuring that these aims are
achieved.
147
E SHAREHOLDERS’ MEETING
E.1. State and, if appropriate, provide details about differences arising with respect to the minimum quorums established
by the Spanish Companies Act (SCA) for calling a General Meeting to order
Yes
No
% quorum different than that
established under Article 102 SCA
for general cases
% quorum different than that
established under Article 103 SCA
for special cases 103
Quorum required for 1st calling
-
-
Quorum required for 2nd calling
-
-
Description of the differences
E.2. State and, if appropriate, provide details of differences with the system established by the Spanish Companies Act (SCA)
for adopting resolutions.
Yes
No
Describe the differences compared with the system established in the SCA.
b) The Board will establish the necessary mechanisms for proxy voting or voting by mail, electronically or any
% established by the Company
to adopt resolutions
Reinforced majority different than that
established under Article 103.2 SCA
for cases covered by Article 103.1
Other cases of reinforced majorities
66
66
Description of the differences
At meetings called at the request of a number of shareholders representing at least 5% of capital stock, a favorable
vote of at least two thirds of capital stock that is present or represented must be obtained to approve resolutions.
E.3. List the rights of shareholders in regard to Shareholders’ Meetings that differ from those per the Corporations Law.
Shareholders’ rights in relation to the general meeting are those established in the Spanish Companies Law, in the
terms established in the Bylaws and in the General Meeting Regulations.
E.4. Describe the measures, if any, adopted to encourage participation of shareholders at Shareholders’ Meetings.
The work of the Bank’s Governing bodies is conceived as part of a business culture which seeks to establish
closer links with shareholders; appropriate channels aimed at informing shareholders and enabling them to
participate in key decision-making are being increased.
The Board of Directors is responsible for arbitrating the channels adequate for hearing the proposals that may
be made by shareholders with respect to the Company's management. In this respect:
a) The Board will deal, with the greatest diligence and in any case within the legally stipulated periods, with
the requests for information and enquiries from shareholders either before the Shareholders’ Meeting or
thereat.
b) The Board will establish the necessary mechanisms for proxy voting or voting by mail, electronically or
any other means of remote communication, provided that the identity of the shareholder is duly
guaranteed.
148
BANCO POPULAR GROUP
c) The Board will implement appropriate procedures to ascertain the proposals of shareholders about the
management of the Bank.
d) The Board may organize briefings about the progress of the Bank and its Group for shareholders resident
in the most important financial centers in Spain and abroad.
The following paragraphs describe the principal measures aimed at encouraging the participation of
shareholders at Shareholders’ Meetings:
Approval of Shareholders’ Meeting Regulations. The regular update of the Shareholders’ Meeting Regulations
is intended to encourage the participation of the shareholders in the life of the Bank, to facilitate their access
to corporate information, and to strengthen the safeguarding of shareholders’ interests in the governance of
the Bank.
Open Meeting. The principles that have shaped the modus operandi of the Shareholders’ Meetings, and
particularly Ordinary Meetings, include most notably their nature as an open meeting, with a policy of
transparency, promptness, objectivity and depth of the information to shareholders whereby the annual
information to the shareholders customarily starts to be disseminated at the end of January of each year and
formally ends with the holding of the Shareholders Meeting. Shareholders thus have a long period of time in
which to request clarification, to make inquiries and to submit proposals.
Notice of Shareholders’ Meetings. To give shareholders sufficient time to request and obtain supplementary
information on the items on the agenda, or to issue their voting instructions, the Board of Directors will
endeavor to announce the Shareholders’ Meeting sooner than legally required and to ensure that the
announcement is published in a greater number of news media than the legally imposed minimum, unless
this is not possible for reasons of urgency or other circumstances beyond the control of the Board.
Right to information. The shareholders may at any time submit enquiries, suggestions and comments of
interest for the Bank or in connection with their status as shareholders. Whenever possible, the Bank will
reply directly in writing to shareholders, either individually or collectively, as soon as possible and not later
than seven working days, unless the data required for the response cannot be obtained within that period,
and will publish on the corporate website the replies, either globally or on an individualized basis, whose
general interest makes it appropriate to do so, with the intention that any response furnished should be
generally known and made available to all shareholders without giving privileged treatment to the
shareholder that requested the information. With this same intention, and if considered appropriate, the
Bank may deal with these issues, either globally or on an individualized basis, at the Shareholders Meeting,
even if they were not included on the agenda.
Similarly, the shareholders may pose such questions as they consider appropriate, particularly with respect
to all the information made public by the Bank and from the date of publication, and such questions shall be
answered and the replies disseminated in accordance with the rules described in the preceding paragraph. In
this respect, the Bank will endeavor to maintain its traditional practice of publishing the relevant financial
information of the year during the first month of the following year.
Publication of the questions put forth by Shareholders. For the third consecutive year a Brochure has been
published containing the questions put forth by shareholders at the General Meeting and is made available to
the public at the corporate website.
Institutional investors and domanial shareholders. In order to facilitate the most active contribution possible
of institutional investors and significant direct or indirect shareholders in the formation of the corporate will,
the Bank offers them the possibility of publicizing on its corporate website their policy of participation or not
in the Shareholders’ Meeting and how they would vote on each of the items on the agenda thereof.
Use of the various channels of information to shareholders. Pursuant to Article 7 of the Shareholders’ Meeting
Regulations the Board of Directors will establish the channels necessary to facilitate communication between
the shareholders and the Bank.
149
In any case, the Bank will make available to the shareholders at least the following channels of information:
- The Shareholders Office, where the available information may be consulted.
- A telephone number for direct contact with the Shareholders Office and an e-mail address that will be
notified in the notice calling the Shareholders Meeting, for shareholders to request the related information.
- The Bank’s website.
The corporate website. The corporate website www.bancopopular.es contains the applicable legally and
regulatory required information, including most notably:
a) General information about the Bank, including its Bylaws, significant events, channels of communication
with it, its capital and number of shares, dates of interest for shareholders, dividends and public offerings
of shares.
b) The attached financial information. Includes periodic public information: annual, half yearly and quarterly
reports, as well as the presentations made to the various market operators.
c) Information about corporate governance of the Bank, including the Shareholders’ Meeting Regulations,
information about the Shareholders’ Meeting and the Board of Directors and its committees, the Board
Regulations, the Annual Corporate Governance Report, the Annual Corporate Social Responsibility Report
and the Internal Rules of Conduct in the sphere of securities markets.
d) Information regarding the members of the Board of Directors, including a professional profile and
biography; other Boards of Directors to which they pertain; their category within the Board of Directors,
reflecting in the case of domanial directors the shareholder that they represent or with which they are
associated; the date of first appointment and any subsequent re-appointments; the shares in the Company
and any stock options they own.
The website also includes the leaflet of shareholder questions and answers, and any statements made to the
Bank by its institutional and domanial shareholders, pursuant to Article 15 of the Shareholders’ Meeting
Regulations.
As regards the conduct of Shareholders’ Meetings, after the publication of the notice of a Shareholders
Meeting, the corporate website announces:
a) the notice
b) the full content of the proposed resolutions that the Board of Directors submits for the consideration of the General
Meeting with respect to the points on the Agenda, including information regarding the Directors referred to under
Recommendation 28 of the Unified Code of Good Governance.
c) all the documentation relating to the proposed resolutions (financial statements, directors’ reports, reports of
independent experts, etc.)
d) The procedures implemented to vote through remote communications systems. e) Any other information or
documentation that is considered relevant for shareholders.
e) Any other information or documentation that is relevant to shareholders.
After the Shareholders’ Meeting has been held, the markets are informed by publication of a significant event
notice and the corporate website reports the resolutions adopted at the last Shareholders Meeting, showing
the results of the voting. The content of the speeches made during the Meeting is also reported.
Addition of new topics to the agenda. Shareholders representing at least 5% of the capital stock may request
the publication of a supplement to the notice of the Shareholders’ Meeting containing one or more topics for
inclusion in the agenda.
Right of attendance. At the General Meeting held on 30 May 2007 the limitation established in the bylaws
regarding attending the Meeting, consisting of holding .001% of capital stock, was eliminated in order to
facilitate attendance and participation by shareholders at General Meetings.
Voting on independent issues separately. This was a habitual practice carried out by the Bank prior to the
publication of the Unified Code of Good Governance. In order to ensure that shareholders may exercise their
voting preferences separately, at the General Meeting held on May 30, 2007 a resolution was adopted
150
BANCO POPULAR GROUP
whereby issues that are substantially independent and, in particular, the appointment of Directors are voted
on separately and individually as are bylaw amendments which are voted on separately by independent
articles and the annual report on the compensation policy for Directors.
Division of votes. This was a habitual practice carried out by the Bank prior to the publication of the Unified
Code of Good Governance. In accordance with the Resolution adopted by the General Meeting held on May
30, 2007, a Resolution was adopted to amend the Board Regulations to allow the division of votes so that
financial intermediaries who are legitimate shareholders but act on behalf of different customers may issue
their votes in accordance with the latter's instructions.
Remote voting. As from the General Meeting held on May 25, 2005, votes on proposals regarding any point of
the Agenda at any General Meeting may be delegated or exercised by a shareholder through postal or
electronic correspondence.
In order to encourage the participation of shareholders, at the General Meeting held on May 30, 2007, a
resolution was adopted to allow voting via mobile telephone.
Information about corporate governance criteria and observance thereof. The Board has drafted since 1998
an annual corporate governance report that sets forth in an orderly manner the principles guiding the Bank’s
actions in this respect.
Information about corporate social responsibility criteria and the observance thereof. A corporate social
responsibility report is also prepared dealing with the Group’s policy in this field. The first such report was
for the year 2003.
Starting in 2004, the Corporate Social Responsibility Reports have been prepared in accordance with the GRI
indicators and, from 2005, have been reviewed by PriceWaterhouseCoopers to obtain an independent
opinion about the quantitative and qualitative information contained therein.
E.5. State whether or not the position of Chairman of the General Meeting coincides with the position of Chairman of the
Board of Directors. Indicate any measures taken to guarantee the independence and proper operation of the General
Meeting:
Yes
No
Measures adopted
Without prejudice to the relevant Bylaw provisions, the Shareholders’ Meeting Regulations contain adequate measures
to guarantee the sound functioning thereof.
Mention is to be made in this respect of the creation of a Meeting Committee to attend to the functions of the Chair. Its
composition differs from that of the Board of Directors, in accordance with the rules established in this respect in the
Bylaws. The Meeting Committee is permanently made up of seven shareholders, six of whom are current members of
the Board of Directors. Three of these are classed as independent, two as executive - the Chairman and the Secretary - ,
and one is classed as domanial. Among other duties, the Meeting Committee is the body responsible for calling the
Meeting to order, directing speakers and debates, declaring the approval of resolutions and declaring the meeting
closed.
E.6. the changes, if any, in the Shareholders’ Meeting Regulations during the year.
E.7. State the attendance figures for the Shareholders’ Meetings held during the reporting year:
Attendance
% of remote voting
General Meeting
Date
present in person
% represented
electronic
vote
Others
05-30-2008
11-10-2008
11.8166%
1.0052%
46.3533%
45.6864%
0.053%
0.041%
1.3497%
11.1784%
Total
59.57%
57.91%
151
ICORPORATE GOVERNANCE REPORT FOR 2008
E.8. Summarize the resolutions adopted at the Shareholders’ Meetings during the reporting year and the percentage of
votes with which each was adopted.
Shareholders’ Meeting on Wednesday, May 30, 2008 adopted the following resolutions:
RESOLUTIONS ADOPTED
Yea votes
Nay votes
99.984%
0,004%
0,012%
Ratification, re-election, and appointment of Directors.
2.1 Ratification of Directors appointed by cooptation:
22.1.a) Mr. José María Lucía Aguirre
2.1.b) Mr. Vicente Tardío Barutel
96,760%
96,823%
3,186%
3,123%
0,054%
0,054%
2.2 Re-election of Directors:
2.2.a) Mr. Ángel Ron Güimil
2.2.b) Mr. Américo Ferreira de Amorim
2.2.c) Asociación Profesional de Directivos de BPE
2.2.d)Mr. Eric Gancedo Holmer
2.2.e) Mr. Casimiro Molins Ribot
2.2.f) Mr. Luis Montuenga Aguayo
2.2.g) Mr. Manuel Morillo Olivera
2.2.h) Mr. Miguel Nigorra Oliver
2.2.i) Mr. José Ramón Rodríguez García
2.2.j) Mr. Vicente Santana Aparicio
2.2.k) Mr. Miguel Ángel de Solís Martínez-Campos
2.2.l) Mr. Herbert Walter.
96,765%
96,828%
96,828%
96,865%
96,828%
96,828%
96,899%
96,828%
96,801%
96,867%
96,860%
96,828%
3,186%
3,123%
3,123%
3,083%
3,123%
3,123%
3,051%
3,123%
3,147%
3,080%
3,088%
3,123%
0,049%
0,049%
0,049%
0,052%
0,049%
0,049%
0,050%
0,049%
0,052%
0,053%
0,052%
0,049%
2.3 Appointment as Director of Mr. Roberto Higuera Montejo.
96,813%
3,176%
0,011%
3. Re-appointment of Auditors to undertake the review and
legal audit of the Bank’s financial statements and the
consolidated financial statements.
99,803%
0,183%
0,014%
99,733%
0,089%
0,178%
99,707%
0,044%
0,249%
99,795%
0,027%
0,178%
Approval of financial statements (balance sheet, income
statement and notes to the financial statements) and
management report of Banco Popular Español, S.A., and its
consolidated group, of the proposed allocation of income
and of management of the business for 2007.
4. Authorization to acquire treasury stock shares subject to
legal conditions, and to redeem them against equity and
therefore reduce capital stock, up to a limit equal to 5% of
capital.
5. Report on the policy of remuneration for Board
Members, for consultational voting purposes.
6. Delegation of powers to the Board of Directors, with
authority to make replacements, for the formalization,
interpretation, correction and fullest possible execution of the
resolutions passed by the General Shareholders’ Meeting.
152
Abstentions
BANCO POPULAR GROUP
RESOLUTIONS ADOPTED
Yea votes
Nay votes
Abstentions
Information on the amendments made to the Board
Regulations.
-
-
-
Presentation of the Report explaining the aspects of the
Management Report envisaged in Article 116 bis of the
Securities Market Law.
-
-
-
Yea votes
Nay votes
Abstentions
99,9001%
0,0886%
0,0113%
99,9089%
0,0787%
0.0124%
The Extraordinary General Meeting held on November 10, 2008 passed the following resolutions:
RESOLUTIONS ADOPTED
1. Approval of the Project for the Merger of Banco
Popular Español, S.A., Banco de Castilla, S.A., Banco de
Crédito Balear, S.A., Banco de Galicia, S.A. and Banco de
Vasconia, S.A. Approval of the merger balance sheet
drawn up as at June 30, 2008. Approval of the Merger of
Banco Popular Español, S.A., Banco de Castilla, S.A.,
Banco de Crédito Balear, S.A., Banco de Galicia, S.A. and
Banco de Vasconia, S.A., through the absorption of the
four latter companies by the first company named, with
the extinction of the four companies absorbed, and the
universal transfer of their respective assets and liabilities
to Banco Popular Español, S.A., with a capital increase
in order to effect the share swap, and with the
corresponding amendment of the final article of the
Bylaws of the absorbing company, all in accordance
with the terms established in the Merger Project.
Execution of the merger under the tax regime envisaged
in Chapter VIII of Title VII of the Corporate Income Tax
Law.
2. Delegation of powers to the Board of Directors, with
authority to make replacements, for the formalization,
interpretation, correction and fullest possible execution
of the resolutions passed by the General Shareholders’
Meeting.
153
E.9. State whether or not there is any bylaw restriction establishing a minimum number of shares required to attend the
General Meeting.
Yes
No
Number of shares necessary to attend the General Meeting
The owners of shares that represent at least a nominal value of €100 (currently 1000 shares) may attend the General
Meeting. Shareholders owning less than that percentage may be represented by another shareholder entitled to attend
or by any of those grouped together in order to reach the stipulated minimum. Standard practice is to invite
shareholders that have stated an interest in attending the Meeting.
E.10. Describe and justify the Bank’s policies on proxy voting at Shareholders’ Meetings.
Proxy forms are intended to facilitate the participation of shareholders by enabling all of them to exercise their right to
vote by signifying their intention of vote on each of the resolutions submitted to the meeting in the agenda.
These proxies include a specific section for the shareholder to express voting instructions with respect to each of the
points on the Agenda.
If no voting instructions are provided, the understanding is that the vote is favorable to the proposals made by the
Board of Directors and, if a representing shareholder is not expressly indicated, or if representation is delegated to an
ineligible person, it is understood that the delegation of this authority is conferred to the Chairman of the Meeting or
the member of the Meeting Desk designated by the Chairman, who will take responsibility for the vote delegated by
the shareholder being taken into consideration during the voting on resolutions.
Votes may be delegated via postal or electronic correspondence, or via mobile telephone, in accordance with the
procedures established and published in the call to the Meeting and on the Bank's website.
E.11. State whether the Bank is cognizant of the policy of the institutional investors about whether or not to participate in the
decisions of the Bank:
Yes
No
Description of the policy
In order to facilitate the most active contribution possible of institutional investors and significant direct or indirect
shareholders in the formation of the corporate will, the Bank offers them the possibility of publicizing on its corporate
website their policy of participation or not in the Shareholders’ Meeting and how they would vote on each of the items
on the agenda thereof.
E.12. State where the corporate governance material is included on the website and how it can be accessed.
The Bank’s corporate website is www.bancopopular.es and on the home page there is a section called “Legal
information for shareholders and investors” which contains all the information about the corporate governance of the
Bank.
154
BANCO POPULAR GROUP
F
COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS
State the degree to which the Company follows the recommendations of the Unified Code of Good Governance.
In the event of any non-compliance, describe the recommendations, rules, practices or criteria applied by the
company.
Recommendation 1. Bylaw restrictions.
The bylaws of listed companies should not restrict the maximum number of votes that can be cast by a single
shareholder, nor contain other restrictions that make it difficult to take control of the Company through the acquisition
of its shares in the market.
See headings: A10, B.1.22, B.1.23, E.1 and E.2
Comply
Explain
The bylaws do not contain any restrictions relating to the acquisition or transfer of the Bank's shares in the market.
Article 14 does restrict a single shareholder or companies pertaining to the same group from casting more than 10% of
the votes at a General Meeting.
The restriction on voting rights is expressly established under the Spanish Companies Act and is also set forth in the
internal regulations at a large number of listed companies in Spain and in Europe.
Maintaining the restriction on voting rights is due to the aim of providing stability to shareholders and preventing
speculative stakes in capital stock from interfering with a management model based on efficiency, profitability and
long-term benefits. The intention is to ensure that any movements to take control are in line with the management
model that has characterized the Bank since it was founded.
Recommendation 2. Listings of companies forming groups.
When the parent company and a subsidiary are both listed they should both be publicly defined with precision:
a) The respective areas of activity and any business relationships between them have been precisely and publicly
defined, as well as those of the listed subsidiary with other group companies:
b) The mechanisms established to resolve any conflicts of interest that may arise.
See headings: C.4 y C.7
Comply
Partially comply
Explain
Not applicable
Recomendación 3. Competencias de la Junta.
Even though not expressly required by commercial law, operations that involve a structural modification to the
Company and, in particular the following, are submitted to the General Meeting for approval:
a) The transformation of listed companies into holding companies, by "creating subsidiaries" or transferring essential
activities previously carried out by the company to subsidiaries, even if the former maintains complete control;
155
b) The acquisition or disposal of essential operating assets, when they involve an effective modification to the
corporate purpose;
c) Operations that have an effect equivalent to the liquidation of the Company.
Comply
Partially comply
Explain
Recommendation 4. Prior information regarding proposed resolutions.
Detailed proposals for resolutions to be adopted by the General Meaning, including the information referred to by
Recommendation 28, should be made public at the time the notice for the Meeting is published.
Comply
Explain
Recommendation 5. Separation of issues for voting purposes.
During the General Meeting, separate votes should be cast for issues that are substantially independent so that
shareholders may separately exercise their voting preferences. This rule should be applied, in particular, to:
a) The appointment or ratification of Directors, who should be subject to separate votes;
b) In the case of amendments to the Bylaws, each article or group of articles that is substantially independent.
See heading: E.8
Comply
Partially comply
Explain
Recommendation 6. Division of votes.
The fractioning of votes so that financial intermediaries legitimately participating as shareholders but acting on behalf
of different customers may vote in accordance with the instructions of the latter.
See heading: E.4
Comply
Explain
Recommendation 7. Business interest.
The Board of Directors should carry out its duties with a common purpose and under independent criteria, treat all
shareholders equally and be guided by the Company's interests, understood to be the sustained maximization of the
company's financial value.
The board must also ensure that in its relationships with stakeholders the Company respects laws and regulations;
complies with its obligations and contracts on a good-faith basis; respects common uses and good practices in the
sectors and territorial areas in which it carries out its activities; and observes those additional principles of corporate
responsibility that it has voluntarily accepted.
Comply
156
Partially comply
Explain
BANCO POPULAR GROUP
Recommendation 8. Authority of the Board of Directors.
The Board of Directors should assume its core mission of improving the Company's strategy and the organization
necessary to put it into practice, as well as to supervise and ensure that Management complies with the established
objectives and respects the Company's purpose and business interests. Therefore, for this purpose, the full Board
reserves the authority to approve:
a) The Company's general policies and strategies and, in particular:
i) The strategic or business plan, as well as management and annual budget targets;
ii) The policy of investments and financing;
iii) The definition of the structure for the group of companies;
iv) The corporate governance policies;
v) The corporate responsibility policy;
vi) The policy for evaluating senior management performance and compensation;
vii) The risk management and control policy, as well as regular monitoring of internal information and control
systems;
viii) The policy for dividends, as well as treasury stock and, in particular, their limits.
See headings: B.1.10, B.1.13, B.1.14 y D.3
b) The following decisions :
i) At the proposal of the Chief Executive Officer, the appointment and dismissal of senior executives, as well as their
indemnities;
See heading: B.1.14
ii) Compensation for Directors, as well as additional compensation for executive duties, in the case of Executive
Directors, and any other conditions that their contracts must respect;
See heading: B.1.14
iii) The financial information that the Company must make public on a regular basis due to the fact that it is listed on
a stock exchange;
iv) All investments or transactions that, due to the large amount concerned or their special characteristics, are strategic
in nature except for those that must be approved by the General Meeting;
v) The creation or acquisition of shares in special-purpose vehicles or domiciled in countries or territories that are
considered to be tax havens, as well as any other similar transactions or operations that, due to their complexity,
could harm the transparency of the Group.
c) The transactions that the Company carries out with Directors, significant shareholders or parties represented on the
Board, or with persons to which they are associated ("associated transactions").
However, this authorization from the Board will not be understood to be necessary in those associated transactions
that also comply with the three following conditions:
1ª. They are carried out by in accordance with standardized contracts that are applied to many customers;
2ª. They are carried out at prices or rates that are established in general by the party acting as the supplier of the asset
or service concerned;
3ª. The amount does not exceed 1% of the Company's annual revenues.
The Board should approve associated transactions after having received a favorable report from the On that
Committee or, if appropriate, from any other Committee charged with this duty; and affected Directors, in addition to
not exercising or delegating their right to vote, should leave the meeting room while the Board deliberates and votes on
this issue.
157
The authority attributed here to the Board should not be eligible for delegation, except those mentioned under letters
b) and c), which may be adopted due to reasons of urgency by the Committee and subsequently ratified by the full
Board.
See headings: C.1 y C.6
Comply
Partially comply
Explain
Recommendation 9. Size of the Board of Directors.
The Board should have the size necessary to achieve effective and collaborative operations, which makes it advisable
for it to have not less than five and not more than fifteen members.
See heading: B.1.1
Comply
Explain
The Bylaws deviate from this recommendation, establishing that the Board of Directors is to be made up of a
minimum of twelve and a maximum of twenty directors. The Board is currently made up of 20 members. This is
considered to be a reasonable number bearing in mind the Entity’s shareholder composition and the fact that the aim
is to ensure representation of all positions and of the highest possible percentage of capital on the Board, and that it be
of a size which enables it to function in an effective and participative manner.
Recommendation 10. Functional structure of the Board of Directors.
External domanial and Independent Directors should constitute a wide majority on the Board and the number of
Executive Directors be as few as possible, bearing in mind the complexity of the corporate Group and the percentage
of participation of the Executive Directors in the Company's capital stock.
See headings: A.2, A.3, B.1.3 y B.1.14
Comply
Partially comply
Explain
Recommendation 11. Other Directors.
If there is any External Director that cannot be considered to be Domanial or Independent, the Companies should
explain this circumstance and the Director's associations, whether they be with the Company, its Executives or
shareholders.
See heading: B.1.3
Comply
Explain
Not applicable
Recommendation 12. Proportion between Domanial and Independent Directors.
Among External Directors, the ratio between the number of Domanial Directors and Independent Directors should
reflect the proportion between the Company's capital stock represented by the Domanial Directors and the rest of the
capital stock.
This strict proportionality criteria may be moderated, such that the weight of the Domanial Directors exceeds that
which would be the case based on the total percentage of capital stock that they represent:
1º At highly capitalized companies in which there are few or no shareholdings that are legally considered to be
significant, but in which there are shareholding packages with high absolute values;
158
BANCO POPULAR GROUP
2º When concerning companies at which there are multiple shareholders represented on the Board that are not
associated among themselves.
See heading: B.1.3, A.2, A.3
Comply
Explain
Recommendation 13. Sufficient number of Independent Directors.
The number of independent Directors represents at least one third of all Directors.
See heading: B.1.3
Comply
Explain
Recommendation 14. Explanation of the classification of Directors.
The classification of each Director should be explained by the Board to the General Meeting that must make or ratify
their Nomination and this classification should be confirmed or, if appropriate, revised on an annual basis in the
Corporate Governance Report, after having received verification from the Appointments Committee. This report should
also explain the reasons for which Domanial Directors have been nominated at the request of shareholders whose
stake is less than 5% of capital stock; and the reasons for which, if any, formal requests were denied for a seat on the
Board from shareholders whose interest is equal or higher than that of others whose request resulted in the
designation of Domanial Directors.
See headings: B.1.3, B.1.4
Comply
Partially comply
Explain
Recommendation 15. Gender diversification.
When there are few or no women Directors, the Board should explain the reasons and the initiatives taken to correct
this situation; and, in particular, the Appointments Committee should ensure that this is taken into account when filling
new vacancies:
a) By ensuring that selection procedures do not have any implicit bias that could raise obstacles to the selection of
women Directors;
b) By ensuring that the Company deliberately seeks, and includes among potential candidates, women that have the
target professional profile.
See headings: B.1.2, B.1.27 y B.2.3
Comply
Partially comply
Explain
Not applicable
Recommendation 16. Chairman of the Board of Directors
The Chairman, as the party responsible for the effective operations of the Board, should ensure that the Directors
receive sufficient information before hand; stimulate debate and the active participation of Directors during Board
meetings, safeguarding the right to freely take a position and express opinions; and organize and coordinate regular
evaluations of the Board with the Chairman of relevant Committees, as well as an evaluation of the CEO or lead
executive.
159
See heading: B.1.42
Comply
Partially comply
Explain
Recommendation 17. Authority of an Independent Director in the event of an accumulation of powers by the Chairman.
When the Chairman of the Board is also the Bank's CEO, the Board of Directors will authorize one of the independent
Directors to call a meeting of the Board and include new points in the agenda in order to coordinate and express the
concerns of external Directors and to direct evaluations by the Board of its Chairman.
See heading: B.1.21
Comply
Partially comply
Explain
Not applicable
Recommendation 18. Secretary to the Board of Directors.
The Secretary to the Board of Directors should particularly ensure that the Board's actions:
a) Meet the letter and the spirit of Laws and regulations, including those approved by regulatory bodies;
b) Are in line with the Company's bylaws and with the Regulations governing the General Meeting, the Board and any
others in force at the Company;
c) Take into account the recommendations regarding good governance established in this Unified Code that the
Company has accepted.
In order to safeguard the independence, impartiality and professionalism of the Secretary, the appointment and
removal from this position must be reported by the Appointments Committee and approved by the full Board, and the
procedure for appointing and removing the Secretary should be established in the Board's Regulations.
See heading: B.1.34
Comply
Partially comply
Explain
Recommendation 19. Board Meetings.
The board should meet with the frequency necessary to efficiently perform its duties, following the schedule and
agenda established at the start of the year and each Director may propose other points to be added to the Agenda.
See heading: B.1.29
Comply
Partially comply
Explain
Recommendation 20. Directors’ Attendance.
Director absences should be reduced to unavoidable cases and should be indicated in the Annual Corporate
Governance Report. If the delegation of representative authority is unavoidable, instructions should be given.
See headings: B.1.28 y B.1.30
Comply
160
Partially comply
Explain
BANCO POPULAR GROUP
Recommendation 21. Content of the minutes to Board Meetings.
When the Directors or the Secretary express any concern regarding any proposal or, in the case of Directors,
regarding the Company's progress and these concerns are not resolved during the Board Meeting, the party
expressing the concerns may request that they be recorded in the minutes to the Meeting.
Comply
Partially comply
Explain
Not applicable
Recommendation 22. Regular evaluation of the Board of Directors.
Once per year the Board should evaluate:
a) The quality and efficiency of the Board's operations;
b) Based on the report presented by the Appointments Committee, the performance of the Chairman and the
Company's CEO;
c) The operation of its Committees, based on the reports that they issue.
See heading: B.1.19
Comply
Partially comply
Explain
Recommendation 23. Information to Directors.
All Directors should be able to exercise the right to obtain all additional information that they deem necessary
regarding the matters over which the Board has authority. Unless the bylaws or the Board Regulations
establish otherwise, these requests should be directed to the Chairman or the Secretary to the Board.
See heading: B.1.42
Comply
Explain
Recommendation 24. Advisory services for Directors.
All Directors should have the right to obtain all necessary advisory services from the Company in order to
comply with their duties. The Company should create adequate channels for exercising this right, which
under special circumstances may include external advisory services paid for by the Company.
See heading: B.1.41
Comply
Explain
Recommendation 25. Orientation program for Directors.
Companies should establish an orientation program providing new Directors with quick and sufficient
knowledge of the Company, as well as it's Corporate Governance rules. It should also offer Directors
programs for updating knowledge when the circumstances make this advisable.
Comply
Partially comply
Explain
Recommendation 26. Directors’ dedication.
Company should require that Directors dedicate the time and effort that is necessary to perform their duties
efficiently and, as a result:
161
a) Directors should inform the Appointments Committee of all other professional obligations to determine
whether or not they could interfere with the dedication required;
b) Company should establish rules regarding the number of Boards to which its Directors may pertain.
Comply
Partially comply
Explain
Recommendation 27. Selection, appointment and reelection of Directors.
Proposals to appoint or reelect Directors made at the General Meeting, as well as provisional appointments
through designation, should be approved by the Board:
a) At the proposal of the Appointments Committee, in the case of Independent Directors;
b) After receiving a report from the Appointments Committee, in the case of all other Directors.
See heading: B.1.2
Comply
Partially comply
Explain
Recommendation 28. Public information regarding Directors.
Companies should make the following information regarding Directors public on its website and maintain it
up-to-date:
a) Professional profile and biography;
b) Other Boards of Directors to which the individual pertains, whether or not involving listed companies;
c) An indication of the classification of the Director as appropriate, stating, in the case of Domanial Directors,
the shareholder represented or with which the individual is associated;
d) Date of first appointment as a Director of the Company, as well as all subsequent appointments and;
e) Shares and share options in the Company which are held by the Director.
Comply
Partially comply
Explain
Recommendation 29. Rotation of Independent Directors.
Independent Directors should not remain as such for a continuous period exceeding 12 years.
See heading: B.1.2
Comply
Explain
Mr. José Ramón Rodríguez García and Mr. Miguel Angel de Solís Martínez-Campos, two of the seven members
of the Board of Directors who are classed as independent, have been Directors for an uninterrupted period of
over 12 years.
The Board of Directors - at the proposal of the Appointments, Remuneration, Corporate Governance and
Conflicts of Interests Committee - has agreed to keep them on as independent directors, in accordance with
the criteria established in the Board Regulations.
162
BANCO POPULAR GROUP
In evaluating their independence, consideration has been given to the fact that they have held office all this
time without receiving any remuneration, to their continued and particular dedication and contribution to the
Board and its Committees, to the fact that they have maintained a constant ownership interest in the Bank’s
capital, and to their compliance, in the strictest of terms, with all other conditions required for independent
status.
Recommendation 30. Removal and resignation of Domanial Directors.
Domanial Directors should present their resignations when the shareholder they represent fully sells its stake
in the Bank. This should also take place, by the relevant number, when that shareholder reduces its stake to
a level that requires a reduction in the number of its Domanial Directors.
See headings: A.2, A.3, B.1.2
Comply
Partially comply
Explain
Recommendation 31. Removal of Independent Directors.
The Board of Directors should not propose the removal of any Independent Director before the end of the
term to which the individual was appointed, unless there is just cause appreciated by the Board after having
received a report from the Appointments Committee. In particular, just cause will be understood to exist
when the Director has failed to comply with the duties inherent to his/her position or is subject to any of the
circumstances described in Section III.5 on definitions in this Code.
A proposal to remove Independent Directors may also be made as a result of Public Stock Offers, mergers or
other similar corporate transactions that give rise to a change in the Company's capital stock structure, when
such changes in the Board’s structure are the result of the proportional criteria indicated in Recommendation
12.
Comply
Explain
Recommendation 32. Obligation of Directors to inform and resign.
Companies should establish rules to require Directors to report and, if appropriate, resign in those cases in
which they may harm the credit and reputation of the Company and, in particular, they should be required to
inform the Board of any criminal proceedings in which they are involved, as well as all subsequent
procedural issues.
If a Director is prosecuted or if the opening of oral proceedings takes place with respect to any of the crimes
indicated under Article 124 of the Spanish Companies Act, the Board will examine the case as soon as
possible and in the light of the specific circumstances at hand, must reach a decision as to whether or not the
Director will remain on the Board. Any such action should be explained by the Board in the Annual Corporate
Governance Report.
Comply
Partially comply
Explain
Recommendation 33. Opposition to proposals by Directors.
Directors should clearly express their opposition when they consider that any proposal for a decision
submitted to the Board may go against its business interests. Directors, particularly Independents and other
Directors not affected by the potential conflict of interest, should also do this when decisions arise that may
harm the shareholders not represented on the Board.
163
When the Board adopts significant or repeated resolutions on which the Director has stated serious
reservations, the Director concerned should reach the appropriate conclusions and, if he/she chooses to
resign, the reasons for doing so should be explained in a letter referring to the following recommendation.
This recommendation also covers the Secretary to the Board of Directors, even if the Secretary is not a
Director.
Comply
Partially comply
Explain
Not applicable
Recommendation 34. Explanatory letter in the case of resignation/removal from the Board of Directors.
When a Director leaves the Board before the end of his/her term, whether due to resignation or any other
reason, the reasons should be explained in a letter sent to all of the members of the Board of Directors.
Notwithstanding the fact that this should be reported as a relevant event, the reason for the action taken
should be reported in the Annual Corporate Governance Report.
See heading: B.1.5
Comply
Partially comply
Explain
Not applicable
Recommendation 35. Compensation policy.
The Compensation policy approved by the Board should mention at least the following:
a) A breakdown of any fixed components of the per diems paid for participation on the Board and its
Commissions and an estimate of the fixed annual compensation they represent.
b) Variable compensation, including in particular:
i)
The classification of Directors to which it is applied, as well as an explanation of the relative
importance of variable compensation compared with fixed compensation;
ii)
Criteria for evaluating results on which any rights to shares, share options, or any other variable
component, are based;
iii) Essential parameters and basis for any annual bonus or any other benefits not paid in cash; and
iv) An overall estimate of the absolute amount of variable compensation that could derive from the
proposed compensation plan, based on the extent of compliance with assumptions or objectives used as
a reference.
c) Main characteristics of retirement systems (for example, supplementary pensions, life insurance and
similar items), with an estimate of the annual equivalent amount or cost.
d) Conditions that must be respected by contracts concluded with those exercising Executive Director duties,
among which the following are included:
i)
Term;
ii)
Notice periods; and
iii) Any other clauses relating to contract bonuses, indemnities or “golden parachutes” deriving from
early termination of the contractual relationship between the Company and the Executive Director.
See heading: B.1.15
Comply
164
Partially comply
Explain
BANCO POPULAR GROUP
Recommendation 36. Limitation of certain compensation for Executive Directors.
Executive Directors should be restricted to compensation consisting of shares in the Company or Group
Companies, share options or instruments indexed to the share value, a variable compensation linked to the
performance of the Company or retirement systems.
This recommendation will not cover the delivery of shares, when subject to the condition that the Directors
hold them until they ceased to be Directors.
See headings: A.3, B.1.3
Comply
Explain
Recommendation 37. Compensation for External Directors.
Remuneration paid to External Directors should be that which is necessary to compensate their dedication,
qualifications and responsibilities in the position, but not so high as to compromise their independence.
Comply
Explain
Recommendation 38. Compensation based on the results obtained by the Company.
The compensation relating to the results obtained by the Companies should take into account any
qualifications that are included in the external auditor's report and reduce those results.
Comply
Explain
Not applicable
Recommendation 39. Relationship of variable compensation with professional performance.
In the case of variable compensation, the compensation policies include the technical precautions necessary
to ensure that such compensation is in line with the professional performance of its beneficiaries and does
not derive merely from the general evolution of markets or the sector in which the Company operates or
other similar circumstances.
Comply
Explain
Not applicable
Recommendation 40. Consultation vote regarding the compensation policy by the General Meeting.
The Board should submit a report regarding the compensation policy for Directors to a consultation vote by
the General Meeting, as a separate point on the Agenda. This report should be made available to
shareholders, either separately or in any other manner that the Company considers advisable.
This report will particularly focus on the compensation policy approved by the Board for the year in progress
and, if appropriate, the plan projected for future years. It will cover all matters referred to by
Recommendation 35, except for any that could involve the revelation of sensitive business information. It will
emphasize the most significant changes in these policies compared with the policy applied last year, to which
the General Meeting refers. It will also include an overall summary of how the compensation policy was
applied last year.
The Board will also provide information on the role played by the Compensation Committee when preparing
the compensation policy and, if any external advisory services were used, the identity of the external
consultants will be revealed.
165
See heading: B.1.16
Comply
Partially comply
Explain
Recommendation 41. Transparency of variable compensation.
The Notes to the financial statements should provide details of individual compensation paid to Directors
during the year and should include:
a) An individual breakdown of the compensation paid to each Director which will include, if appropriate:
i)
Per diems for attendance and other fixed compensation paid to the Director;
ii)
Additional compensation paid for holding the position of Chairman or member of any Board
Committee;
iii) Any compensation paid as profit-sharing or bonuses, and the reason for paying such amounts;
iv) Contributions made on behalf of the Director to defined contribution pension plan; or the increase
of consolidated rights held by the Director, when involving contributions to defined benefit plans;
v)
Any indemnities agreed or paid in the event of termination;
vi) Compensation received for holding the position of Director at other Group companies;
vii) Compensation paid for carrying out the senior management duties falling to Executive Directors;
viii) Any other compensation other than the items listed above, regardless of its nature or the group
company making payment, particularly when it is considered to be an associated transaction or when
omitting this item could distort the true and fair view of the total compensation received by the Director.
b) An individual breakdown of any shares, options or any other instrument indexed to the value of the
share granted to Directors, indicating:
i)
The number of shares or options granted during the year and the conditions for exercising these
rights;
ii)
The number of options exercised during the year, indicating the number of shares involved and the
exercise price;
iii) The number of options pending at the end of the year, indicating their price, dates and other
relevant information;
iv) Any modification made during the year to the conditions for exercising options already granted.
c) Information regarding the relationship, last year, between the compensation obtained by Executive
Directors and the results or other performance measurements recorded by the Company.
Comply
Partially comply
Explain
Recommendation 42. Structure of the Executive Committee.
When there is an Executive Committee, the structure for the different categories of Directors should be
similar to that of the Board and its Secretary should be the Secretary to the Board.
Comply
Partially comply
Explain
Not applicable
The Board of Directors is made up of 16 external directors (80%) - of which 6 are classed as domanial
(30%), 7 are classed as independent (35%) and 3 as other external (15%) - plus 4 executive directors (20%).
The Executive Committee is made up of 4 external directors (57%), all of which are classed as independent
(57%), and 3 executive directors (43%).
166
BANCO POPULAR GROUP
The proportion of independent directors on the Executive Committee (57%) is therefore higher than on the
Board of Directors (35%).
The Board of Directors seeks to ensure that in the composition of the Executive Committee, together with the
Executive Directors, there is a number of independent Directors congruent with the participation of external
Directors in the Board itself.
It is essential for its correct functioning that the non-executive Directors forming part of this Committee be
appointed in all cases from among the independent Directors.
The Secretary of the Board of Directors is also the Secretary to the Executive Committee.
Recommendation 43. Relationships between the Board and the Executive Committee.
The Board should always be aware of the issues being discussed and the Resolutions being adopted by the
Executive Committee and all of the Members of the Board should receive a copy of the minutes to the
meetings held by the Executive Committee.
Comply
Explain
Not applicable
Recommendation 44. Audit and Control Committee and Appointments, Compensation, Corporate Governance
and Conflicts of Interest Committee.
The Board of Directors must form, in addition to the Audit Committee required by the Securities and
Exchange Act, a Committee or two separate Committees, covering Nominations and Compensation. The rules
governing the composition and operation of the Audit Committee and the Committee or Committees for
Nominations and Compensation must be covered by the Board Regulations and include the following items:
a) The Board should designate the Members of these Committees, bearing in mind the knowledge, aptitudes
and experience of the Directors and the duties of each Committee; it should deliberate with respect to its
proposals and reports; and Reports must be given, at the first Board Meeting held after their meetings,
regarding their activity and work performed;
b) These Committees should be formed exclusively of a minimum of three Directors. The above is understood
to be notwithstanding the attendance of Executive Directors or senior executives, if expressly requested by the
Members of the Committee;
c) The Chairmen should be Independent Directors;
d) External advisory services should be available when considered necessary to fulfill their duties;
e) Minutes should be kept of all meetings held and a copy should be sent to all members of the Board.
Comply
Partially comply
Explain
Recommendation 45. Supervision of the Internal Code of Conduct and the Rules for Corporate Governance.
The supervision of compliance with internal codes of conduct and corporate governance rules is the
responsibility of the Audit Committee, the Nominations Committee or, if existing separately, the Compliance
Committee or the Corporate Governance Committee.
Comply
Explain
167
Recommendation 46. Knowledge and experience of the Members of the Audit and Control Committee.
The Members of the Audit Committee, and particularly its Chairman, should be appointed bearing in mind
their knowledge and experience with respect to accounting, audit and risk management.
Comply
Explain
Recommendation 47. Internal Audit.
Listed companies should have an internal audit area which, under the supervision of the Audit Committee,
ensures the proper operation of the internal control and information systems.
Comply
Explain
Recommendation 48. Reporting obligations relating to the person responsible for the Internal Audit Area.
The person responsible for the Internal Audit Area should present an annual plan to the Audit Committee; it
should directly report any incidents that arise during the fulfillment of this plan; and at the end of the year a
report on activities should be presented.
Comply
Partially comply
Explain
Recommendation 49. Risk management and control policy.
The risk management and control policy should identify at least:
a) The various types of risk (operational, technological, financial, legal, reputational and others) faced by the
Company, including financial or economic risks, contingent liabilities and other off-balance sheet risks.
b) The establishment of the risk level that the Company considers acceptable;
c) The measures established to mitigate the impact of identified risks should they materialize;
d) The Internal control and information systems that are used to control and manage these risks, including
contingent liabilities or off-balance sheet risks.
See heading: D
Comply
Partially comply
Explain
Recommendation 50. Authority of the Audit and Control Committee.
With respect to the Audit Committee:
1º Internal Control and Information Systems:
a) Supervise the preparation and the integrity of financial information relating to the Company and, if
appropriate, to the Group, reviewing compliance with legislative requirements, adequate definition of the
scope of consolidation and the proper application of accounting standards.
168
BANCO POPULAR GROUP
b) Regular reviews of the Bank's internal control and risk management systems, so that the main risks are
identified, managed and adequately reported.
c) Ensure the independence and efficiency of the internal audit function; proposed new selection,
nomination, reelection and removal of the person responsible for internal audit; propose the budget for this
service; receive regular information regarding its activities; and verify that senior management takes into
account the conclusions and recommendations of its reports.
d) Establish and supervise a mechanism that allows employees to report, on a confidential basis and, if
deemed advisable, anonymously, any irregularities that are potentially important, particularly those of a
financial and accounting nature, that are observed within the Company.
2º The external auditor:
a) Present before the Board proposals for selecting, nominating, reelecting and replacing the external auditor,
as well as the contract conditions;
b) Regularly receive from the external auditor information regarding the audit plan and the results of
execution, and verify that Senior Management bears in mind the recommendations made.
c) Ensure the independence of the external auditor and, in this respect:
i)
The Company reports any change in Auditor to the Spanish Securities and Exchange Commission
and it provide a statement regarding the existence of any disagreements with the exiting auditor;
ii)
The Committee should ensure that the Bank and the auditor respect current regulations regarding
the rendering of services other than audit, limits to the concentration of the Auditor's business and, in
general, any other regulation established to ensure the independence of auditors;
iii) In the event that the external auditor withdraws from the mandate, it will examine the
circumstances giving rise to this situation.
d) In the case of Groups, ensure that the Auditor of the Group assumes the responsibility of auditing the
Group companies.
See headings: B.1.35, B.2.2, B.2.3 y D.3
Comply
Partially comply
Explain
Recommendation 51. Appearance of employees or executives before the Audit and Control Committee.
The Audit Committee should be able to call any employee or executive at the Company, even without the
presence of any other executive.
Comply
Explain
Recommendation 52. Information provided to the Board of Directors.
The Audit Committee should inform the Board prior to adopting any of the relevant decisions, of the following
matters indicated in Recommendation 8:
a) The financial information that the Company must make public on a regular basis due to the fact that it is
listed on a stock exchange; The Committee should ensure that the interim accounts are prepared using the
same accounting criteria as are used for the Annual accounts and, in this respect, consider the
appropriateness of a limited review performed by the external auditor;
169
b) The creation or acquisition of shares in special-purpose vehicles or domiciled in countries or territories
that are considered to be tax havens, as well as any other similar transactions or operations that, due to their
complexity, could harm the transparency of the Group.
c) Associated operations, unless this reporting duty has been delegated to a Committee other than the
supervisory and control committees.
Comply
Partially comply
Explain
Recommendation 53. Financial Statements.
The Board of Directors should endeavor to present the financial statements to the General Meeting without
reservations or qualifications in the Audit Report, and should any exceptional situations exist, both the
Chairman of the Audit Committee and the Auditors will clearly explain the contents and the scope of any
such reservations or qualifications to shareholders.
See heading: B.1.38
Comply
Partially comply
Explain
Recommendation 54. Composition of the Appointments, Compensation, Corporate Governance and Conflicts
of Interest Committee
The majority of the Members of the Appointments Committee —or the Appointments and Compensation
Committee, if consisting of only one body—should be Independent Directors.
See heading: B.2.1
Comply
Explain
Not applicable
Recommendation 55. Authority regarding Appointments.
In addition to the duties indicated in the preceding Recommendations, the Appointments Committee is
responsible for the following:
a) Evaluating the competencies, knowledge and experience that is necessary on the Board and the necessary
duties and aptitudes for candidates that cover each vacancy must be determined, while bearing in mind the
time and dedication that are necessary to adequately perform the duties of the position.
b) Examining or organizing, in the manner deemed most adequate, the succession of the Chairman and the
CEO and, if appropriate, making proposals to the Board so that said succession takes place in an ordered and
well-planned fashion..
c) Reporting nominations and removals of senior executives as proposed by the CEO to the Board;
d) Informing the Board of matters regarding gender diversity, as indicated in Recommendation 14 of this
Code.
See heading: B.2.3
Comply
170
Partially comply
Explain
Not applicable
BANCO POPULAR GROUP
Recommendation 56. Consultations by the Appointments Committee.
The Appointments Committee should consult the Chairman and the CEO of the Company, especially when
involving areas relating to Executive Directors.
Any Director should be able to request that the Appointments Committee take into consideration, should it
deem it appropriate, potential candidates to cover vacancies on the Board.
Comply
Partially comply
Explain
Not applicable
Recommendation 57. Authority regarding Compensation.
In addition to the duties indicated in the preceding Recommendations, the Compensation Committee is
responsible for the following:
a) Making proposals to the Board of Directors:
i)
ii)
iii)
Regarding the compensation policy for Directors and senior management;
Regarding the individual compensation for Executive Directors and other conditions regarding their
contracts;
The basic conditions regarding the contracts for senior management.
b) Ensure the observance of the compensation policy established by the Company.
Comply
Partially comply
Explain
Not applicable
Recommendation 58. Consultations by the Compensation Committee.
The Compensation Committee should consult the Chairman and the CEO of the Company, especially when
involving areas relating to the Executive Directors and senior management.
Comply
Explain
Not applicable
171
G OTHER INFORMATION OF INTEREST
If it is considered that any principles or significant aspects relating to corporate governance practices applied by the
company have not been addressed in this report, describe and explain them below.
This heading may include any other information, clarification or nuance relating to the receding sections of the Report.
Specifically, state whether the company is subject to legislation other than Spanish law as regards corporate governance,
and if so include such information as it is obliged to provide that differs from that contained in this report.
Binding definition of Independent Director:
State whether or not any of the Independent Directors had is, or has had, any relationship with the Company, it's a
significant shareholders or Directors which, if sufficiently significant, could have led the Director to not being considered as
Independent in accordance with the definition established by Section 5 of the Unified Code of Good Governance:
Yes
No
Name of the
Director
Type of
relationship
Explanation
-
-
-
This annual Corporate Governance Report was approved by the Bank’s Board of Directors at its meeting of February 26,
2009. This report has been reviewed by PricewaterhouseCooopers. The corresponding review report is included in
Appendix IV.
State whether any directors voted against or abstained from approval of this report.
Yes
Name of the Director that did not vote in favor
of approving this report
172
No
Reasons (opposition,
Abstention, absence)
Explain the reasons
GRUPO BANCO POPULAR
Annual Financial Statements
ANNUAL REPORT 2008
CONTENT
REPORT OF INDEPENDENT AUDITORS
FINANCIAL REPORTING RESPONSIBILITY
FINANCIAL STATEMENTS
-
Consolidated balance sheets
Consolidated statements of income
Consolidated statements of changes in equity
Consolidated cash flow statements
NOTES TO THE ACCOUNTS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
174
Nature of the institution
Basis of presentation of the consolidated financial statements
Treatment of changes and errors in accounting criteria and estimates
Distribution of profits for the year
Basic earnings per share
Minimum capital requirement
Segment reporting
Business combinations and acquisition of holdings in dependent and jointly-controlled companies and associates.
Discontinued operations
Remuneration of the directors and senior management of Banco Popular Español, S.A.
Agency contracts
Environmental impact
Guarantee Funds
Audit fees
Accounting principles and valuation methods
Duty of loyalty of directors
Customer care
Exposure and risk management
Cash and balances with central banks
Financial assets and liabilities held for trading
Other financial assets and liabilities at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investment portfolio
Changes in the fair value of the hedged items in portfolio hedges of interest rate risk
Asset and liability hedging derivatives
Non-current assets held for sale
Investments
Insurance contracts linked to pensions
Reinsurance assets
Tangible assets
Intangible assets
Tax assets and liabilities
Other assets
Financial liabilities at amortized cost
Insurance contract liabilities
Provisions
Other liabilities
Equity
Equity
Equity valuation adjustments
Minority interests
Tax matters
Time to maturity of the balances in the consolidated balance sheets
Fair value
Contingent exposures
Contingent commitments
GRUPO BANCO POPULAR
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
Interest and similar income
Interest expense and similar charges
Return on equity instruments
Profits of equity method entities
Fees and commissions
Gains or losses on financial assets and liabilities (net)
Exchange differences (net)
Other operating revenues (compensating fees)
Other operating expenses
Personnel expenses
Other administrative expenses
Depreciation and amortization
Provisioning expense (net)
Impairment losses on financial assets (net)
Impairment losses on other assets (net)
Gains (losses) on disposal of assets not classified as non-current for sale
Negative difference on business combinations
Gains (losses) on non-current assets for sale not classified as discontinued operations (net)
Results of discontinued operations (net)
Results attributed to minority interests
Transactions with dependent and jointly-controlled companies and associates
Detail of securitizations
Subsequent events
EXHIBITS
175
ANNUAL REPORT 2008
REPORT OF INDEPENDENT AUDITORS
176
GRUPO BANCO POPULAR
FINANCIAL REPORTING
RESPONSIBILITY
The Bank's General Management, as the technical and
executive body of Banco Popular pursuant to Article
22 of the Bank's Bylaws, is responsible for the
preparation and presentation of all the financial
information appearing hereinafter.
In Management's opinion, this information presents a
true and fair view of the Bank's financial position, and
all the operational and accounting processes applied
comply with current legal and administrative
regulations and with Bank of Spain instructions and
recommendations.+
To this end, certain procedures, which are periodically
reviewed and optimized, have been implemented to
ensure that a uniform accounting record is kept of all
transactions by means of an appropriate system of
internal controls.
These procedures include monthly management
controls at all decision-making levels, the scrutiny and
approval of transactions in the framework of a formal
system of functional delegation, ongoing professional
training of the staff and the issuance and updating of
manuals and operating standards. Also, the
professional independence of the related control
bodies is formally established in the organization.
The financial statements were audited by
PricewaterhouseCoopers, include such explanations as
were considered necessary for a clearer understanding
and the disclosure of certain items required to bring
the information into line with the current legally
required formats for balance sheets and statements of
income. For a thorough understanding of the financial
statements, reference should be made to the
background events and major results impacting them,
which are described in the Directors’ Report
contained in the preceding pages of this document.
177
2008 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007
(€ thousand)
Assets
Cash and balances with central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item: Loaned or pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investment portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changesin the fair value of the hedged items in portfolio hedges of interest rate risk . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non- current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jointly-controlled entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts linked to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For own use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased out under operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item: Acquired under finance lease . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets
.....................................................
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets
..........................................................
Current
Deferred
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
...........................................................
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
2008
1,859,577
1,334,199
49,192
378,172
906,835
336,666
190,636
146,030
3,760,410
3,614,645
145,765
2,805,781
96,606,802
4,905,281
91,701,521
20,175,786
34,854
992,626
1,660,596
32,151
32,151
182,368
5,566
1,355,443
654,444
654,444
700,999
546,576
486,787
59,789
827,306
319,541
507,765
840,911
350,730
490,181
110,376,051
2007(*)
1,955,178
1,173,709
91,256
626,358
456,095
30,039
500,157
162,901
337,256
4,211,248
4,114,837
96,411
57,546
96,739,984
9,691,916
87,048,068
15,418,439
562
115,615
228,125
20,393
20,393
206,213
3,856
729,573
661,961
643,430
18,531
67,612
524,792
476,551
48,241
526,188
22,808
503,380
233,760
233,760
107,169,353
(*) Note 2.d) of this document explains the reclassifications made to the information for 2007 in order to make it comparable with
the presentation models introduced by Bank of Spain Circular 6/2008.
178
GRUPO BANCO POPULAR
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007
(€ thousand)
Liabilities
Financial liabilities held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt certificates including bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt certificates including bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......................................
.......................................
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the fair value of hedged items in portfolio hedges of interest rate risk . . . . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities associated with non-current assets for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions
Provisions for pensions and similar obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for taxes and other legal contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for contingent exposures and commitments . . . . . . . . . . . . . . . . . . . . . . .
Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current
Deferred
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes
2008
20
1,729,742
1,695,180
34,562
134,520
134,520
98,957,138
3,644,312
10,619,566
51,665,410
30,208,172
1,616,757
1,202,921
414,217
931,865
474,463
249,563
41,945
181,515
1,440
185,717
117,569
68,148
490,733
103,318,395
21
35
25
26
36
37
33
38
2007(*)
670,365
583,311
87,054
326,784
37,016
289,768
96,655,928
9,417,398
42,577,395
41,881,373
1,794,537
985,225
914,312
793,487
461,730
273,400
33,648
152,022
2,660
253,396
211,363
42,033
448,898
100,524,900
179
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 and 2007
(€ thousand)
Equity
Equity
............................................................
Capital stock or assigned capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpaid and uncalled (-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves (accumulated losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves (losses) of equity method companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity component of equity method companies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:: Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results attributed to the parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Dividends and remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available- for- sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedges of net investments in foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity method companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest
.............................................................
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item:
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 (*)
Notas
2008
40
6,734,394
123,574
123,574
1,390,128
4,557,023
4,551,213
5,810
(81,128)
1,052,072
(307,275)
30,770
9,396
2,957
24,292
(5,875)
292,492
84
292,408
7,057,656
110,376,051
6,228,215
121,543
121,543
1,216,291
3,931,122
3,926,603
4,519
(9,827)
1,264,962
(295,876)
13,968
14,090
7,447
50
(7,619)
402,270
104
402,166
6,644,453
107,169,353
15,132,009
18,755,570
12,314,679
20,678,554
41
42
39
46
47
180
GRUPO BANCO POPULAR
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 3 1, 2008 and 2007
(€ thousand)
Interest and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of equity method companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains/loss on financial transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments at fair value through profit or loss . . . . . . . . . . . . . . .
Financial instruments not carried at fair value through profit or loss . . . . . . . .
Other
.......................................................
Exchange differences (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance and reinsurance premiums collected . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and income from non-financial services . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses relating to insurance and reinsurance contracts . . . . . . . . . . . . . . . . .
Variation in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses
Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other general administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation / amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisioning expense (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on financial assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments not carried at fair value
through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT/ LOSS FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on other assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on the disposal of assets not classified as non-current held for sale
Negative difference on business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on non-current assets held for sale not classified as
discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT BEFORE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . .
Profit from discontinued operations (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to the Parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BASIC EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes
2008
2007 (*)
48
49
6,289,255
3,753,994
2,535,261
23,839
14,356
1,015,647
151,099
74,484
16,488
(10,230)
49,522
18,704
54,229
250,380
141,735
39,333
69,312
160,327
118,477
41,850
3,656,770
1,215,770
818,142
397,628
100,786
29,515
998,162
905,174
5,216,413
2,928,539
2,287,874
58,763
3,920
1,048,136
165,343
65,864
55,218
24
12,470
(1,848)
52,638
253,774
141,692
46,045
66,037
153,197
113,792
39,405
3,452,429
1,118,211
747,311
370,900
99,642
12,563
302,278
289,836
92,988
1,312,537
15,242
15,242
233,020
-
12,442
1,919,735
349
349
8,622
-
(69,295)
1,461,020
390,343
1,070,677
40,023
1,110,700
1,052,072
58,628
0.867
0.867
11,931
1,939,939
605,734
1,334,205
7,269
1,341,474
1,264,962
76,512
1.041
1.041
50
51
52
52
53
54
55
56
58
59
60
61
62
63
64
65
66
67
5
5
(*)Note 2.d) of this document explains the reclassifications made to the information for 2007 in order to make it comparable with the
presentation models introduced by Bank of Spain Circular 6/2008 and the reclassifications made as a result of the disposal of Banco
Popular France.
181
CONSOLIDATED RECOGNISED INCOME AND EXPENSE FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(€ thousand)
2008
CONSOLIDATED PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER RECOGNISED INCOME AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IAmounts transferred to the income statement . . . . . . . . . . . . . . . . . . . . .
Other reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts transferred to the income statement . . . . . . . . . . . . . . . . . . . . . .
Amounts transferred at initial carrying amount of hedged items . . . . . . . .
Hedges of net investments in foreign operations . . . . . . . . . . . . . . . . . . . . . . . .
Other reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gains (losses) on pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity method entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other recognised income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL INCOME AND EXPENSES RECOGNISED . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed to the parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,110,700
11,306
(6,315)
43,207
(49,522)
(6,414)
(6,414)
34,631
34,631
(8,472)
2,307
(4,431)
1,122,006
1,063,580
58,426
2007(*)
1,341,474
(11,268)
(21,900)
(9,430)
(12,470)
2,474
7,994
(5,520)
81
81
(1,805)
7,141
2,740
1,330,205
1,253,835
76,370
(*)The information for 2007 has been reclassified in accordance with the changes introduced by Bank of Spain Circular 6/2008
182
GRUPO BANCO POPULAR
CHANGES IN CONSOLIDATED EQUITY FOR THE YEAR ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007
(€ thousand)
Equity
Opening balance at (01/01/2008) . . . . . . . . . .
Profit for the
Equity
year attribuReserves method entiOther
Less Treted to parent Less diviTotal
dends and
Capital Share Pre- (accumulatedties Reserves Equity ins- asury
company
equity
losses)
trument
shares
mium
remuneration
121,543 1,216,291 3,926,603
295,876 6,228,215
4,519
9,827 1,264,962
121,543 1,216,291 3,926,603
295,876 6,228,215
4,519
9,827 1,264,962
- 1,046,778
(5,294)
- 1,052,072
2,031 173,837
11,399 (540,599)
629,904
1,291
71,301 (1,264,962)
2,031 173,837
175,868
-
Adjustments for changes in criteria . . . . . . . .
Adjustments for errors . . . . . . . . . . . . . . . . .
Adjusted opening balance . . . . . . . . . . . . .
Total recognised income and expenses . . . .
Other changes in equity . . . . . . . . . . . . . . .
Capital increases . . . . . . . . . . . . . . . . . . . . . .
Capital decreases . . . . . . . . . . . . . . . . . . . . .
Conversion of equity financial liabilities . . .
Increases in other equity instruments . . . . . .
Reclassification of financial liabilities to other
equity instruments . . . . . . . . . . . . . . . . . . . .
Reclassification of other equity instruments
to financial liabilities . . . . . . . . . . . . . . . . . .
Distribution of dividends . . . . . . . . . . . . . . .
301,913
Transactions with own equity instruments
(net)
..........................
915
Transfers between equity items . . . . . . . . . .
967,795
Increases (decreases)
due to business . . . . . . . . . . . . . . . . . . . . . .
Equity settled payments . . . . . . . . . . . . . . . .
Other increases (decreases ) in
equity
(36,893)
Closing balance at (31/12/2008) . . . . . . . 123,574 1,390,128 4,551,213
-
-
1,291
-
-
-
5,810
-
-
-
-
- (307,275)
71,301
- (1,264,962) (295,876)
-
(70,386)
-
-
81,128 1,052,072
609,188
-
-
(36,893)
307,275 6,734,394
Equity
Profit for the
Equity
year attribuReserves method entiOther
Less Treted to parent Less dividends and
Capital Share Pre- (accumulatedties Reserves Equity ins- asury
company
losses)
trument
shares
mium
remuneration
Opening balance at (01/01/2007) . . . . . . . . . . 121,543 1,216,291 3,415,150
Adjusted opening balance . . . . . . . . . . . . . 121,543 1,216,291 3,415,150
(895)
- 512,348
- 255,361
(net)
..........................
(106)
773,145
due to business . . . . . . . . . . . . . . . . . . . . . .
equity
(5,330)
Closing balance at (31/12/2007) . . . . . . . 121,543 1,216,291 3,926,603
1,874
1,874
2,645
-
-
-
-
-
-
2,645
4,519
Total
equity
1,445 1,026,031 250,241 5,529,203
1,445 1,026,031 250,241 5,529,203
- 1,264,962
- 1,264,067
8,382 (1,026,031) 45,635 (565,055)
-
-
-
-
-
-
-
551,237
-
(295,876)
8,382
- (1,026,031) (250,241)
-
-
(5,330)
9,827 1,264,962 295,876 6,228,215
(8,488)
-
183
Valuation
adjustments
Total equity
(net)
..........................
due to business . . . . . . . . . . . . . . . . . . . . . .
equity
Closing balance at (31/12/2008) . . . . . . .
(net)
..........................
due to business . . . . . . . . . . . . . . . . . . . . . .
equity
Closing balance at (31/12/2007) . . . . . . .
184
6,228,215
6,228,215
1,046,778
(540,599)
175,868
609,188
Minority
interests
Total
13,968
13,968
16,802
-
6,242,183
6,242,183
1,063,580
(540,599)
175,868
-
-
-
-
Total equity
402,270
402,270
58,426
(168,204)
-
6,644,453
6,644,453
1,122,006
(708,803)
175,868
-
-
(70,386)
-
34,701
-
643,889
(70,386)
-
-
-
-
-
(36,893)
6,734,394
30,770
(36,893)
6,765,164
(133,503)
292,492
(170,396)
7,057,656
Total equity
Valuation
adjustments
(70,386)
-
609,188
Total equity
Minority
interests
Total
5,529,203
5,529,203
1,264,067
(565,055)
-
24,200
24,200
(10,232)
-
5,553,403
5,553,403
1,253,835
(565,055)
-
361,178
361,178
76,370
(35,278)
-
5,914,581
5,914,581
1,330,205
(600,333)
-
-
-
-
-
-
551,237
-
551,237
30,831
582,068
(8,488)
-
-
(8,488)
-
(5,330)
6,242,183
(4,447)
402,270
(9,778)
6,644,453
(8,488)
(5,330)
6,228,215
13,968
GRUPO BANCO POPULAR
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(€ thousand)
A) CASH FLOWS FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Consolidated profit/loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.Adjustments to profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Amortisation/ depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2 Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Net increase /decrease in operating assets . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Trading portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Other financial assets at fair value through profit or loss . . . . . . . . . . . . . .
3.3 Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.4 Loans and advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Other operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Net increase /decrease in operating liabilities . . . . . . . . . . . . . . . . . . . . . . .
4.1 Trading portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Other financial liabilities at fair value through profit or loss . . . . . . . . . . . .
4.3 Financial liabilities at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 Other operating liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Collections/payments corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . .
B) CASH FLOWS FROM INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.1 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Subsidiaries and other business units . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5 Non-current assets and associated liabilities for sale . . . . . . . . . . . . . . . . .
6.6 Held-to-maturity investment portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.7 Other payments related to investing activities . . . . . . . . . . . . . . . . . . . . . .
7. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Subsidiaries and other business units . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.6 Held-to-maturity investment portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.7 Other collections related to investing activities . . . . . . . . . . . . . . . . . . . . . .
C) CASH FLOWS FROM FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Redemption of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.4 Acquisition of equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.5 Other payments related to financing activities . . . . . . . . . . . . . . . . . . . . . .
9. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.1 Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.2 Issue of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3 Disposal of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.4 Other collections related to financing activities . . . . . . . . . . . . . . . . . . . . .
D) EFFECT OF EXCHANGE RATE FLUCTUATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
E) NET INCREASE (DECREASE ) IN CASH AND CASH EQUIVALENTS (A+B+C+D) . .
F) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD . . . . . . . . . . . .
G) CASH AND CASH EQUIVALENT AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . .
MEMORANDUM ITEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPONENTS OF CASH FOR THE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2 Cash equivalent balances at central banks . . . . . . . . . . . . . . . . . . . . . . . . .
1.3 Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.4 Less: bank overdrafts repayable on demand . . . . . . . . . . . . . . . . . . . . . . . .
Total cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . .
Of which held by consolidated entities but not drawable by group . . . . . . . . .
2008
2007(*)
1,339,488
1,110,700
1,269,985
100,786
1,169,199
2,324,283
(290,250)
(163,491)
(353,874)
2,279,788
852,110
892,743
(52,492)
97,504
1,681,123
(833,392)
390,343
(733,416)
859,286
782,795
42,199
34,292
125,870
61,312
2,598
61,960
(701,764)
881,939
607,608
198,723
75,608
180,175
175,868
4,307
(95,692)
1,953,086
1,857,394
972,457
1,341,474
745,974
100,211
645,763
14,991,152
(1,457,712)
3,543,100
12,848,333
57,431
13,268,828
(4,231)
(6,814)
12,468,554
811,319
607,333
(275,415)
360,487
190,600
169,766
121
85,072
22,155
3,040
59,877
(244,798)
692,636
559,098
133,538
447,838
322,530
125,308
452,244
1,500,842
1,953,086
427,657
1,429,737
1,857,394
-
406,995
1,546,091
1,953,086
-
(*) The information for 2007 has been reclassified in accordance with the changes introduced by Bank of Spain Circular 6/2008.
185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2008
1. Nature of the institution
Banco Popular was incorporated on July 14, 1926, and is
domiciled at Velázquez 34, Madrid.
Banco Popular Español, S.A. is a private law company
whose corporate purpose, per Article 4 of its bylaws, is
banking. Its activities are subject to the rules and
regulations applicable to banks operating in Spain.
The shares of Banco Popular are listed on the four Spanish
stock exchanges and are traded on the continuous market,
and Euronext Lisbon.
The Group has also issued fixed income securities
(Euronotes, preferred shares, covered bonds, securitization
bonds, subordinated bonds, etc.) which are listed on the
following markets: AIAF Fixed Income Market, London Stock
Exchange, Frankfurt Stock Exchange, Luxembourg Stock
Exchange, Euronext Amsterdam, Euronext Lisbon, Bourse de
Paris and Irish Stock Exchange.
Banco Popular is the controlling company of a group of
companies comprising the Banco Popular Group.
Accordingly, Banco Popular is obliged to prepare, in
addition to its own individual financial statements, which
are also submitted to obligatory audit, consolidated
financial statements of the Group which include, as
appropriate, the related investments in dependent and
jointly-controlled companies and the investments in
associates. The companies comprising the Group engage
basically in financial activities. The term “Banco Popular” in
these consolidated financial statements refers exclusively to
the parent company of the Group.
186
In December 2008 Banco Popular Español, S.A., Banco de
Castilla, S.A., Banco de Crédito Balear, S.A., Banco de
Galicia, S.A., and Banco de Vasconia, S.A. were merged by
absorption with Banco Popular Español, S.A. However, all
the operations performed by the target banks are
understood to have been performed by Banco Popular
Español, S.A, for accounting purposes as from 30 June
2008.
The merger entails the group’s restructuring and seeks to
simplify regulatory obligations and leverage synergies and
economies of scale.
To a large extent, this accounts for the increase in the
individual figures for 2008.
At December 31, 2008 the total assets, equity and profit
for the year of Banco Popular Español, S.A. account for
92%, 80% and 75%, respectively, of the same items in the
Group (74%, 56% and 66%, respectively, at December
31, 2007).
Set out below are the individual balance sheet, individual
income statement, individual statement of recognised
income and expenses, individual total statement of changes
in equity and individual cash flow statement of Banco
Popular Español, S.A. for the years ended December 31,
2008 and 2007, which have been prepared in accordance
with the same accounting principles and standards as those
applied in the Group’s present consolidated financial
statements.
GRUPO BANCO POPULAR
Individual balance sheets as of December 31, 2008 and 2007
(€ thousand)
Assets
Cash and balances with central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items: Loaned or pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available- for- sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items: Loaned or pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items Loaned or pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the fair value of the hedged items in portfolio hedges or interest rate risk .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jointly-controlled entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Group companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts linked to pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For own use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased out under an operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum items: Acquired under a finance lease . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets
..........................................................
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
...........................................................
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007 (*)
1,472,256
2,044,115
40,655
357,304
1,646,156
9,918,170
9,823,102
95,068
7,085,775
84,523,417
12,448,132
72,075,285
1,379,910
240
341,752
272,577
1,941,796
3,211
8,943
1,929,642
83,163
405,787
397,608
397,608
8,179
32,835
32,835
386,793
33,655
353,138
160,321
160,321
101,583,222
1,468,541
1,413,148
75,680
582,366
755,102
6,151,125
6,087,563
63,562
54,464
68,010,594
17,948,356
50,062,238
6,010,181
428
146,146
45,429
1,556,079
3,211
8,225
1,544,643
82,200
348,623
342,337
342,337
6,286
17,430
17,430
319,276
10,701
308,575
71,853
71,853
79,630,872
187
Liabilities
2008
Financial liabilities held for trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . .
Deposits from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the fair value of the hedged items in portfolio hedges of interest rate risk .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities associated with non-current assets for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for pensions and similar obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for taxes and other legal contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for contingent exposures and commitments . . . . . . . . . . . . . . . . . . . . . . . .
Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,649,928
1,615,366
34,562
93,385,315
3,513,902
12,377,002
61,116,807
13,943,261
1,613,933
820,410
382,341
337,735
139,449
39,021
158,367
898
118,711
64,890
53,821
394,917
96,268,947
2007 (*)
810,065
723,011
87,054
73,794,818
10,588,815
42,722,457
18,047,006
1,776,685
659,855
687,176
247,391
114,588
21,413
110,485
905
118,364
87,669
30,695
234,886
75,892,700
188
GRUPO BANCO POPULAR
Equity
2008
2007 (*)
Equity
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:: Uncalled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oher equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compound financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-voiing equity units and associated funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Tresaury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Dividends and return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjsutmetns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedges of net investments in foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differneces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,305,341
123,574
123,574
1,390,128
3,211,869
(13)
891,736
(311,953)
8,934
5,977
2,957
5,314,275
3,724,761
121,543
121,543
1,216,291
1,791,915
-
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101,583,222
79,630,872
MEMORANDUM IITEMS
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,927,281
14,226,033
23,335,410
11,324,777
890,970
(295,958)
13,411
5,964
7,447
3,738,172
189
b) INDIVIDUAL STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 3 1, 2008 and 2007
(€ thousand )
2008
Interest and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission expense s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of financial transactions (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-for -trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments at fair value through profit or loss . . . . . . . . . . . .
Financial assets available for sale not carried at fair value through profit or loss
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GROSS INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other general administration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisioning expense (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on financial assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial instruments not carried at fair value
through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on other assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on the disposal of assets not classified as non-current for sale . . . .
Gains (losses) on non-current assets held for sale not classified as
discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT BEFORE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impuesto sobre beneficios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate income tax PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS .
Profit from discountinued op. (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BASIC EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 (*)
4,987,953
3,388,557
1,599,396
145,994
690,373
110,102
45,860
37,870
5,078
2,912
43,779
50,506
19,469
2,446,337
751,313
505,836
245,477
69,117
21,818
645,874
564,709
3,543,889
2,306,268
1,237,621
207,192
610,967
107,779
41,283
32,225
7,438
1,620
38,212
40,094
16,766
2,050,824
602,525
413,759
188,766
59,789
14,126
182,796
170,511
81,165
958,215
204,920
12,285
1,191,588
129
6,731
(21,008)
1,142,127
250,391
891,736
891,736
24,821
1,223,011
332,041
890,970
890,970
0,.35
0.735
0,733
0,733
190
GRUPO BANCO POPULAR
c) Individual statements of recognised income and expenses for the years ended December 31, 2008 and 2007
(€ thousand)
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER RECOGNISED INCOME AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation gains (losses ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation gains (losses ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts transferred at the initial carrying value of the hedged items . . . .
Hedges of net investments in foreign operations . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gains (losses) on pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other recognised income and expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL RECOGNISED INCOME AND EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007(*)
891,736
(16,143)
8,511
28,328
(19,817)
(4,490)
(4,490)
(16,666)
(3,498)
875,593
890,970
(4,706)
2,710
7,731
5,021
2,474
7,994
5,520
(7,029)
(2,861)
886,264
(*) The information for 2007 has been reclassified in accordance with the changes introduced by Bank of Spain Circular 6/2008
191
INDIVIDUAL STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(€ thousand)
Equity
Profit for the
Reserves Less tre- year attributed Less: diviTotal equity Valuation
to the parent
dends and
Capital Share pre- (accumulated asury
adjustments Total
company
losses)
shares
mium
remuneration
295,958 3,724,761
121,543 1,216,291 1,791,915
- 890,970
13,411 3,738,172
4,920
(4,920)
295,958 3,724,761
121,543 1,216,291 1,796,835
- 886,050
13,411 3,738,172
(11,666)
891,736
880,070
(4,477) 875,593
15,995
2,031 173,837 1,426,710
13 (886,050)
700,510
- 700,510
2,031 173,837
- 175,868
-
Opening balance at (01/01/2008) . . . . . . . . . . .
Adjustments for changes in criteria . . . . . . . . . . .
Adjustments for errors . . . . . . . . . . . . . . . . . . . . .
Adjusted opening balance . . . . . . . . . . . . . . . . . .
Total recognised income and expenses . . . . . . . . .
Other changes in equity . . . . . . . . . . . . . . . . . . .
Capital increases . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital decreases . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of equity financial liabilities . . . . . . .
Increases in other equity instruments
equity instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of other equity instruments to
financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of dividends . . . . . . . . . . . . . . . . . . . .
(net)
..............................
915
Transfers between equity items . . . . . . . . . . . . . .
288,179
Increases (decreases) . . . . . . . . . . . . . . . . . . . . .
due to business combinations . . . . . . . . . . . . . . . .
combinaciones de negocios . . . . . . . . . . . . . . . . .
Equity –settled transactions . . . . . . . . . . . . . . . . .
- 1,137,606
Other increases (decreases) in equity . . . . . . . . .
Closing balance at (31/12/2008) . . . . . . . . . . . . 123,574 1,390,128 3,211,869
-
-
-
-
597,871
13
- (288,179)
-
-
13
891,736
(15,995)
613,866
-
613,866
-
902
-
-
902
-
-
-
-
-
- 1,137,606
311,953 5,305,341
- 1,137,606
8,934 5,314,275
Equity
Capital Share premium
121,543 1,216,291
121,543 1,216,291
-
Profit for the
Reserves Less tre- year attributed Less: divi(accumulated asury to the parent dends and Total equity Valuation
adjustments Total
company
losses)
shares
remuneration
13,197 3,403,335
250,257 3,390,138
1,617,464
- 685,097
13,197 3,403,335
250,257 3,390,138
1,617,464
- 685,097
214 886,264
(4,920)
890,970
886,050
- (551,427)
45,701 (551,427)
179,371
- (685,097)
-
Opening balance at (01/01/2007) . . . . . . . . . . .
Adjustments for changes in criteria . . . . . . . . . . .
Adjustments for errors . . . . . . . . . . . . . . . . . . . . .
Adjusted opening balance . . . . . . . . . . . . . . . . . .
Total recognised income and expenses . . . . . . . . .
Other changes in equity . . . . . . . . . . . . . . . . . . .
Capital increases . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital decreases . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of equity financial liabilities . . . . . . .
Increases in other equity instruments
equity instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of other equity instruments to
financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of dividends . . . . . . . . . . . . . . . . . . . .
(net)
..............................
(106)
Transfers between equity items . . . . . . . . . . . . . .
179,477
Increases (decreases) . . . . . . . . . . . . . . . . . . . . .
due to business combinations . . . . . . . . . . . . . . . .
combinaciones de negocios . . . . . . . . . . . . . . . . .
Equity –settled transactions . . . . . . . . . . . . . . . . .
Other increases (decreases) in equity . . . . . . . . .
Closing balance at (31/12/2007) . . . . . . . . . . . . 121,543 1,216,291 1,791,915
192
250,257
255,363
-
255,363
295,958
(106)
(295,958)
-
(106)
(295,958)
-
-
-
-
-
-
-
505,620
- ( 179,477)
-
-
-
890,970
295,958 3,724,761
-
13,411 3,738,172
GRUPO BANCO POPULAR
d) Individual cash flow statements for the years ended December 31, 2008 and 2007
(€ thousand)
2008
A) CASH FLOW FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Consolidated profit or loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Adjustment to profit or loss .
2.1 Depreciation or amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2 Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Net increase /decrease in operating assets . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Held-for-trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Other financial assets at fair value through profit or loss
3.3 Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.4 Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Other operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Net increase/ decrease in operating liabilities . . . . . . . . . . . . . . . . . . . . . . .
4.1 Held-for-trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Other financial liabilities at fair value through profit or loss
4.3 Financial liabilities at amortised cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 Other operating liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Collections/ payments corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . .
B) CASH FLOWS FROM INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.1 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.6 Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.7 Other payments related to investing activities . . . . . . . . . . . . . . . . . . . . . .
7. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.6 Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.7 Other collections related to investing activities . . . . . . . . . . . . . . . . . . . . . .
C) CASH FLOWS FROM FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Redemption of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.4 Acquisition of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.5 Other payments related to financing activities . . . . . . . . . . . . . . . . . . . . . .
9. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.1 Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.2 issue of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3 Disposal of own equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.4 Other collections related to financing activities . . . . . . . . . . . . . . . . . . . . .
D) EFFECT OF EXCHANGE RATE FLUCTUATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
E) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) .
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . .
G) CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . .
MEMORANDUM ITEM
COMPONENTS OF CASH FOR THE PERIOD
1.1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2 Cash equivalent balances at central banks . . . . . . . . . . . . . . . . . . . . . . . . .
1.3 Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.4 Less: bank overdrafts repayable on demand . . . . . . . . . . . . . . . . . . . . . . . .
Total cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
5,126,689
891,736
465,776
69,117
396,659
21,793,087
630,967
3,866,671
17,204,050
91,399
25,311,873
839,863
23,446,214
1,025,796
250,391
(325,306)
622,197
182,424
29,172
410,601
296,891
201,579
95,124
188
(4,797,668)
5,013,734
612,286
197,640
39,296
4,164,512
216,066
175,868
40,198
3,715
1,468,541
1,472,256
1,837,275
890,970
396,919
59,789
337,130
11,068,594
(1,497,868)
3,857,374
8,718,770
(9,682)
11,285,939
(4,231)
11,593,748
(303,578)
332,041
(178,741)
267,453
31,655
11,932
223,866
88,712
42,928
2,086
43,684
14
(1,199,062)
1,614,761
528,348
115,571
970,842
415,699
300,234
115,465
458,944
1,009,069
1,468,541
297,387
1,174,869
1,472,256
208,159
1,260,382
1,468,541
193
2. Basis of presentation of the consolidated
financial statements
a) Basis of presentation
LThe accompanying consolidated financial statements of
Grupo Banco Popular are presented in accordance with
International Financial Reporting Standards adopted by the
European Union (hereinafter IFRS-EU), the application of
which is mandatory as from 1 January 2005 for those
entities that at the balance sheet date have issued securities
listed on a regulated market in any EU Member State, in
conformity with Regulation 1606/2002, of July 19, of the
European Parliament and Council and Law 37/1998, of
November 16, amending Law 24/1988, of July 28, on the
Securities Market and the Spanish Companies Act,
approved by Legislative Royal Decree 1564/1989.
In order to adapt the accounting system of Spanish credit
institutions to the aforementioned regulations, the Bank of
Spain issued Circular 4/2004 on public and confidential
financial reporting rules and formats for credit institutions,
expressly stating that its purpose was to modify the
accounting regime of such entities by adapting it to the
accounting environment arising from the adoption by the
European Union of the International Financial Reporting
Standards, in order to make this Circular fully compatible
with regard to the underlying conceptual basis. This Circular
4/2004 has been obligatorily applicable since January 1,
2005, to the individual financial statements of Spanish
credit institutions.
During 2008 IAS 39 and IFRS 7 were amended. IAS 39
was amended mainly to enable the reclassification from
held-for-trading to other portfolios while IFRS 7 was
amended in terms of the disclosure of transfers between
portfolios.
Consequently, the accompanying consolidated financial
statements were prepared from the accounting records of
the Group companies and in conformity with IFRS-EU, and
accordingly give a true and fair view of the Group’s
consolidated net worth and consolidated financial position
as of December 31, 2008 and 2007, and of the
consolidated results of its operations, of the changes in its
consolidated net worth and of the consolidated cash flows
for the years then ended. There is no accounting principle
or standard or compulsory valuation rule that has a
significant effect that has not bee applied when preparing
these accounts. Set out in Note 15 is a summary of the most
significant accounting principles and standards and the
valuation rules applied in these consolidated financial
statements.
194
b)
Preparation and responsibility for information
The Banco Popular Group’s consolidated financial
statements for 2008 were prepared by the Directors of
Banco Popular, S.A. during the meeting of the Board of
Directors of February 26, 2009 and have yet to be
approved by its General Shareholders’ Meeting. They are
expected to be approved without significant changes. The
information contained in these consolidated financial
statements is the responsibility of the Directors of Banco
Popular Español, S.A. Except as otherwise mentioned, such
information is presented in thousands of euros.
c)
Consolidation principles
The Group was defined in accordance with IFRS-EU as
adapted by Bank of Spain Circular 4/2004, of 22
December. Investees are all the dependent, and jointlycontrolled companies and associates.
Those investees that constitute a decision-making unit with
Banco Popular, which are those over which the Bank has
directly or indirectly, through another or other investees,
capacity to exercise control, are dependent companies. In
general, but not exclusively, this ability to exercise control is
manifested by having, either directly or indirectly through
another or other investees, a holding of 50% or more of the
voting rights at the investee. Control is deemed to be the
power to direct the financial and operating policies of an
investee in order to obtain profit from its activities, and may
be exercised even if the aforementioned percentage of
ownership is not maintained.
The information of holdings in dependent companies as of
December 31, 2008 and 2007, is as follows:
GRUPO BANCO POPULAR
At December 31, 2008:
Deposit-taking companies:
Banco de Andalucía, S.A. . . . . . . . . . . . . . . . . . . . .
bancopopular-e, S.A. . . . . . . . . . . . . . . . . . . . . . . . .
Banco Popular Hipotecario, S.A. . . . . . . . . . . . . . . .
Banco Popular Portugal, S.A. . . . . . . . . . . . . . . . . . .
Popular Banca Privada, S.A. . . . . . . . . . . . . . . . . . .
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address
Fernández y González, 4
Velázquez, 34
Labastida 9-11
Rua Ramalho Ortigao, 51
J. Ignacio Luca de Tena, 13
2720 Coral Way
Sevilla
Madrid
Madrid
Lisboa
Madrid
Miami
Banking
Banking
Banking
Banking
Banking
Banking
Lisboa
Madrid
Factoring
Factoring
María de Molina, 34
Boulevard Royal, 261
J. Ortega y Gasset, 29
Labastida 9-11
Lisboa
Lisboa
Madrid
Luxemburgo
Madrid
Madrid
Investment fund management
Pension plan management
Share portfolio & ownership
Stockbroker
Labastida 9-11
Labastida 9-11
Madrid
Madrid
Madrid
Venture capital
Holding company Stockbroker
Holding company Stockbroker
Ugland House
Ugland House
Rua Tomás Ribeiro, 50
Labastida 9-11
2720 Coral Way
Pz. Pablo Ruiz Picasso, s/n.
Prof. Agustin Miralles Carlo, s/n
J . Ortega y Gasset, 29
Rua do Comercio, 85
Strawinskylaan, 3105
13/F Tim Mei Avenue
Strawinskylaan, 3105
Madrid
George Town
Madrid
George Town
Lisboa
Madrid
Lisboa
Madrid
Miami
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Las Palmas
Madrid
Madrid
Madrid
Lisboa
Madrid
Amsterdam
Hong Kong
Amsterdam
Madrid
Madrid
Asset holidng
Finance
Finance
Finance
Real estate management consultants
Real estate investment fund
Services instrumentality
Financial instrumentality
Securitisation fund Asset
Instrumental inmobiliaria
Instrumental inmobiliaria
Instrumental de servicios
Real estate development
RE management and services
Finance Finance
Finance Finance
Finance Finance
Finance Finance
Real estate
Real estate
Madrid
Lisboa
Miami
Madrid
Madrid
Madrid
Madrid
Madrid
Lisboa
Madrid
Miami
Data processing
Insurance
Dormant
Asset holding
Communication services
IT services
Insurance broker
Contract hire
Insurance
Asset holding
Dormant
Financial companies
Popular Factoring, S.A. (Portugal) (1) . . . . . . . . . . . Rua Castilho, 39
Popular de Factoring, S.A. . . . . . . . . . . . . . . . . . . . . Labastida, 11
Holding and services companies:
Gerfundos, S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Predifundos, S.A . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europensiones, EGFP, S.A. . . . . . . . . . . . . . . . . . . .
Gestión Premier Fund, S.A. . . . . . . . . . . . . . . . . . . .
Gestora Popular, S.A. . . . . . . . . . . . . . . . . . . . . . . .
Popular Bolsa SV, S.A. . . . . . . . . . . . . . . . . . . . . . . .
Popular de Participaciones Financieras S.C.R. de
régimen simplificado, S.A. . . . . . . . . . . . . . . . .
Popular Gestión SGIIC, S.A. . . . . . . . . . . . . . . . . . . .
Popular Gestión Privada SGIIC, S.A. . . . . . . . . . . . .
Special purpose entities:
Aliseda, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BPE Finance International, LTD. . . . . . . . . . . . . . . . . .
BPE Financiaciones, S.A. . . . . . . . . . . . . . . . . . . . . . .
BPE Preference International, LTD. . . . . . . . . . . . . . . .
Consulteam-Consultores de Gestao, S.A. . . . . . . . . .
Finespa, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fondo Imopopular, FEIIF . . . . . . . . . . . . . . . . . . . .
Gestora Europea de Inversiones, S.A. . . . . . . . . . . .
Gold Leaf Title Company . . . . . . . . . . . . . . . . . . . . .
IM Banco Popular FTPYME 1, FTA . . . . . . . . . . . . .
IM Banco Popular FTPYME 2, FTA . . . . . . . . . . . . .
IM Banco Popular MBS 1, FTA . . . . . . . . . . . . . . . .
IM Cédulas 1 Grupo Banco Popular, FTA . . . . . . . .
IM Cédulas Grupo Banco Popular 2, FTA . . . . . . . .
IM Cédulas Grupo Banco Popular 3, FTA . . . . . . . .
IM Cédulas Grupo Banco Popular 4, FTA
IM Grupo Banco Popular Empresas 1, FTA . . . . . . .
IM Grupo Banco Popular Empresas 2, FTA . . . . . . .
IM Grupo Banco Popular Financiaciones 1, FTA . . .
IM Grupo Banco Popular FTPYME I, FTA . . . . . . . . .
IM Grupo Banco Popular FTPYME II, FTA . . . . . . . .
IM Grupo Banco Popular Leasing 1, FTA . . . . . . . . .
Inmobiliaria Viagracia, S.A. . . . . . . . . . . . . . . . . . . .
Inmobiliaria Vivesa, S.A. . . . . . . . . . . . . . . . . . . . . .
Intermediación y Servicios Tecnológicos, S.A. . . . . . .
Inversiones Inmobiliarias Alprosa, S.L. . . . . . . . . . .
Inversiones Inmobiliarias Canvives, S.L . . . . . . . . . .
Inversiones Inmobiliarias Cedaceros, S.L . . . . . . . . ..
Inversiones Inmobiliarias Gercebio, S.L.
Inversiones Inmobiliarias Jeraguilas, S.L.
Inversiones Immobiliarias Tamadaba, S.L . . . . . . . .
Isla de los Buques, S.A. . . . . . . . . . . . . . . . . . . . . .
MUNDOCREDIT, S.A. . . . . . . . . . . . . . . . . . . . . . . . .
Mundo Envíos, S.A. . . . . . . . . . . . . . . . . . . . . . . . . .
Populargest Gestao de Imóveis, S.L. . . . . . . . . . . . .
Popular Capital, S.A. . . . . . . . . . . . . . . . . . . . . . . . . .
Popular Capital Europe, B.V. . . . . . . . . . . . . . . . . . . . .
Popular Español Asia Trade, LTD. . . . . . . . . . . . . . . . .
Popular Finance Europe, B.V . . . . . . . . . . . . . . . . . . .
Urbanizadora Española, S.A. . . . . . . . . . . . . . . . . . .
Velázquez 34.S.L. . . . . . . . . . . . . . . . . . . . . . . . . . .
Activity
Non-financial companies:
Desarrollo Aplicaciones Especiales, S.A. . . . . . . . . . Juan de Olías, 1
Eurovida, S.A. (Portugal) . . . . . . . . . . . . . . . . . . . . . Avenida da República, 57
FIB Realty Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
Panorama Ibicenca, S.A. . . . . . . . . . . . . . . . . . . . . . J. Ortega y Gasset, 29
Popular de Comunicaciones, S.A. . . . . . . . . . . . . . . J. Ortega y Gasset, 29
Popular de Informática, S.A. . . . . . . . . . . . . . . . . . . J. Ortega y Gasset, 29
Popular de Mediación, S.A. . . . . . . . . . . . . . . . . . . . J. Ortega y Gasset, 29
Popular de Renting, S.A. . . . . . . . . . . . . . . . . . . . . . Labastida 9-11
Popular Seguros, S.A. . . . . . . . . . . . . . . . . . . . . . . . Avenida da República, 57
Promoción Social de Viviendas, S.A. . . . . . . . . . . . . J. Ortega y Gasset, 29
Total Sunset Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
(1) Its business name was Heller Factoring Portuguesa, S.A. in 2007
195
% of voting rights
Direct
Indirect
Total
Carrying
value
Assets
Total
Equity
Of which results
Banco de Andalucía, S.A. . . . . . . . . . . . . . . . . . . 80.07
bancopopular-e, S.A. . . . . . . . . . . . . . . . . . . . . . 100.00
Banco Popular Hipotecario, S.A. . . . . . . . . . . . . . 99.94
Banco Popular Portugal, S.A. . . . . . . . . . . . . . . . 100.00
Popular Banca Privada, S.A. . . . . . . . . . . . . . . . . 52.50
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
0.12
0.06
7.50
-
80.19
100.00
100.00
100.00
60.00
100.00
168,258
34,908
106,476
780,448
13,784
264,058
Financial companies:
Popular Factoring, S.A. (Portugal) . . . . . . . . . . . . 49.76
Popular de Factoring, S.A. . . . . . . . . . . . . . . . . . 100.00
50.06
-
99.82
100.00
43,334
45,818
189,546
517,206
42,150
57,052
3,094
6,715
100.00
100.00
60.00
65.00
-
100.00
100.00
51.00
60.00
100.00
100.00
300
375
7,968
76
12,363
6,100
2,191
1,529
56,771
174
71,920
10,413
2,189
1,497
50,172
172
6,340
9,613
1,131
355
27,929
(5)
(8,719)
2,545
100.00
0.01
100.00
100.00
100.00
36,000
2,404
3,010
46,711
8,921
198,505
45,947
7,097
191,671
877
385
15,138
10.00
26.90
95.81
100.00
0.10
100.00
0.01
0.01
0.50
64.39
100.00
100.00
100.00
100.00
1.00
0.02
0.17
0.04
100.00
10.00
90.55
2.20
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
97.62
100.00
302,599
45
100
52
735
8,058
5030
655
256
20,635
1,170
1,203
54,636
3
38,000
3
3
30
61
26,500
500
11,751
90
2,000
2,000
11,459
3
2,177,481
245,375
8,433,764
438,419
59,939
9,224
5,341
3,940
310
649,785
1,104,812
2,509,893
3,076,143
2,024,837
1,027,687
1,014,594
2,774,886
1,202,802
1,221,163
1,452,051
6,287,339
1,847,767
123,226
1,243
2,318
91,901
33,544
168,448
45,072
2
30
406,724
19,403
652
100,728
859,543
2,329
28
2,684
12,931
3
264,912
46
536
52
329
9,208
5,258
3,905
293
2,800
73
(511)
5,741
1,877
(414)
3,560
(257)
1,009
(2,869)
111,670
1,233
1,653
53,813
(3,305)
35,841
8
2
30
66
10,498
480
1,470
1,276
2,303
2,656
12,816
3
(37,162)
16
(36)
11
197
100
27
458
73
100
5,932
1,931
(414)
4,061
500
1,009
(2,869)
49,093
26
85
319
(3,308)
(1,888)
5
(1)
2
(11,441)
(7,209)
473
48
76
336
-
60.83
100.00
100.00
0.16
0.16
10.00
100.00
91.84
100.00
50.67
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
91.84
100.00
4,117
589,386
474
82
61
4,261
31,937
9,663
661
7
2,024
27,294
474
81
61
627
7,460
7,725
661
7
852
4,896
16
540
112
104
13
(11)
Holding and services companies
Gerfundos, S.A . . . . . . . . . . . . . . . . . . . . . . . . . .
Predifundos, S.A . . . . . . . . . . . . . . . . . . . . . . . . .
Europensiones, EGFP, S.A. . . . . . . . . . . . . . . . . . 51.00
Gestión Premier Fund, S.A. . . . . . . . . . . . . . . . .
Gestora Popular, S.A. . . . . . . . . . . . . . . . . . . . . . 35.00
Popular Bolsa SV, S.A. . . . . . . . . . . . . . . . . . . . . 100.00
S.C.R. de régimen simplificado, S.A. . . . . . . . 100.00
Popular Gestión Privada SGIIC, S.A. . . . . . . . . . .
Popular Gestión SGIIC, S.A. . . . . . . . . . . . . . . . . 99.99
Aliseda, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BPE Finance International, LTD. . . . . . . . . . . . . . .
BPE Financiaciones, S.A. . . . . . . . . . . . . . . . . . . . .
BPE Preference International, LTD . . . . . . . . . . . . .
Consulteam-Consultores de Gestao, S.A. . . . . . .
Finespa, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fondo Imopopular, FEIIF . . . . . . . . . . . . . . . . . .
Gestora Europea de Inversiones, S.A. . . . . . . . . .
Gold Leaf Title Company . . . . . . . . . . . . . . . . . .
IM Banco Popular FTPYME 1, FTA . . . . . . . . . . .
IM Banco Popular FTPYME 2, F.T.A . . . . . . . . . .
IM Cédulas 1 Grupo Banco Popular, FTA . . . . . .
IM Cédulas Grupo Banco Popular 2, FTA . . . . . .
IM Cédulas Grupo Banco Popular 3, FTA . . . . . .
IM Cédulas Grupo Banco Popular 4, F.T.A . . . . .
IM Grupo Banco Popular Empresas 1, FTA . . . .
IM Grupo Banco Popular Empresas 2, FTA . . . .
IM Grupo Banco Popular Financiaciones 1, F.T.A
M Grupo Banco Popular FTPYME I, FTA . . . . . . .
IM Grupo Banco Popular FTPYME II, FTA . . . . . .
IM Banco Popular MBS 1, FTA . . . . . . . . . . . . . .
IM Grupo Banco Popular Leasing 1, F.T.A . . . . . .
Inmobiliaria Viagracia, S.A. . . . . . . . . . . . . . . . .
Inmobiliaria Vivesa, S.A. . . . . . . . . . . . . . . . . . .
Intermediación y Servicios Tecnológicos, S.A. . . .
Inversiones Inmobiliarias Alprosa, S.L. . . . . . . . .
Inversiones Inmobililarias Canvives, S.L. . . . . . .
Inversiones Inmobiliarias Cedaceros, S.L . . . . . .
Inversiones Inmobiliarias Gercebios, S.L . . . . . .
Inversiones Inmobiliarias Jeráguilas, S.L . . . . . .
Inversiones Inmobiliarias Tamadaba, S.L . . . . . .
Isla de los Buques, S.A. . . . . . . . . . . . . . . . . . . .
MUNDOCREDIT, S.A. . . . . . . . . . . . . . . . . . . . . . .
Mundo Envíos, S.A. . . . . . . . . . . . . . . . . . . . . . .
Populargest Gestao de Imóveis, S.L. . . . . . . . . . .
Popular Capital, S.A. . . . . . . . . . . . . . . . . . . . . . . .
Popular Capital Europe, B.V. . . . . . . . . . . . . . . . . .
Popular Español Asia Trade, LTD . . . . . . . . . . . . . .
Popular Finance Europe, B.V. . . . . . . . . . . . . . . . .
Urbanizadora Española, ,S.A. . . . . . . . . . . . . . . .
Velazquez,34, S.L . . . . . . . . . . . . . . . . . . . . . . . .
Desarrollo Aplicaciones Especiales, S.A. . . . . . . .
Eurovida, S.A. (Portugal) . . . . . . . . . . . . . . . . . . .
FIB Realty Corporation . . . . . . . . . . . . . . . . . . . . . .
Panorama Ibicenca, S.A. . . . . . . . . . . . . . . . . . . .
Popular de Comunicaciones, S.A. . . . . . . . . . . . .
Popular de Informática, S.A. . . . . . . . . . . . . . . . .
Popular de Mediación, S.A. . . . . . . . . . . . . . . . . .
Popular de Renting, S.A. . . . . . . . . . . . . . . . . . . .
Popular Seguros, S.A. . . . . . . . . . . . . . . . . . . . . .
Promoción Social de Viviendas, S.A. . . . . . . . . . .
Total Sunset Inc . . . . . . . . . . . . . . . . . . . . . . . . . . .
196
100.00
100.00
90.00
100.00
73.10
4.19
99.90
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
99.99
99.50
35.61
99.00
99.98
99.83
99.96
90.00
100.00
100.00
100.00
7.07
97.80
50.67
39.07
99.84
99.84
90.00
100.00
-
47
69,730
357
60
61
62
3,005
7,500
553
7
13,682,267 1,195,702
1,138,837
69,487
2,324,047
235,209
8,456,544
641,056
1,977,137
44,015
1,363,474
152,803
150,695
1,526
1,315
26,250
3,202
(5,168)
GRUPO BANCO POPULAR
Address
Banco de Andalucía, S.A. . . . . . . . . . . . . . . . . . . . . Fernández y González, 4
Banco de Castilla, S.A. . . . . . . . . . . . . . . . . . . . . . . Pl. de los Bandos, 10
Banco de Crédito Balear, S.A. . . . . . . . . . . . . . . . . . Pl. de España, 1
Banco de Galicia, S.A. . . . . . . . . . . . . . . . . . . . . . . . Policarpo Sanz, 23
Banco de Vasconia, S.A. . . . . . . . . . . . . . . . . . . . . . Pl. del Castillo, 39
bancopopular-e, S.A. . . . . . . . . . . . . . . . . . . . . . . . . Velázquez, 34
Banco Popular France, S.A . . . . . . . . . . . . . . . . . . . 8, Rue D´Anjou
Banco Popular Hipotecario, S.A. . . . . . . . . . . . . . . . Labastida, 9-11
Banco Popular Portugal, S.A. . . . . . . . . . . . . . . . . . . Rua Ramalho Ortigao, 51
Popular Banca Privada, S.A. . . . . . . . . . . . . . . . . . . J.Ignacio Luca de Tena, 13
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
Activity
Sevilla
Salamanca
P.Mallorca
Vigo
Pamplona
Madrid
París
Madrid
Lisboa
Madrid
Miami
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Banking
Heller Factoring Portuguesa, S.A (1). . . . . . . . . . . . . Rua do Comércio, 85
Popular de Factoring, S.A. . . . . . . . . . . . . . . . . . . . . Labastida, 9-11
Lisboa
Madrid
Factoring
Factoring
Madrid
Lisboa
Luxemburgo
Madrid
Madrid
Share portfolio & ownership
Stockbroker
Madrid
Madrid
Madrid
Lisboa
Venture capital
Mututal fund management
Mututal fund management
Madrid
Madrid
George Town
Madrid
George Town
Madrid
Lisboa
Madrid
Miami
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Getafe
Madrid
Madrid
Madrid
Lisboa
Madrid
Amsterdam
Hong Kong
Amsterdam
Madrid
Asset ownership
Property instrumentality
RE management and services
Lisboa
Madrid
Lisboa
Miami
Madrid
Madrid
Madrid
Madrid
Madrid
Madrid
Lisboa
París
Madrid
Madrid
Miami
Management consultants
IT services
Insurance
Dormant
Real estate promotion s
Asset holding
Communication services
IT services
Insurance broker
Contract hire
Insurance
Insurance broker
Asset holding
Dormant
Dormant
Europensiones, EGFP, S.A. . . . . . . . . . . . . . . . . . . . María de Molina, 34
Gerfundos, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rua Ramalho Ortigao, 51
Gestión Premier Fund, S.A. . . . . . . . . . . . . . . . . . . . Boulevard Royal, 261
Gestora Popular, S.A. . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Popular Bolsa SV, S.A. . . . . . . . . . . . . . . . . . . . . . . . Labastida, 9-11
Popular de Participaciones Financieras S.C.R. de
régimen simplificado, S.A. . . . . . . . . . . . . . . . . Labastida, 9-11
Popular Gestión SGIIC, S.A. . . . . . . . . . . . . . . . . . . . Labastida, 9-11
Popular Gestión Privada SGIIC, S.A. . . . . . . . . . . . . J.Ignacio Luca de Tena, 13
Predifundos, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Rua Ramalho Ortigao, 51
Aliseda, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Aula 2000, S.L. . . . . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
BPE Finance International, LTD. . . . . . . . . . . . . . . . . . Ugland House
BPE Financiaciones, S.A. . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
BPE Preference International, LTD. . . . . . . . . . . . . . . . Ugland House
Finespa, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Fondo Imopopular, FEIIF . . . . . . . . . . . . . . . . . . . . Rua Ramalho Ortigão, 51
Gestora Europea de Inversiones, S.A. . . . . . . . . . . . Labastida, 9-11
Gold Leaf Title Company . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
IM Banco Popular FTPYME 1, FTA . . . . . . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Cédulas 1 Grupo Banco Popular, FTA . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Cédulas Grupo Banco Popular 2, FTA . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Cédulas Grupo Banco Popular 3, FTA . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Grupo Banco Popular Empresas 1, FTA . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Grupo Banco Popular Empresas 2, FTA . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Grupo Banco Popular FTPYME I, FTA . . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
IM Grupo Banco Popular FTPYME II, FTA . . . . . . . . Pz. Pablo Ruiz Picasso, s/n
Inmobiliaria Viagracia, S.A. . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Inmobiliaria Vivesa, S.A. . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Intermediación y Servicios Tecnológicos, S.A. . . . . . . Torneros, 9
Isla de los Buques, S.A. . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
MUNDOCREDIT, S.A. . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Mundo Envíos, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Populargest Gestao de Imóveis, S.L. . . . . . . . . . . . . Rua Ramalho Ortigão, 51
Popular Capital, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Popular Capital Europe, B.V. . . . . . . . . . . . . . . . . . . . . Strawinskylaan, 3105
Popular Español Asia Trade, LTD. . . . . . . . . . . . . . . . . 13/F Tim Mei Avenue
Popular Finance Europe, B.V . . . . . . . . . . . . . . . . . . . Strawinskylaan, 3105
Urbanizadora Española, S.A. . . . . . . . . . . . . . . . . . . J.Ortega y Gasset, 29
Non-financial companies
Consulteam-Consultores de Gestao, S.A. . . . . . . . . .Rua Tomás Ribeiro, 50
Desarrollo Aplicaciones Especiales, S.A. . . . . . . . . .Juan de Olías, 1
Eurovida, S.A. (Portugal) . . . . . . . . . . . . . . . . . . . . .Rua Castilho, 39
FIB Realty Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
Inversiones Inmobiliarias Alprosa, S.L. . . . . . . . . . .J.Ortega y Gasset, 29
Panorama Ibicenca, S.A. . . . . . . . . . . . . . . . . . . . . .J.Ortega y Gasset, 29
Popular de Comunicaciones, S.A. . . . . . . . . . . . . . .J.Ortega y Gasset, 29
Popular de Informática, S.A. . . . . . . . . . . . . . . . . . .J.Ortega y Gasset, 29
Popular de Mediación, S.A. . . . . . . . . . . . . . . . . . . .Labastida, 9-11
Popular de Renting, S.A. . . . . . . . . . . . . . . . . . . . . .Labastida, 9-11
Popular Seguros, S.A. . . . . . . . . . . . . . . . . . . . . . . .Rua Castilho, 39
Proassurances, S.A.R.L . . . . . . . . . . . . . . . . . . . . . . .8, Rue D’Anjou
Promoción Social de Viviendas, S.A. . . . . . . . . . . . .J.Ortega y Gasset, 29
Sicomi, S.L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .J.Ortega y Gasset, 29
Total Sunset Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2720 Coral Way
(1) Currently Popular Factoring (Portugal), S.A
197
Banco de Andalucía, S.A. . . . . . . . . . . . . . . .
Banco de Castilla, S.A. . . . . . . . . . . . . . . . . .
Banco de Crédito Balear, S.A. . . . . . . . . . . . .
Banco de Galicia, S.A. . . . . . . . . . . . . . . . . . .
Banco de Vasconia, S.A. . . . . . . . . . . . . . . . .
bancopopular-e, S.A. . . . . . . . . . . . . . . . . . . .
Banco Popular France, S.A . . . . . . . . . . . . . .
Banco Popular Hipotecario, S.A. . . . . . . . . . .
Banco Popular Portugal, S.A. . . . . . . . . . . . .
Popular Banca Privada, S.A. . . . . . . . . . . . . .
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . .
% of voting rights
Direct
Indirect
Total
Carrying
value
Assets
Equity Total
Total
Of which
80.07
95.16
64.47
93.54
96.82
100.00
100.00
99.94
100.00
52.50
100.00
0.10
0.22
0.57
0.11
0.10
0.06
7.50
-
80.17
95.38
65.04
93.65
96.92
100.00
100.00
100.00
100.00
60.00
100.00
168,048
72,766
32,746
66,902
32,930
34,908
15,538
106,476
580,448
13,784
238,908
Heller Factoring Portuguesa, S.A(1). . . . . . . . 49.76
Popular de Factoring, S.A. . . . . . . . . . . . . . . . 100.00
50.06
-
99.82
100.00
43,334
45,818
194,166
370,595
40,566
50,337
3,014
4,352
100.00
60.00
65.00
-
51.00
100.00
60.00
100.00
100.00
7,968
300
77
12,363
6,100
57,826
3,092
174
15,970
18,907
50,835
2,890
172
15,696
14,810
28,613
1,843
(2)
(105)
7,764
0.01
60.00
100.00
100.00
100.00
60.00
100.00
36,000
3,010
2,404
375
45,844
204,752
9,909
1,541
45,187
186,831
7,691
1,477
1,385
19,844
1,088
375
1.00
10.00
95.81
100.00
0.10
100.00
0.01
0.01
0.50
0.02
0.17
0.04
100.00
10.00
90.55
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
97.55
2,592
7
45
100
52
8,058
5,030
654
256
20,635
1,170
1,203
61
15,500
500
11,751
90
2,000
2,000
11,449
4,192
32
409,997
10,867,650
438,574
11,064
5,099
3,821
266
873,861
2,056,896
3,074,124
2,020,889
1,349,151
2,836,406
1,608,725
1,970,112
65,806
1,210
2,216
301,245
11,437
540
60,052
857,826
203,102
39
1,511,774
12,523
4,179
31
34
997
34
10,782
5,061
3,804
266
2,248
(611)
(179)
(54)
(504)
(757)
64,504
1,207
1,565
64
11,057
480
8,679
791
2,245
2,583
12,479
73
115
(287)
25
77
10
342
100
620
(54)
(446)
(757)
2,695
17
87
6
(4,187)
(12)
(1,498)
322
139
498
303
100.00
100.00
100.00
64.39
100.00
0.16
0.16
10.00
100.00
100.00
91.84
100.00
100.00
100.00
50.67
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
91.84
100.00
100.00
368
4,565
644,114
53,494
459
81
61
4,481
36,253
8,045
121
648
7
-
366
2,037
25,891
53,494
459
80
61
706
7,327
7,587
121
648
7
-
(1)
776
5,526
196
12
1
628
419
156
7
7
(11)
-
Europensiones, EGFP, S.A. . . . . . . . . . . . . . . 51.00
Gerfundos, S.A. . . . . . . . . . . . . . . . . . . . . . . .
Gestión Premier Fund, S.A. . . . . . . . . . . . . . .
Gestora Popular, S.A. . . . . . . . . . . . . . . . . . . 35.00
Popular Bolsa SV, S.A. . . . . . . . . . . . . . . . . . . 100.00
S.C.R. de régimen simplificado, S.A. . . . . 100.00
Popular Gestión SGIIC, S.A. . . . . . . . . . . . . . . 99.99
Popular Gestión Privada SGIIC, S.A. . . . . . . .
Predifundos, S.A. . . . . . . . . . . . . . . . . . . . . . .
Aliseda, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
Aula 2000, S.L. . . . . . . . . . . . . . . . . . . . . . . 99.00
BPE Finance International, LTD. . . . . . . . . . . . . 100.00
BPE Financiaciones, S.A. . . . . . . . . . . . . . . . . . 90.00
BPE Preference International, LTD . . . . . . . . . . 100.00
Finespa, S.A. . . . . . . . . . . . . . . . . . . . . . . . . .
4.19
Fondo Imopopular, FEIIF . . . . . . . . . . . . . . .
Gestora Europea de Inversiones, S.A. . . . . . . 99.90
Gold Leaf Title Company . . . . . . . . . . . . . . . .
IM Banco Popular FTPYME 1, FTA . . . . . . . . 100.00
IM Cédulas 1 Grupo Banco Popular, FTA . . . 100.00
IM Cédulas Grupo Banco Popular 2, FTA . . . 100.00
IM Cédulas Grupo Banco Popular 3, FTA . . . 100.00
IM Grupo Banco Popular Empresas 1, FTA . . 100.00
IM Grupo Banco Popular Empresas 2, FTA . . 100.00
IM Grupo Banco Popular FTPYME I, FTA . . . . 100.00
IM Grupo Banco Popular FTPYME II, FTA . . . 100.00
Inmobiliaria Viagracia, S.A. . . . . . . . . . . . . . . 99.99
Inmobiliaria Vivesa, S.A. . . . . . . . . . . . . . . . . 99.99
Intermediación y Servicios Tecnológicos, S.A. . 99.50
Isla de los Buques, S.A. . . . . . . . . . . . . . . . . 99.98
MUNDOCREDIT, S.A. . . . . . . . . . . . . . . . . . . . 99.83
Mundo Envíos, S.A. . . . . . . . . . . . . . . . . . . . . 99.96
Populargest Gestao de Imóveis, S.L. . . . . . . .
Popular Capital, S.A. . . . . . . . . . . . . . . . . . . . . 90.00
Popular Capital Europe, B.V. . . . . . . . . . . . . . . 100.00
Popular Español Asia Trade, LTD . . . . . . . . . . . 100.00
Popular Finance Europe, B.V. . . . . . . . . . . . . . . 100.00
7.00
Urbanizadora Española, ,S.A. . . . . . . . . . . . .
Consulteam-Consultores de Gestao, S.A. . . . .
Desarrollo Aplicaciones Especiales, S.A. . . . . 50.67
Eurovida, S.A. (Portugal) . . . . . . . . . . . . . . . .
FIB Realty Corporation . . . . . . . . . . . . . . . . . . .
Inversiones Inmobiliarias Alprosa, S.L. . . . . . 35.61
Panorama Ibicenca, S.A. . . . . . . . . . . . . . . . .
Popular de Comunicaciones, S.A. . . . . . . . . . 99.84
Popular de Informática, S.A. . . . . . . . . . . . . . 99.84
Popular de Mediación, S.A. . . . . . . . . . . . . . . 90.00
Popular de Renting, S.A. . . . . . . . . . . . . . . . . 100.00
Popular Seguros, S.A. . . . . . . . . . . . . . . . . . .
Proassurances, S.A.R.L . . . . . . . . . . . . . . . . .
Promoción Social de Viviendas, S.A. . . . . . . .
Sicomi, S.L. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Sunset Inc . . . . . . . . . . . . . . . . . . . . . . . .
(1) Currently Popular Factoring (Portugal), S.A
198
623
47
13,500
54,636
357
60
61
62
3,005
8
553
7
-
12,366,888 1,108,204
5,160,650
533,375
2,264,262
222,523
4,595,806
426,771
4,129,521
251,170
1,123,629
68,022
477,500
65,783
2,378,229
233,953
7,237,603
420,845
1,473,224
40,833
1,028,110
88,661
184,812
76,204
34,792
61,829
46,967
7,935
7,461
25,483
50,072
9,696
1,552
GRUPO BANCO POPULAR
The following entities and securitization funds were added to
the Group in 2008: IM Cédulas Grupo Banco Popular 4 F.T.A.,
IM Grupo Banco Popular Financiaciones 1, F.T.A, IM Grupo
Banco Popular Leasing 1, F.T.A, IM Banco Popular F.TPYME 2,
F.T.A, IM Banco Popular MBS 1, FTA, Inversiones Inmobiliarias
Cedaceros, S.L, Inversiones Inmobiliarias Canvives, S.L,
Inversiones Inmobiliarias Gercebio, S.L, Inversiones
Inmobiliarias Jeráguilas, S.L, Inversiones Inmobiliarias
Tamadaba, S.L and Velazquez 34, S.L.
The companies that no longer form part of the Group are:
Banco de Castilla, S.A., Banco de Crédito Balear, S.A., Banco de
Galicia, S.A., and Banco de Vasconia, S.A., that were absorbed
by Banco Populas Español, S.A, as discussed in Note 8 to
these financial statements. In June 2008 the interest in Banco
Popular France was sold. Complete information on this sale is
offered in Note 9. Lastly, Aula 2000, Sicomi and Proasurances
were sold or wound up with no impact on the Group’s results
or equity.
In 2007 the following entities were incorporated:
IM Cédulas Grupo Banco Popular 3, FTA, IM Grupo Banco
Popular Empresas 2 FTA and IM Grupo Banco Popular
FTPYME II FTA and the following special purpose subsidiaries
were wound up Popular Commercial Europe, BV and BPE
Capital International Limited: with no effect on equity and
results. In addition, the names of Popular Gestión (formerly
Sogeval) and Popular de Mediación (formerly Eurocorredores)
were changed.. On November 9, 2007 the Group acquired
100% of TotalBank, with a special purpose subsidiary Gold
Leaf Title Company and two dormant subsidiaries FIB Realty
Corporation and Total Sunset Inc., a US banking institution
which operates in Miami-Dade county, Florida, USA.
Popular de Participaciones Financieras, S.A, amended its
bylaws as necessary in order to qualify for the simplified
regime, including the inclusion of the term “de régimen
simplificado” in its name, as stipulated by Law 25/2005
governing Venture Capitalists and their Management
Companies. Therefore its name is now Popular de
Participaciones Financieras, S.C.R. de régimen simplificado,
S.A.
The accounting statements of these companies that were
added to the Group’s consolidation relate in any event to
December 2008 and 2007, respectively.
Subsidiaries were fully consolidated. Consequently all
material balances and transactions between these
companies and the other companies in the Group have
been eliminated in consolidation. Similarly, third- party
holdings in the Group’s equity are presented under Minority
Interests on the consolidated balance sheet and the part of
results for the year attributable to them is presented under
Results attributed to minority interests in the consolidated
income statement.
The results of the entities acquired by the Group during the
year are consolidated taking into account only those results
for the period between the date of acquisition and year end.
Similarly, the results of the companies disposed of by the
Group during the year are consolidated taking into account
only those results for the period from the start of the year
to the date of sale.
Jointly-controlled companies are investees which, although
not classified as dependent companies, are controlled
jointly by the Group and another or other companies not
related to the Group and joint ventures. Joint ventures are
contractual agreements whereby two or more entities or
venturers perform operations or hold assets such that any
strategic decision of a financial or operational nature
affecting them requires the unanimous consent of all the
venturers, without such operations or assets being included
in different financial structures other than those of the
venturers.
Jointly-controlled companies were consolidated by the
proportionate consolidation method. Accordingly, all the
balances and transactions and eliminations to which they
give rise are eliminated in proportion to the Group's
ownership percentage.
Jointly-controlled companies at the 2008 year end are as
follows:
Address
Jointly-controlled companies:
Cédulas TDA 11, F.T.A . . . . . . . . . . . . . . . . . . . . . . . Orense, 69
Eurovida, S.A. (España) . . . . . . . . . . . . . . . . . . . . . . María de Molina, 34
GAT FTGENCAT 2005, F.T.A. . . . . . . . . . . . . . . . . . . Fontanella, 5-7
Sociedad Conjunta para la Emisión y Gestión de
Medios de Pago “Iberia Cards”, S.A. . . . . . . . . . . . . José Ortega y Gasset, 22
Actiivty
Madrid
Madrid
Barcelona
Asset securitization fund
Insurance
Asset securitization funds
Madrid
Payment means
199
GRUPO BANCO POPULAR
Relevant information of the holdings in jointly-controlled
companies at the 2008 year end is as follows:
Jointly-controlled entities
Cédulas TDA. 11, F.T.A . . . . . . . . . . . . . . . . . . . . . . .
Eurovida, S.A. (España) . . . . . . . . . . . . . . . . . . . . . .
GAT FTGENCAT 2005, F.T.A. . . . . . . . . . . . . . . . . . .
Medios de Pago “Iberia Cards”, S.A. . . . . . . . . . . . .
% of voting rights
Direct Indirect
Total
Carring
value
Assets
Total
Equity
Of which results
40.00
37.00
28.57
12.00
-
40.00
49.00
28.57
4,342
-
5,015,390
930,010
312,230
93,437
1,271
35,394
1,792
42.50
-
42.50
4,890
32,967
18,656
1,440
The table below sets out informaiton on jointly-controlled
entities for 2007
Address
Jointly-controlled entities::
Eurovida, S.A. (España) . . . . . . . . . . . . . . . . . . . . . . María de Molina, 34
GAT FTGENCAT 2005, F.T.A. . . . . . . . . . . . . . . . . . . Fontanella, 5-7
Medios de Pago “Iberia Cards”, S.A. . . . . . . . . . . . . José Ortega y Gasset, 22
% of voting rights
Direct Indirect
Total
Jointly-controlled entities:
Eurovida, S.A. (España) . . . . . . . . . . . . . . . . . . . . . . 37.00
GAT FTGENCAT 2005, F.T.A. . . . . . . . . . . . . . . . . . . 28.57
Medios de Pago “Iberia Cards”, S.A. . . . . . . . . . . . . 42.50
Madrid
Barcelona
Insurance
Asset securitization fund
Madrid
Payment means
Carrying
Value
Assets
Equity
Total Of which results.
12.00
-
49.00
28.57
4,282
-
824,632
433,259
65,324
(53)
34,443
644
-
42.50
4,889
30,944
17,216
2,228
During 2008 the asset securitization fund Cédulas TDA 11,
F.T.A in which 40% of the voting rights are held, was added as
a jointly-controlled entity using the proportionate method.
The accounting information of these companies used for
consolidation referred in all cases to December 31, 2008
and 2007, respectively.
The figures in the table showing assets and equity refer to
the total for the company, regardless of the percentage
included in the consolidation process.
Associates are investees in which the Group exercises
significant influence.. This significant influence generally,
although not exclusively, takes the form of a shareholding,
held directly or indirectly through another or other
Investees, of 20% or more of the investee’s voting rights.
in their capital, net of dividends received from them and
other balance sheet eliminations. The results on
transactions with an associate are eliminated in the
proportion to the Group’s holding therein. If losses cause an
associate to have negative equity for accounting purposes,
in the Group’s consolidated balance sheet, it is presented
with a zero value unless the Group has the obligation to
support it financially.
Redes y Procesos S.A., that resulted from the split of Sistema
4B, S.A., was added in 2008. This transaction has not had
a significant effect on the Group’s results or financial
situation.
Relevant information on associates as of December 31,
2008 and 2007, is as follows:
In the consolidation process, the equity method is used for
associates. Therefore shareholdings in associates were
valued at the fraction represented by the Group’s holding
Address
Associates
Inversiones Area Sur, S.L. . . . . . . . . . . . . . . . . . . . . Acera del Darro, 30
Granada
Sistema 4B, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Francisco Sancha, 12
Madrid
Redes y Procesos S.A. . . . . . . . . . . . . . . . . . . . . . . . Francisco Sancha, 12
Madrid
% of voting rights
Direct
Indirect
Total
Associates
Inversiones Area Sur, S.L. . . . . . . . . . . . . . . . . . . . .
50.00
50.00
Sistema 4B, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.31
23.31
Redes y Procesos S.A. . . . . . . . . . . . . . . . . . . . . . . .
23.31
23.31
200
Activity
Payment means
Payment means
Carrying
value
8,950
1,191
2,020
GRUPO BANCO POPULAR
Address
Activity
Associates:
Inversiones Area Sur, S.L. . . . . . . . . . . . . . . . . . . . . Acera del Darro, 30
Sistema 4B, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Francisco Sancha, 12
Direct
Associates:
Inversiones Area Sur, S.L. . . . . . . . . . . . . . . . . . . . .
Sistema 4B, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . .
% voting rights
Indirect
-
23.31
Inversiones Área Sur, S.L in which the Group has a 50%
holding is managed and controlled by the other shareholder
and has therefore been classified as an associate in both years.
In 2007 the Group disposed of its holding in the associate
Global Ends, S.A.
The financial statements used in the preparation of these
consolidated financial statements with respect to
Inversiones Area Sur, S.L. are at November 30, 2008 and
2007, without this time difference having any significant
effect on consolidated earnings and equity.
Note 8 discloses the most significant acquisitions and
disposals during the year of the Group’s holdings in
dependent and jointly-controlled
companies and
associates.
Since the accounting principles and standards and
valuation criteria applied in preparing the Group’s
consolidated financial statements for 2008 and 2007 may
differ from those used by some of the dependent and
jointly-controlled companies and associates included in
the Group, the necessary significant adjustments and
reclassification have been made on consolidation in order
to ensure consistency with respect to accounting principles
and standards.
d) Comparability
In 2008 the Bank of Spain amended the formats of the
standard public financial statements and brought them into
line with the general international consensus, thereby
completing the process towards ensuring the comparability
of the financial statements between credit institutions.
In this respect, and in accordance with international
accounting standards, a statement of changes in equity has
been created, the balance sheet has been amended slightly
and the structure of the income statement, the consolidated
statement of recognised income and expense and the
consolidated cash flow statement has been changed.
50.00
-
Granada
Madrid
Total
50.00
23.31
Payment means
Carrying
value
8,950
3,211
Therefore, and in accordance with IAS 1, all quantitative
information for 2007 that figures in these financial
statements, affected by the changes in the presentation
formats, has been adapted and reclassified for comparative
purposes.
The main changes in the presentation of the balance sheet
with respect to that published in the previous year are as
follows:
- - Assets include “Other assets” which groups together and
summarises the lines relating to “Accruals accounts ” and
“Other assets” on the Group’s consolidated balance sheet
published in 2007.
- Cheques and clearing house are reclassified from other
financial assets to Due from credit institutions. The rest of
this heading is reclassified under customer loans.
- Money-market transactions through counterparties are
reclassified to customer loans or customer deposits on the
basis of their nature, debtor or creditor.
- Embedded derivatives are no longer reflected as a
valuation adjustment and are transferred to hedging
derivatives.
- Under liabilities, the item “Capital having the nature of a
financial liability”, is eliminated and the balance is
reclassified to “subordinated liabilities” under the heading
“Financial liabilities at amortised cost”..
- The heading “Other liabilities” is included that groups
together the items under liabilities on the consolidated
balance sheet, included in the financial statements at
December 31, 2007 in “Accrual accounts” and “Other
liabilities”.
-The deposit component on life insurance linked to
investment funds is separated and reclassified in the
portfolio of “other financial liabilities at fair value through
profit or loss” when the financial assets to which they are
linked are also carried against results.
201
- The heading “Financial liabilities at fair value through
equity” is eliminated from valuation adjustments of
consolidated equity, the balance of which is reclassified to
a new heading “Other valuation adjustments”. Under this
heading, a new item is created named “Equity method
companies” which reflects the valuation adjustments
arising from the application of the equity method in the
valuation of associates and jointly-controlled companies in
which it has been decided to apply this method.
Lastly, legislation differentiates and separates financial
guarantees from technical guarantees such that fees and
commissions which have not yet accrued are taken from
“other liabilities” to “other financial liabilities” , in the case
of financial guarantees and “liabilities for insurance
contracts" in the case of technical guarantees.This does not
entail any further operational change.
The consolidated income statement has undergone
numerous changes with respect to the consolidated income
statement published in the financial statements for 2007.
The main changes and reclassifications are as follows:
- Financial income and expenses from insurance operations
and other non-financial operations are included in “Interest
and similar income” or “Interest expense and similar
charges”, as appropriate. The difference between both
figures makes up the "Net interest margin” that replaces the
former “Net interest income”” without the return on equity
instruments.
- The Group’s insurance operations are no longer disclosed
separately in the consolidated income statement and
therefore the amounts relating to financial income and
expenses are included in profit/loss by nature while those
related to insurance operations are carried in “Other
operating income” or “Other operating charges”, depending
on their nature.
- Se elimina el “Margen ordinario” y se presenta un nuevo
margen denominado “Margen bruto”. Básicamente, se
diferencian por el hecho de que en el nuevo margen se
incluyen los otros ingresos y las otras cargas de explotación,
que anteriormente no formaban parte del margen ordinario,
así como por el hecho comentado de incluir los intereses y
cargas financieras de la actividad no financiera.
- Gross income” is eliminated and a new margin, the “Gross
Margin, is presented . The basic difference is the fact that
the new margin includes other operating income and
charges that did not previously form part of net ordinary
income and the fact, as mentioned, that it includes interest
and financial changes from non-financial operations.
202
“Sales and income from non-financial services” and “Cost
of sales” are eliminated that are reclassified to “Other
operating income” and “Other operating charges”,
respectively.
-- The heading “Impairment losses on assets (net)” is
broken down into two items and its location is changed:
“Impairment losses on financial assets (net)”, that includes
net losses on the impairment of financial assets other than
“Investments” and “Impairment losses on other assets
(net)” that includes the amount of net impairment losses on
other non-financial assets and “investments”.
- “Net operating income" disappears and "Profit/loss on
operating activities" is created to replace it. The difference
is basically that the latter includes financial income and
expense from the Group's non-financial activities, the "net
transfer to impairment losses on financial instruments”, the
“net transfer to provisions” , the location of which also
changes, and “other gains” and “other losses”.
-Items relating to “Other gains” and “Other losses”
disappear under the new presentation. However, three new
headings are included: “Gains/(Losses) on the disposal of
assets not classified as non-current for sale”; “Negative
difference on consolidation” and “Gains /(Losses) on noncurrent assets for sale not classified as discontinued
operations” that basically include the amounts of the two
headings eliminated, with the exception of the items “Other
items” that have been reclassified under “Other operating
income” and “Other operating charges ” on the basis of the
nature of the corresponding balance.
In 2008 Banco Popular France that operated in an
independent geographical area was sold, meeting the
conditions to be considered a discontinued operation. In
order to fulfil the conditions of IFRS 5, it has been necessary
to restate the 2007 income statement for comparative
purposes, as may be noted below and in Note 66.
The table below sets out the reconciliation of the
consolidated income statement presented in the annual
accounts for 2007.
GRUPO BANCO POPULAR
Consolidated
Dec 07 previous
Income statement at 31/12/2007
Adjustments changes
Consolidated
Discont
presentation criteria Dec 07 adjusted operations
Interest and similar income
Interest expenses and similar charges a
5,213,058
2,929,511
(1)
(1)
23,611
1,178
(55,441)
(33,008)
58,763
8,846
2,228
(53,377)
(6,591)
520
254,787
153,734
73,878
(46,862)
(7,131)
(52,897)
5,236,669
2,930,689
2,305,980
58,763
3,920
1,056,172
166,068
65,864
52,686
254,787
153,734
3,478,370
755,862
375,072
100,211
12,379
304,073
1,930,773
349
-
(20,256)
(2,150)
(18,106)
(8,036)
(725)
(48)
(1,013)
(537)
(25,941)
(8,551)
(4,172)
(569)
184
(1,795)
(11,038)
-
Return on equity instruments .
NET INTEREST INCOME .
55,441
2,338,988
(2)
(9) (10)
8,618
-
8,618
-
(7) (10)
(1)
(1)
(8),(9) (10)
(8),(9) (10)
11,931
(800)
(75)
(54,152)
(14,405)
7,080
2,166
4,914
4,914
142
4,772
11,931
1,950,973
609,499
4
(11,034)
(3,765)
1,341,474
1,341,474
76,512
1,264,962
(7,269)
7,269
-
(2)
3,920
1,047,326
163,740
53,377
(1) (3)
72,455
52,166
(3),(4),(5) (8)
(3),(4),(5),(8)
3,404,492
GROSS INCOME
(5)
Sales and income from non- financial services 46,862
7,131
(5)
Cost of sales
52,897
(4)
Other operating income
755,862
Personnel expenses
352,297
22,775
Other general administration expenses
100,211
Amortisation/ depreciation
43,156
(4) (43,156)
Other operating charges
(6) (8) (11)
12,379
(7) 304,073
2,245,594
(321,901)
NET OPERATING INCOME
323,380
(7) (314,821)
Impairment losses on assets (net)
349
18,793
(6) (18,793)
Provisioning expense (net)
Results equity method companies
Fee and commission income
Fee and commission expense
Insurance operations
Profit/loss insurance operations (net)
Exchange differences (net)
Financial income non-financial operations
Financial expenses non-financial operations.
Other gains
Other losses
PROFIT/LOSS BEFORE TAXES
Corporate income tax
PROFIT/LOSS FOR YEAR CONT.
OPERATIONS
Profit/loss on discontinued operations (net)
CONSOLIDATED PROFIT/LOSS FOR YEAR
a)Profit/loss attributed to minority interests
b) Profit/loss attributed to Group
800
75
54,152
14,405
1,943,893
607,333
1,336,560
1,336,560
76,370
1,260,190
Consolidated with discont. operations
5,216,413 Interest and similar income a.
2,928,539 Interest expense and similar charges
- Return on equity reimbursable on demand
2,287,874 NET INTEREST MARGIN
58,763 Return on equity instruments
3,920 Profit/loss equity method companies
1,048,136 Fee and commission income.
165,343 Fee and commission expense
-65,864 Profit/loss financial transactions (net)
52,638 Exchange differences (net)
253,774 Other operating income .
153,197 Other operating charges .
3,452,429 GROSS MARGIN
---747,311 Personnel expenses
370,900 Other general administration expenses
99,642 Amortisation/ depreciation
-12,563 Provisioning expense (net)
302,278 Impairment losses on financial assets (net)
1,919,735 PROFIT/LOSS OPERATING ACTIVITIES
-349 impairment losses on other assets (net)
--
Gains(Losses) on disposals
8,622 assets not classified as non-current for sale
- - Negative difference on consolidation
Gains/(losses) on non-current assets for sale
11,931 not classified as discontinued operations
----1,939,939 PROFIT/LOSS BEFORE TAXES
605,734 Corporate income tax
PROFIT/LOSS FOR YEAR CONT.
1,334,205 OPERATIONS
7,269 Profit/loss discontinued operations i (net)
1,341,474 CONSOLIDATED PROFIT/LOSS FOR YEAR
76,512 a) Profit/loss attributed to minority interests
1,264,962 b) Profit/loss attributed to parent company
(1) Transfer of financial income and expenses from insurance operations to different lines, based on their nature
(2)Reclassification of return on equity instruments in new location .
(3) Transfer of “Income on insurance and reinsurance contracts” issued to "Other operating income" and “Expenses relating to insurance and reinsurance
contracts” to "Other operating charges "
(4)Reclassification of Other operating income and charges in new location
(5)Adjustment of “Sales and income from non-financial services” and “cost of sales” to other operating income and charges.
(6)Reclassification of “Provisioning expense (net)" to the line with the same name under the new presentation .
(7)Inclusion of "Impairment losses on financial assets" in "Profit/loss from operating activities" and "Losses on non-current assets held for sale" in the
specific line under the new presentation.
(8)Reclassification of "Other items" in "Other gains" and "Other losses" to “Other operating income and charges “,
(9)Reclassification of “Profit/ loss on sale of investments ” to “Gains /Losses on disposal of assets”.
(10)Transfer of “Profits and losses on non-current assets held for sale ” to its line under the new presentation and reclassification of
results on current assets to "Gains/losses on disposal of assets not classified as non-current for sale”.
(11)The Group has adopted the option of recognising actuarial gains and losses against equity and has therefore modified the consolidated income
statement for 2007 for comparative purposes.
203
3. Treatment of changes and errors in accounting
criteria and estimates
The new accounting options and criteria allowed include
the following:
The information contained in the accompanying financial
statements is the responsibility of the Directors of Banco
Popular. Estimates have been used, where appropriate, in
these consolidated financial statements, in the
measurement of certain assets, liabilities, revenues,
expenses and commitments. These estimates have been
made by the Senior Management of the Bank and Investees
and ratified by the Directors. These estimates relate to:
- Entities may reflect a hybrid instrument at fair value in
its entirety. Until now it was only possible to reflect the
embedded derivative at fair value, following the
segregation of the main instrument.
- The losses for impairment of certain assets (Note 15h)
- The actuarial assumptions used in calculating the
liabilities and commitments for post-employment
compensation (Note 15.q).
- The useful life adopted for items of tangible assets and
intangible assets and the valuation of goodwill in
consolidation (Notes 15.r and s).
- The fair value of certain unlisted assets (Note 45).
- The reversal period of temporary differences for the
purposes of their valuation (Note 33).
- Technical guarantees that do not meet the definition of
financial guarantees should be treated for accounting
purposes in accordance with the standards governing
insurance contracts.
These estimates were made in accordance with the best
information available at December 31, 2008 about the
items concerned and it is therefore possible that future
events may make it necessary to modify them in some way
in coming years. Any such modification will, in any event,
be made prospectively, giving recognition to the effects of
the change in estimate in the relevant consolidated
statement of income.
a) Changes in accounting principles
In 2008 Bank of Spain Circular 4/2004 was amended
and adapted the accounting environment deriving from
the adoption by the European Union of the IFRS-EU
approved by European Parliament Regulation
1606/2002. Such amendments aim to further drive total
comparability of information between credit institutions
in different countries. In this respect, certain accounting
options have been made available and some criteria,
already permitted under IFRS-EU, have been amended.
Additionally, the reporting format has changed.
Figures in euro
- The deposit component of life insurance linked to
investment funds is included in “other financial liabilities
at fair value through profit or loss”.
- The option to recognise actuarial gains and losses in
equity is made available. Until now they were recognised
directly in the consolidated income statement. The
impact of this change of criterion has totalled a gross
amount of €18,723k and €7,080k, in the income
statements for 2008 and 2007, respectively.
Except for the option concerning the recognition of
actuarial gains and losses in equity, the aforementioned
amendments entail no major changes at Group equity
level.
b) Errors and changes in accounting estimates
The Group did not correct any errors or change any
accounting estimates in the accompanying consolidated
financial statements..
4. Distribution of profits for the year
The proposed distribution of profits for 2008 which Banco
Popular’s Board of Directors will submit for approval by the
General Shareholders’ Meeting and that previously
approved for 2007 on May 30, 2008 are as follows, in
euros:
2008
2007(*)
Distribution:
Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary reserves and other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interim dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,015,400.55
479,909,557.74
410,811,652.43
161,846,489.66
248,965,162.77
891,736,610.72
293,098,573.97
597,871,266.43
147,431,967.10
450,439,299.33
890,969,840.40
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
891,736,610.72
890,969,840.40
(*) The distribution for 2007 was amended for comparative purposes following the Group’s decision to apply the option and reflect actuarial gains
and losses against equity and not in the income statement
204
GRUPO BANCO POPULAR
The profits of the Group’s subsidiaries and jointly-controlled
companies and associates included in the consolidation
will be distributed as approved by their respective General
Shareholders’ Meetings.
prepared by Banco Popular Español, S.A. in 2008 and
2007, respectively, reveal the existence of sufficient
liquidity and profits to pay an interim dividend in those
years. The principal figures in these statements were as
follows:
The provisional accounting statements, in accordance with
Spanish mercantile and accounting legal requirements,
2008
€ thousand
September
December
2007
September
December
Accumulated net profit . . . . . . . . . . . . . . . . . . . . . . . .
Dividends:
Accumulated interim dividends . . . . . . . . . . . . . . . . .
Interim dividends declared . . . . . . . . . . . . . . . . . . . . .
Sum of dividends paid and declared . . . . . . . . . . .
Dividends not yet declared . . . . . . . . . . . . . . . . . . . . .
Total dividends for the year . . . . . . . . . . . . . . . . . .
738,799
891,736
645.404
890,970
161,846
161,846
161,846
150,107
311,953
98,859
410,812
147,432
147,432
147,432
148,526
295,958
301,913
597,871
Primary liquidity * . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,605,933
13,731,231
17,445,003 19,0195,686
* Primary liquidity is made up of the following headings under assets on the balance sheet: Cash and balances with central banks and
loans and advances to credit institutions
5. Basic earnings per share
Basic earnings per share are calculated by dividing the net
profit attributed to the Group by the weighted average
number of shares of common stock during the year,
excluding, where appropriate, the treasury shares acquired
by the Group. The calculation of the basic earnings per
share of the Group coincides exactly in 2008 and 2007
with diluted earnings per share and is s follows:
2008
2007
Net profit attributed to the Group (€ thousand) . . . . . . . . . . . . . . . . . . . . .
Average outstanding number of ordinary shares (thousand) . . . . . . . . . . .
1,052,072
1,213,540
1,264,962
1,214,993
Basic earnings per share (euros) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share (euros) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.867
0.867
1.041
1.041
6. Minimum capital requirement
Bank of Spain Circular 3/2008 came into effect in 2008
and develops, with respect to credit institutions, legislation
concerning capital and supervision at consolidated group
level. Its issue was based on Law 36/2007, of November
16, amending Law 13/1985, of May 25, setting out
investment coefficients, capital and reporting requirements
of financial intermediaries and other rules governing the
financial system, and also includes Royal Decree
216/2008, of February 15, on capital requirements for
financial institutions. This has also brought to an end the
process of adapting Spanish legislation on credit institutions
to EC Parliament and Council Directives 2006/48/EC of
June 14, 2006, concerning access to credit institutions’
operations and performance, and European Parliament and
Council Directive 2006/49/EC, of June 14, 2006,
concerning the capital adequacy of investment companies
and credit institutions.
The new approach, known as Basel II, contains two new
pillars underpinning the rules that ensure the solvency and
stability of entitles and aims, inter alia, to ensure that own
fund requirements are far more sensitive to the risks
actually borne by entities in the course of business. An
example of this is the increase in the types of risk, coverage
of which through capital is considered significant, such as
the operational risk.
Concerning minimum capital requirements with respect to
the credit risk and although the traditional 8% of risk
weighted assets is maintained, the most significant updates
relate to:
205
— The possibility of using internal classifications and
internal models to calculate weighted risk exposures and
therefore resulting capital requirements. Implementation of
this alternative is subject to express authorisation from the
Bank of Spain and a highly detailed set of prudent and
technical requirements, mainly related to risk management
and the robustness of internal controls in credit institutions.
— For entities that do not use those models and that
therefore follow the standard method, the Circular
determines applicable weightings while it establishes the
requirements that must be met by the external rating
agencies often used to determine such weightings. These
criteria are mainly based on objectivity, independence,
transparency, reputation and the on-going update of the
methodology applied to measure risk ratings.
— The extension of acceptable risk reduction and mitigation
techniques.
— Highly specific and technically complex regulation of
capital requirements to be met with respect to exposure to
asset securitization risks, for both the originating entity and
any other player involved in the securitization process.
A further update is the weighting now attributed mortgages
where coverage is insufficient, i.e., where the loan exceeds
the value of the home purchased. Excess amounts are
considered high risk.
Pillar II is based on two principles: a) Credit institutions
should have a process to assess the sufficiency of capital
based on their risk profile and with a strategy designed to
maintain capital levels. This process should be monitored
by senior management, through internal controls and
integrated in a general management process. b) Supervisory
review by the Bank of Spain of strategies and internal
assessments of the sufficiency of capital to guarantee
compliance with regulatory capital coefficients.
With respect to Pillar II of the new Basel Accord, devoted to
normalising and favouring the reporting to the market of
relevant information for it to enforce discipline, the
minimum content of the information to be published is
established in order to ensure comparability between
entities.
€ thousand
The Group has designed and developed the risk
management and control systems that are considered
appropriate to the Group’s risk profile. In this respect,
Senior Management has been actively involved in designing
the control policies and their regular follow-up.
The Group’s capital objective is established in terms of
computable capital levels and make-up (Tier I, Tier II, Tier
III). That level is set within a range and as a percentage of
the excess of minimum capital required under Pillar I and
is compared with capital effectively available at the
requisite date.
Capital policies and objectives are set at consolidated level
as there are no substantial differences in the management
of the credit institutions involved.
With respect to the range of the excess over capital, the
Group’s objective is to maintain it at between 10% and
25% of minimum capital required. The Group considers
this adequate in view of the risk profile.
Additionally, the aim of the Banco Popular Group is that the
excess of Computable Capital over the requirements under
both pillars should be sufficient to cover at least 50% of
additional capital calculated in stress testing.
Concerning the make-up of computable capital and in order
to preserve quality, the Entity has set as an objective that a
minimum of 70% should relate to Tier I. Since there is no
Tier III, the Tier II objective is determined on a basis
complementary to that set for Tier I.
Lastly, the Group has carried out capital planning, including
the dividend policy, for the period 2008-2010. In this
respect, the Group has taken into account both the strategic
business plans established and delinquency rates, both of
which result from the macroeconomic environment for the
period considered.
The chapter on Solvency in the Directors’ Report, included
herein, contains all relevant information on this subject.
At December 31, 2008 and 2007 the Group’s computable
capital was as follows:
2008
2007
Tier one capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,609,947
6,632,403
Tier two capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,040,011
1,577,390
Other items and deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(268,552)
(50,511)
Total computable capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,381,406
8,159,282
Total minimum capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,370,324
7,138,858
Computable capital in 2007 was calculated using the standard method while in 2008 it was calculated through internal models
approved by Bank of Spain.
206
GRUPO BANCO POPULAR
7. Segment reporting
The information about the main segment by geographical
area is presented in four columns: Consolidated includes the
information from the relevant statement, balance sheet or
income statement; Spain is the segment whose content is
explained in the following paragraphs and was prepared by
consolidation of the entities comprising the segment; Portugal
was obtained by consolidation of the companies in the
geographical area and finally the adjustments column
discloses the intra-segment eliminations so that the algebraic
sum of these three columns constitutes the consolidated
balance .
a) The main segment defined is the geographical segment,
with the following classification:
Spain, where most of the Group’s activity is conducted,
including the fund raising issues launched by special
purpose financial subsidiaries. This segment also includes
the activity in the US market, which is scantly material and
does not affect the evaluation of management .
Portugal, where the Group has developed its activity in
recent years and where it has an expansion plan.
Banco Popular Portugal, S.A., through a formal agreement
with Banco Popular Español, S.A., holds the majority of the
voting rights and therefore has control of Heller Factoring
(Portugal), S.A. As a result, the geographical consolidation of
Portugal includes the profits attributable to the real holding of
Banco Popular Portugal, S.A. in that company and the holding
of Banco Popular Español, S.A. figures in minority interests as
attributable to the Group.
The authentic activity of each geographical area is thus
disclosed, plus relations existing between the two, thereby
facilitating the interpretation of the functioning of the Group
as a whole as regards financing and lending.
Shown is the 2008 consolidated income statement in
accordance with the foregoing criteria.
€ thousand
Interest and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of equity method companies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains/losses on financial transactions . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GROSS MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/ amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisioning expense (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on financial assets (net) . . . . . . . . . . . . . . . . . . . . . .
NET OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on other losses (net) . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on the disposal of assets not classified
as non-current held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative difference on consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains/ losses) o n disposal of assets not classified as non-current held for sale
Corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS . . . . . . . . . . . .
Gains / (losses) on discontinued operations (net) . . . . . . . . . . . . . . . . . .
CONSOLIDATED PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain
2008
Portugal Adjustments Consolidated
6,050,159
3,684,518
2,365,641
18,708
14,356
971,447
145,770
99,176
50,771
229,476
144,624
3,459,181
1,113,794
91,923
28,646
903,254
1,321,564
15,241
465,546
295,926
169,620
5,131
45,550
6,679
(24,692)
3,458
20,904
15,703
197,589
101,976
8,863
869
94,908
(9,027)
1
(226,450)
(226,450)
(1,350)
(1,350)
-
6,289,255
3,753,994
2,535,261
23,839
14,356
1,015,647
151,099
74,484
54,229
250,380
160,327
3,656,770
1,215,770
100,786
29,515
998,162
1,312,537
15,242
232,833
(50,883)
1,488,273
393,641
1,094,632
40,023
1,134,655
1,076,030
58,625
56,529
(18,412)
29,089
11,633
17,456
17,456
17,453
3
(56,342)
-
233,020
(69,295)
1,461,020
390,343
1,070,677
40,023
1,110,700
1,052,072
58,628
(56,342)
(14,931)
(41,411)
(41,411)
(41,411)
-
207
The components of the net interest margin by geographical
segment are detailed in the table below. .In the
adjustments column, interest and similar income relates
basically to that obtained the investor position of Banco
Popular Español, S.A. while interest and similar charges
relate to financing obtained by Banco Popular Portugal,
S.A. from the rest of the Group.
€ thousand
2008
Interest and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocable to pension funds and similar . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain
6,050,159
56,414
436,197
5,345,055
200,746
2,673
9,074
Interest and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt certificates including bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,684,518
86,925
412,743
1,261,633
1,817,154
91,279
4,559
10,225
The details of net fees and commissions by geographical
segment, collected less paid, for the items that are usually
Portugal
Adjustments
465,546 (226,450)
1,912
24,812 (209,649)
410,760
23,479
(16,801)
4,583
295,926
195,509
86,614
232
9,114
4,453
4
(226,450)
(209,649)
(7,919)
(8,882)
-
Consolidated
6,289,255
58,326
251,360
5,755,815
207,424
7,256
9,074
3,753,994
86,925
398,603
1,348,247
1,809,467
91,511
9,012
10,229
presented in these lines of businesses are set out in the
table below for 2008.
€ thousand
Spain
2008
Portugal
Adjustments Consolidated
5,270
122,923
5,079
103,330
191
19,593
Provisions for contingent exposures: and commitments
Collateral and other contingent exposures . . . . . . . . . . . . . . . . . . . . . . .
For availability and other contingent commitments . . . . . . . . . . . . . . . .
117,653
98,251
19,402
Services inherent to asset transactions:
Trade discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,886
31,197
6,838
99,851
5,222
5,111
111
-
-
143,108
36,308
6,949
99,851
Management services:
Collection and payment mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Draft collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct debit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund mobilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency purchase and sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchase and sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration of customer securities portfolios . . . . . . . . . . . . . . . . . .
Securities portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration of demand and savings accounts . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
570,138
204,524
7,408
24,683
14,093
120,351
37,989
2,281
13,528
186,096
24,712
2,845
106,765
51,774
103,657
60,052
825,677
28,379
11,352
308
1,505
88
6,140
3,311
104
1,461
10,876
1,500
1,200
7,622
554
2,896
1,690
38,871
-
598,517
215,876
7,716
26,188
14,181
126,491
41,300
2,385
14,989
196,972
26,212
4,045
114,387
52,328
106,553
61,742
864,548
Memorandum item:
Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
971,447
145,770
45,550
6,679
208
(1.350)
(1.350)
1,015,647
151,099
GRUPO BANCO POPULAR
The table below sets out a breakdown by segment for 2008
of personnel expenses and overheads..
€ thousand
Spain
Portugal
2008
Personnel expenses
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social Security l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
573,258
135,554
23,315
25,045
757,172
44,493
6,825
2,850
6,772
60,940
30
30
617,781
142,379
26,165
31,817
818,142
Overheads:
Rentals and common services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed asset conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IT expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forms and office materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technical reports and legal expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising and publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surveillance and transfer of funds services . . . . . . . . . . . . . . . . . . . . .
Travelling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property taxes, VAT and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other overheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donations to foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subcontracted administrative expenses . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,837
24,896
20,588
43,928
7,819
14,230
36,257
3,796
18,127
11,108
49,517
41,977
21,542
356,622
5,983
3,711
4,719
5,817
656
5,555
1,300
708
2,226
1,587
1,756
4,594
2,424
41,036
(30)
(30)
68,820
28,607
25,307
49,745
8,475
19,785
37,557
4,504
20,353
12,695
51,273
46,541
23,966
397,628
Employees by category and gender and number of branches
at the 2008 year end are as follows:
Directors and Senior Management . . . . .
Technical personnel . . . . . . . . . . . . . . . . .
Clerical staff . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of branches . . . . . . . . . . . . . . .
Spain and rest
Men
Women
14
61
2,748
6,724
1,639
2,507
4,401
9,292
Portugal
Total
75
9,472
4,146
13,693
2,328
Women
183
188
371
Men
3
779
223
1,005
Total
3
962
411
1,376
235
209
All accounting criteria, principles and valuation methods
contained in these annual accounts are applicable to these
segments, including those deriving from the change in tax
rates in both countries. The public balance sheets of these
segments together with the corresponding adjustments and
consolidated figures at December 31, 2008 are as follows
2008
€ thousand
Spain
Portugal
Adjustments
Consolidated
Assets
Cash and balances with central banks . . . . . . . . .
Financial assets held for trading . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss
Available-for-sale financial assets . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . . . . . . . . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance contracts linked to pensions . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total activo . . . . . . . . . . . . . . . . . . . . . . . . . .
1,665,047
1,319,275
23,607
3,505,689
94,768,733
34,854
992,619
2,035,237
32,151
89,134
2,545
1,230,908
199,412
764,940
643,119
107,307,270
194,530
22,882
338,410
395,357
7,647,854
7
250,311
93,234
3,021
124,535
5,602
62,366
197,853
9,335,962
(7,958)
(25,351)
(140,636)
(5,809,785)
(624,952)
341,562
(61)
(6,267,181)
1,859,577
1,334,199
336,666
3,760,410
96,606,802
34,854
992,626
1,660,596
32,151
182,368
5,566
1,355,443
546,576
827,306
840,911
110,376,051
Financial liabilities held for trading
1,728,167
Other financial liabilities at fair value through profit or loss
13,707
Financial liabilities at amortised cost . . . . . . . . . . . . .
96,939,194
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .
414,217
Insurance contract liabilities . . . . . . . . . . . . . . . . . . . .
501,885
Provisions for exposures . . . . . . . . . . . . . . . . . . . . . . .
376,534
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
177,108
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469,568
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,620,380
9,533
120,813
7,993,716
429,980
97,929
8,609
21,226
8,681,806
(7,958)
(5,975,772)
(61)
(5,983,791)
1,729,742
134,520
98,957,138
414,217
931,865
474,463
185,717
490,733
103,318,395
292,457
36,504
6,357,929
35
(5,734)
659,855
(283,390)
292,492
30,770
6,734,394
6,686,890
654,156
(283,390)
7,057,656
.................
107,307,270
9,335,962
(6,267,181)
110,376,051
Memorandum items:
Contingent exposures . . . . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . . . . . .
14,568,991
17,706,910
629,314
1,048,660
(66,296)
-
15,132,009
18,755,570
Liabilities
Equity
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . .
Total equity
......................
Total equity and liabilities
The adjustments of €5,809,785k in Loans and receivables
and €5,975,772k in Financial liabilities at amortized cost
relate mostly to the transactions between Group banks in
the two segments which are eliminated in consolidation. Of
the foregoing amounts, €5,732,012k relates to net
210
intragroup financing from Spain to Portugal provided in all
cases at market rates based on the term; In this connection,
€209,649k was eliminated in consolidation from interest
and similar income and interest and similar expense,
respectively
GRUPO BANCO POPULAR
The detail of Loans and advances to other debtors, by
segment at December 31, 2008, is as follows, showing that
the relations in each geographical area are with its
customers, without any intra-group transactions.
€ thousand
2008
Spain
Portugal
Adjustments
Consolidated
Loans and advances to general government
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
561,395
561,395
3
-
-
561,395
561,395
3
Private sectors:
Trade loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable on demand and other . . . . . . . . . . . . . . . . . . . . . .
Finance leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overdrafts and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,282,629
6,094,699
46,270,991
46,126,940
144,050
1,922,065
22,671,155
3,399,574
3,532,416
178,960
2,556,408
6,488,634
342,178
2,149,190
2,149,190
1,858
3,110,433
212,517
211,166
296,616
(58,999)
(58,999)
(58,999)
-
92,712,264
6,377,878
48,420,181
48,276,130
144,051
1,923,923
25,781,588
3,612,091
3,743,582
178,960
2,853,024
Total loans and advances to other debtors . . . . . . . . . . . . . . . . .
87,022,984
6,488,634
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which value corrections for impairment of assets . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,574,892)
(1,810,376)
85,448,092
(176,206)
(204,765)
6,312,428
( 5 8 , 9 9 9 ) 93,452,619
-
(1,751,098)
(2,015,141)
( 5 8 , 9 9 9 ) 91,701,521
211
The funds managed at the 2008 year end are presented
broken down within each segment. The amounts in the
“Adjustments” column relate to the balance in current
accounts of certain Spanish subsidiaries at Banco Popular
Portugal, S.A. The adjustment “Debt certificates including
bonds” relates to bonds issued by a Spanish bond issuing
vehicle which are owned by Banco Popular Portugal, S.A.
and classified as
Other financial assets at fair value through profit or loss:
Also, the €170.000k of Subordinated liabilities issued by
Banco Popular Portugal, S.A. are included in the availablefor- sale financial asset portfolio of Banco Popular Español,
S.A. Also shown is the detail of “Other intermediated
funds”.
€ thousand
2008
Spain
Portugal
Ajustes
Consolidado
Deposits from other creditors . . . . . . . . . . . . . . . .
48,924,333
2,570,882
General government
Current accounts . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . .
Term deposits . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . .
Non-resident general government . . . . . . .
6,346,247
1,633,645
579
127,143
4,583,365
1,515
145,543
145,543
Private sectors:
Term deposits . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . .
Other accounts . . . . . . . . . . . . . . . . . . . .
42,578,086
11,701,637
4,805,696
23,794,145
2,108,933
167,675
2,425,339
691,592
1,651,759
81,988
(712)
(712)
-
45,002,713
12,392,517
4,805,696
25,445,904
2,108,933
249,663
Debt certificates including bonds:
Bonds and other securities outstanding . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . .
20,143,577
9,805,972
60,763
-
(164,000)
20,040,340
9,805,972
Subordinated liabilities . . . . . . . . . . . . . . . . . . . .
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . .
1,618,490
510,235
4,000
18,799
(2,000)
1,622,490
527,034
Total on-balance sheet funds (a) . . . . . . . . . .
81,002,607
2,654,444
(166,712)
83,490,339
Other intermediated funds:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management . . . . . . . . . . . . . . . . . . . . .
Pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
8,447,810
713,727
3,905,595
201,538
161,979
-
-
8,649,348
875,706
3,905,595
Total other intermediated funds (b) . . . . . . . .
13,067,132
363,517
-
13,430,649
Total (a+b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,069,739
3,017,961
212
(712)
-
(166,712)
51,494,503
6,491,790
1,633,645
579
127,143
4,583,365
147,058
96,920,988
GRUPO BANCO POPULAR
Risk management information at December 31, 2008 for
the two segments, Spain and Portugal, together with
consolidated data for the Group, is set out below:
2008
€ thousand
Spain
Portugal
Consolidated
Non-performing loans :
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net variation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% increase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit loss allowance:
Transfer for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other variations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which : specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
general . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
country risk . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans transferred to suspense accounts . . . . . . . . . . . . . . . . . . . . .
705,911
2,647,818
375,1
(548,734)
2,804,995
128,567
190,041
147,8
(21,992)
296,616
834,478
2,778,860
333,0
(570,726)
3,042,612
1,703,407
118,946
1,822,353
1,435,753
(810,692)
625,061
(3,878)
(318,425)
2,006,165
772,135
1,230,272
3,758
220,843
(126,151)
94,692
15,917
(13,818)
215,737
149,902
65,731
104
1,656,596
(936,843)
719,753
12,039
(332,243)
2,221,902
922,037
1,296,003
3,862
101,463,387
623,851
7,121,241
83,000
108,584,628
706,851
2.76
0.54
71.52
4.17
0.31
72.73
2.80
0.53
73.03
Risk quality measures (%):. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performance (Non-performing loans/Total risks) . . . . . . . . . . . .
Credit loss (Write-offs/Total risks) . . . . . . . . . . . . . . . . . . . . . . . . . .
Coverage (Credit loss allowance / non-performance) . . . . . . . . . . . .
213
The performance in 2008 of each segment and the Group
was as follows:
2008
Rates in % and amounts in € thousand
Spain
Portugal
Interest and similar charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fees & commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains or losses on financial assets and liabilities (net) . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GROSS MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisioning expense (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit from discontinued operations (net) . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.82
3.54
2.28
0.02
0.01
0.79
0.10
0.05
0.22
0.14
3.33
1.07
0.09
0.03
0.87
1.27
0.16
1.43
0.38
1.05
0.04
1.09
1.04
0.06
5.59
3.55
2.04
0.06
0.47
(0.30)
0.04
0.25
0.19
2.37
1.22
0.11
0.01
1.14
(0.11)
0.46
0.35
0.14
0.21
0.21
0.21
-
214
Consolidated
5.86
3.50
2.36
0.02
0.01
0.81
0.07
0.05
0.24
0.15
3.41
1.13
0.10
0.03
0.93
1.22
0.14
1.36
0.36
1.00
0.04
1.04
0.98
0.06
GRUPO BANCO POPULAR
The same information for 2007 as that presented for 2008
follows, using the same presentation criterion as discussed
above which differs from that presented in the annual
accounts for the previous year, as mentioned in Note 2d).
The income statement by geographical area for 2007 is as
follows.
2007
€ thousand
Spain
NET INTEREST MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee & commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee & commission expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains or losses on financial assets and liabilities (net) . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GROSS MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisioning expense (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses on other assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains /(losses) on disposal of assets not classified as
non-current held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative consolidation difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains/(losses) on non-current assets held for sale not
classified as discon operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit from discontinued operations (net) . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit attributed to parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,956,774
2,828,284
2,128,490
53,850
3,920
1,003,986
158,921
61,092
50,861
234,010
137,309
3,239,979
1,027,845
88,434
14,321
270,506
1,838,873
349
Portugal
393,339
233,955
159,384
4,913
44,864
7,136
4,772
1,777
19,764
15,888
212,450
90,366
11,208
(1,758)
31,772
80,862
-
(133,700)
(133,700)
(714)
(714)
-.
-.
-
5,216,413
2,928,539
2,287,874
58,763
3,920
1,048,136
165,343
65,864
52,638
253,774
153,197
3,452,429
1,118,211
99,642
12,563
302,278
1,919,735
349
8,622
-
-
-
8,622
-
11,931
1,859,077
586,338
1,272,739
7,269
1,280,008
1,205,721
74,287
80,862
19,396
61,466
61,466
59,241
2,225
-
11,931
1,939,939
605,734
1,334,205
7,269
1,341,474
1,264,962
76,512
215
The detail of the components of net interest income by
segment for 2007 is as follows:
€ thousand
Spain
2007
Portugal
Adjustments
Consolidated
Central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocable to the pension fund and similar . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,956,774
35,830
393,383
4,410,001
108,894
3,445
5,221
393,339
2,573
13,370
370,501
3,123
3,772
-
(133,700)
(125,658)
(8,042)
-
5,216,413
38,403
281,095
4,780,502
103,975
7,217
5,221
Central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debts represented by negotiable securities . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,828,284
3,702
362,912
697,199
1,675,618
79,242
5,377
4,234
233,955
118,060
103,890
663
6,771
4,558
13
(133,700)
(125,658)
(1,271)
(6,771)
-
2,928,539
3,702
355,314
801,089
1,675,010
79,242
9,935
4,247
The breakdown of net fees and commissions, by
geographical segment is as follows:
€ thousand
2007
Adjustments
Portugal
4,822
4,822
-
Consolidated
126,338
103,632
22,706
Provisions for contingent exposures: and commitments
Collateral and other contingent exposures . . . . . . . . . . . . . . . . . . . . . . .
For availability and other contingent commitments . . . . . . . . . . . . . . . .
Spain
121,516
98,810
22,706
Services inherent to asset transactions:
Trade discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,360
35,418
6,666
58,276
6,842
4,900
40
1,902
-
107,202
40,318
6,706
60,178
Management services:
Collection and payment mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Draft collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct debit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund mobilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency purchase and sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchase and sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration of customer securities portfolios . . . . . . . . . . . . . . . . . .
Securities portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration of demand and savings accounts . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
623,189
200,392
6,879
21,293
13,520
121,451
37,199
1,652
22,956
240,958
26,016
4,110
155,853
54,979
101,337
55,894
845,065
26,064
15,136
378
5,260
7,962
1,536
183
1,310
7,145
1,903
4,761
481
36
2,254
37,728
-
649,253
215,528
7,257
26,553
13,520
129,413
38,735
1,835
24,266
248,103
27,919
4,110
160,614
55,460
101,373
58,148
882,793
1,003,986
158,921
44,864
7,136
Memorandum item:
Fee and commission income
Fee and commission expense
216
.................................
.................................
(714)
(714)
1,048,136
165,343
GRUPO BANCO POPULAR
The table below sets out a breakdown by segment for 2007
of personnel expenses and overheads.
Miles de euros
Personnel expenses
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social Security l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overheads:
Rentals and common services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed asset conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IT expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forms and office materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technical reports and legal expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising and publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surveillance and transfer of funds services . . . . . . . . . . . . . . . . . . . . .
Travelling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property taxes, VAT and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other overheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donations to foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subcontracted administrative expenses . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain
Portugal
2007
525,947
128,057
20,253
18,821
693,078
39,967
7,044
798
6,399
54,208
25
25
565,939
135,101
21,051
25,220
747,311
49,564
21,928
18,818
40,483
6,826
11,526
37,089
3,875
16,970
11,148
50,598
18,738
22,775
24,429
334,767
5,642
3,669
4,564
7,631
1,005
5,326
1,626
524
1,907
1,634
808
1,822
36,158
2
(27)
(25)
55,206
25,597
23,382
48,114
7,831
16,852
38,715
4,399
18,877
12,782
51,406
20,562
22,775
24,402
370,900
The employees of each geographical segment by category
and gender and number of branches at the 2007, are as
follows:
Directors and Senior Management . . . . .
Technical personnel . . . . . . . . . . . . . . . . .
Clerical staff . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of branches . . . . . . . . . . . . . . .
Spain and rest
Men
Women
8
42
2,437
6,671
1,752
2,788
4,197
9,501
Portugal
Total
50
9,108
4,540
13,698
2,311
Women
154
170
324
Men
2
759
255
1.016
Total
2
913
425
1.340
220
The same breakdown of the total headcount of the Group is
presented in Note 57.
217
The balance sheets by segment together with the
consolidated balance sheet and adjustments at the 2007
year end are as follows:
€ thousand
2007
Spain
Portugal
Adjustments
Consolidated
Assets
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total activo . . . . . . . . . . . . . . . . . . . . . . . . . .
1,858,098
1,115,857
61,689
4,240,261
93,810,001
562
115,615
95,702
617,610
115,648
2,251
604,043
176,959
486,674
225,607
103,526,577
97,080
60,211
463,013
281,602
6,574,573
132,423
2,700
90,565
1,605
125,530
6,271
39,514
8,153
7,883,240
(2,359)
(24,545)
(310,615)
(3,644,590)
(599,917)
341,562
(4,240,464)
1,955,178
1,173,709
500,157
4,211,248
96,739,984
562
115,615
228,125
20,393
206,213
3,856
729,573
524,792
526,188
233,760
107,169,353
Financial liabilities held for trading
671,669
Other financial liabilities at fair value through profit or loss
61,101
Financial liabilities at amortised cost . . . . . . . . . . . . .
93,940,826
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . .
914,312
Insurance contract liabilities . . . . . . . . . . . . . . . . . . . .
454,670
Provisions for exposures . . . . . . . . . . . . . . . . . . . . . . .
358,117
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232,453
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
444,327
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,077,475
1,055
265,683
6,694,852
338,817
103,613
20,943
4,571
7,429,534
(2,359)
(3,979,750)
(3,982,109)
670,365
326,784
96,655,928
914,312
793,487
461,730
253,396
448,898
100,524,900
6,055,080
10,812
402,081
411,254
3,156
20,425
(238,119)
(20,236)
6,228,215
13,968
402,270
6,467,973
434,835
(258,355)
6,644,453
.................
103,545,448
7,864,369
(4,240,464)
107,169,353
Memorandum items:
Contingent exposures . . . . . . . . . . . . . . . . . . . . . .
Contingent commitments . . . . . . . . . . . . . . . . . . . .
12,198,393
18,736,639
398,796
1,941,915
(282,510)
-
12,314,679
20,678,554
Liabilities
Equity
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . .
Total equity
......................
Total equity and liabilities
As indicated for 2007, the adjustments in Loans and
receivables and Financial liabilities at amortized cost
relate mostly to the positions between the Spanish
and Portuguese banks. Net financing at the 2007 year
end from Spain to the Portuguese entity amounted to
218
€3,320,087k. Owing to those positions, in that year
€133,700k was eliminated in interest and similar
income and interest and similar charges, respectively,
which were reflected in the corresponding breakdown.
GRUPO BANCO POPULAR
Set out below is a breakdown of Loans and advances to
other debtors.
€ thousand
2007
Spain
Portugal
Adjustments
Consolidated
Loans and advances to general government
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,943
129,939
4
-
-
129,943
129,939
4
Private sectors:
Trade loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable on demand and other . . . . . . . . . . . . . . . . . . . . . .
Finance leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overdrafts and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82,004,264
7,391,818
44,791,221
44,565,159
226,062
2
23,332,472
3,576,095
2,220,647
356,009
692,009
5,973,661
317,536
2,295,233
2,295,233
2,876,178
212,166
143,981
49,681
128,567
-
87,977,925
7,709,354
47,086,454
46,860,392
226,062
2
26,208,650
3,788,261
2,364,628
405,690
820,576
Total loans and advances to other debtors . . . . . . . . . . . . . . . . .
82,490,216
6,023,342
-
88,513,558
-
(1,465,490)
(1,664,393)
-
87,048,068
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which value corrections for impairment of assets . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,378,532)
(1,552,443)
81,111,704
(86,958)
(111,950)
5,936,364
219
Funds managed at the 2007 year end follow, the comments
for 2008 concerning the figures and adjustments included
in this information being applicable.
€ thousand
2007
Spain
Deposits from other creditors . . . . . . . . . . . . . . . . 39,696,012
General government
Term deposits . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . .
Non-resident general government . . . . . . .
Portugal
3,080,925
Adjustment
(63)
Consolidated
42,776,874
5,492,683
3,635,265
495
114,379
1,717,834
24,710
600,190
600,190
-
6,092,873
3,635,265
495
114,379
1,717,834
624,900
Private sectors:
34,203,329
Current accounts . . . . . . . . . . . . . . . . . . . 11,090,202
5,498,859
Term deposits . . . . . . . . . . . . . . . . . . . . . 15,794,546
Asset repos . . . . . . . . . . . . . . . . . . . . . . .
1,539,922
Other accounts . . . . . . . . . . . . . . . . . . . .
279,800
2,480,735
616,154
79,414
1,785,167
-
(63)
(63)
-
36,684,001
11,706,293
5,578,273
17,579,713
1,539,922
279,800
Debt certificates including bonds:
41,936,083
Bonds and other securities outstanding . . . . . 26,325,517
Commercial paper . . . . . . . . . . . . . . . . . . . . . 15,610,566
42,613
42,188
425
(164,000)
(164,000)
-
41,814,696
26,203,705
15,610,991
170,000
13,998
(170,000)
(1,160)
Total on-balance sheet funds (a) . . . . . . . . . . 83,281,022
3,307,536
(335,223)
86,253,335
Other intermediated funds:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . 11,749,997
Asset management . . . . . . . . . . . . . . . . . . . . .
1,354,797
Pension plans . . . . . . . . . . . . . . . . . . . . . . . . .
4,271,852
347,215
216,508
-
-
12,097,212
1,571,305
4,271,852
Total other intermediated funds (b) . . . . . . . . 17,376,646
563,723
-
17,940,369
Total (a+b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,602,264
3,871,259
(335,223)
104,193,674
Subordinated liabilities . . . . . . . . . . . . . . . . . . . .
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . .
220
1,820,606
(171,679)
1,820,606
(158,841)
GRUPO BANCO POPULAR
Information concerning Risk management at the 2007 year
end is as follows:
2007
Miles de euros
Spain
Portugal
Consolidated
Non-performing loans :
Net variation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit loss allowance:
Transfer for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other variations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which : specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
general . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
country risk . . . . . . . . . . . . . . . . . . . . . . . . . .
Memorandum item:
Total risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans transferred to suspense accounts . . . . . . . . . . . . . . . . . . . . .
544,622
372,254
68,4
(210,965)
705,911
90,915
52,807
58,1
(15,155)
128,567
635,537
425,061
66,9
(226,120)
834,478
1,555,339
109,721
1,665,060
499,659
(153,381)
346,278
(9,704)
(188,506)
1,703,407
179,914
1,519,105
4,388
58,913
(31,283)
27,630
(3,250)
(15,155)
118,946
60,558
58,300
88
558,572
(184,664)
373,908
(12,954)
(203,661)
1,822,353
240,472
1,577,405
4,476
94,406,099
215,138
6,422,138
97,004
100,828,237
312,142
0.75
0.22
241.31
2.00
0.24
92.52
0.83
0.22
218.38
Risk quality measures (%): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-performance (Non-performing loans/Total risks) . . . . . . . . . . . . .
Credit loss (Write-offs/Total risks) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coverage (Credit loss allowance / non-performance) . . . . . . . . . . . . .
221
The performance in 2007 of each segment and the group
was follows:
Rates in % and amounts in € thousand
Interest and similar income .............................................................
Interest and similar charges ...........................................................
NET INTEREST MARGIN ...................................................................
Return on equity instruments .........................................................
Results of equity method companies ...............................................
Fee and commission income ..........................................................
Fee and commission expense ..........................................................
Gains/(losses) on financial assets and liabilities (net)....................
Exchange differences (net) ..............................................................
Other operating income ..................................................................
Other operating expense ................................................................
GROSS MARGIN ..............................................................................
Administration expenses ................................................................
Depreciation and amortisation .......................................................
Provisioning expense (net) ..............................................................
Impairment losses on financial assets (net) ..................................
PROFIT FROM OPERATING ACTIVITIES ...........................................
Impairment losses on other assets (net) ........................................
Gains (losses ) on the disposal of assets not classified as
non-current held for sale .................................................................
Negative difference on consolidation .............................................
Gains (losses) on disposal of non-current assets held for
sale not classified as discontinued operations ...............................
PROFIT BEFORE TAX ........................................................................
Corporate income tax .......................................................................
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS ..............
Profit from discontinued operations (net) .......................................
CONSOLIDATED PROFIT FOR THE YEAR ..........................................
Profit attributed to parent company ...............................................
Profit attributed to minority interests .............................................
Return on equity (ROE) (%) ............................................................
Leveraging .......................................................................................
Operating efficiency (%) .................................................................
€ thousand :
Total average assets .........................................................................
Average shareholders’ funds............................................................
222
2007
Spain
5.26
3.00
2.26
0.06
0.00
1.06
0.17
0.07
0.05
0.25
0.15
3.43
1.09
0.09
0.01
0.29
1.95
0.00
0.01
0.00
0.01
1.97
0.62
1.35
0.01
1.36
1.28
0.08
23.56
17.37
31.72
94,342,866
5,117,174
Portugal
5.29
3.15
2.14
0.07
0.00
0.60
0.10
0.07
0.02
0.27
0.21
2.86
1.21
0.15
-0.02
0.43
1.09
0.00
Consolidated
5.31
2.98
2.33
0.06
0.00
1.07
0.17
0.07
0.06
0.26
0.16
3.52
1.14
0.10
0.01
0.31
1.96
0.00
0.00
0.00
0.01
0.00
0.00
1.09
0.26
0.83
0.00
0.83
0.80
0.03
0.01
1.98
0.62
1.36
0.01
1.37
1.29
0.08
17.15
20.75
42.54
24.04
17.59
32.39
7,435,810
345,336
98,182,325
5,262,817
GRUPO BANCO POPULAR
b)The secondary segmentation by business area was
performed by applying the following principles:
The following must be added as significant specific criteria
for this secondary segmentation treatment:
Commercial banking is that conducted by the network of
bank branches offices for typical lending transactions, fundraising, acceptance of off-balance sheet risks and the supply
of financial services of all kinds, including factoring and
renting.
- Internal transfer prices: The 3-month Euribor is applied as
the interest cost or yield rate, as appropriate, to the average
balances of the intra-segment positions since this is the
commonest reference rate in most of the transactions.
Asset management comprises the specific and direct activity
of managing assets and the administration of collective
investment institutions: management of mutual funds,
portfolios and pensions.
Insurance activity reflects that performed by the jointlycontrolled Spanish company Eurovida, S.A and the
Portuguese Eurovida, S.A and Popular Seguros, S.A. in the
Group.
The institutional and market area reflects the activities not
classified in the foregoing activities, including most notably
asset and liability transactions with credit institutions, the
trading portfolios of the banking entities, available-for-sale
financial assets, asset and liability hedging derivatives,
held-to-maturity investment portfolio and investments, noncurrent assets for sale, goodwill, asset and liability
balances arising from pensions, raising of funds in
wholesale markets by issues of Euronotes, subordinated
debt and capital having the nature of a financial liability.
- Operating expenses: direct and indirect expenses are
allocated to each segment based on the related activity
assigned.
- Shareholders’ funds: Equity is assigned to each segment on
the basis of the risks incurred, calculating the requirements
arising from its activity per the supervisory body for each
business (Bank of Spain for commercial banking, Spanish
Securities & Exchange Commission (CNMV) for the asset
management business and the Directorate General for
Insurance for the Insurance business, all for the business
activities in Spain) and that of their equivalent supervisory
bodies in the Portuguese market. Once the requirement for
equity has been determined, it is allocated in proportion to
the Group's structure, i.e., based on the capital, reserves,
subordinated debt and capital having the nature of a
financial liability, together with the costs associated
therewith. The equity cushion over minimum requirements
is attributed in the same way as any assignment that cannot
be included in other segments to institutional investment.
The results in 2008 by business area were as follows:
Since what is involved is transversal information that in
most cases is drawn from one or several of the Group
entities, the aggregation of all them leads to the
consolidated financial statements. For greater clarity, the
liability side of the balance sheet includes a separate
caption called “Net intra-segment financing” obviously with
a zero balance, although some segments present a contra
natura sign in order to place all of them at the same level
and maintain the total figure in the consolidated balance
sheet.
€ thousand
2008
Asset
management
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . .
Net fees and commissions . . . . . . . . . . . . . . . . . . . .
+/- Other financial transactions . . . . . . . . . . . . . . . .
+/- Other operating profit / loss . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses and other provisions (net) . . . . .
Profit / (loss) from operating activities . . . . . . . . . . .
+/- Other profit /loss (net) . . . . . . . . . . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,034
81,113
(3,637)
(1,587)
97,923
30,115
(370)
68,178
-,
68,178
Insurance
36,317
5,956
(5,310)
12,416
49,379
9,130
3,254
36,995
36,995
Commercial
banking
2,444,031
777,479
48,958
87,411
3,357,879
1,174,501
822,938
1,360,440
(88,197)
1,272,243
Institutional
and Market
32,879
126,897
(8,187)
151,589
102,810
201,855
(153,076)
236,680
83,604
Consolidated
2,535,261
864,548
166,908
90,053
3,656,770
1,316,556
1,027,677
1,312,537
148,483
1,461,020
223
The balance sheet by business segment at December 31,
2008 is as follows:
Miles de euros
2008
Institutional
and market
Asset management
Insurance
Commercial
banking
11,978
3,461
14,714
303,871
26,133
22,440
322,121
333,091
18,828
-
415,679
90,709,674
-
1,431,920
1,308,298
14,545
3,412,605
5,574,429
8,721
1,859,577
1,334,199
336,666
3,760,410
96,606,802
34,854
4,670
279
3,747
319
2,849
21,920
393,941
1,702
5,566
192
404
5,940
119,163
829,447
650,505
59,066
91,834,924
986,254
1,660,596
32,151
182,089
700,999
486,787
818,517
699,828
17,317,739
992,626
1,660,596
32,151
182,368
5,566
1,355,443
546,576
827,306
840,911
110,376,051
2,751
-
-
1,726,991
1,729,742
Consolidated
Assets
Available-for-sale financial assets . . . . . . . . . . .
Changes in the fair value of the hedged item in
portfolio hedge of interest rate risk . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
Financial liabilities held for trading . . . . . . . . . . . .
Other financial liabilities at fair value through
profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities at amortized cost . . . . . . . . . .
Insurance contracts liabilities . . . . . . . . . . . . . . . .
Provisions for exposures . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net intra-segment financing . . . . . . . . . . . . . . . . . .
Equity
................................
Total equity and liabilities . . . . . . . . . . . . . . . . . . .
224
1,449,251
257,266
721
5,984
6,505
(1,625,178)
296,641
393,941
134,520
421
931,865
77
7,536
8,793
(338,323)
84,628
829,447
61,320,404
181,279
24,118,949
6,214,292
91,834,924
36,187,062
156,951
292,386
172,197
475,435
(22,155,448)
462,095
17,317,739
134,520
98,957,138
414,217
931,865
474,463
185,717
490,733
7,057,656
110,376,051
GRUPO BANCO POPULAR
The results for 2007 are set out below
Miles de euros
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fee & commission income . . . . . . . . . . . . . . . . . .
+/- Gains/ losses on financial assets and liabilities .
+/- Other operating profit
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loses and other provisions (net) . . . . . .
Profit from operating activities . . . . . . . . . . . . . . . . . .
+/- Other gains/ losses (net) . . . . . . . . . . . . . . . . . . .
2007
Asset management
26,405
90,534
1,911
(540)
118,310
28,859
(1,113)
90,564
90,564
Insurance
20,510
15
5,020
27,832
53,377
9,656
43,653
43,653
Commercial
banking
2,129,455
785,726
98,930
52,416
3,066,527
1,083,762
273,410
1,709,355
1,709,355
Institutional
and market
115,273
78,073
20,869
214,215
95,576
49,624
69,015
20,204
89,219
Consolidated
2,287,874
882,793
181,185
100,577
3,452,429
1,217,853
314,841
1,919,735
20,204
1,939,939
225
The balance sheet by business segment at December 31,
2007 is as follows
€ thousand
2007
Institutional
and market
Consolidated
400,714
87,161,987
1,548,183
1,093,886
7,400
3,724,401
7,868,471
1,955,178
1,173,709
500,157
4,211,248
96,739,984
3,856
243
294
5,579
21,368
1,123,260
639,077
47,607
88,249,385
562
98,629
228,125
20,393
206,213
86,143
476,551
519,085
168,322
16,046,364
562
115,615
228,125
20,393
206,213
3,856
729,573
524,792
526,188
233,760
107,169,353
-
-
-
670,365
670,365
37,016
51,179
48,806
525
11,823
9,602
1,300,836
290,557
1,750,344
289,768
4,346
680,421
77
8,868
7,261
51,155
81,364
1,123,260
57,926,273 38,674,130
865,506
113,066
309,383
151,745
232,705
432,035
582,730
24,061,064 (25,413,055)
5,997,237
275,295
88,249,385 16,046,364
326,784
96,655,928
914,312
793,487
461,730
253,396
448,898
6,644,453
107,169,353
Asset management
Insurance
Commercial
banking
79,823
457,872
437,684
116,541
Assets
Assets
6,281
34,885
49,163
1,592,985
16,986
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance assets . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,110
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
340
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,524
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,070
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,750,344
Liabilities
Financial liabilities held for trading . . . . . . . . . . . .
Other financial liabilities at fair value through
profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities at amortized cost . . . . . . . . . .
Insurance contracts liabilities . . . . . . . . . . . . . . . .
Provisions for exposures . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net intra-segment financing . . . . . . . . . . . . . . . . . .
Equity
................................
Total equity and liabilities . . . . . . . . . . . . . . . . . . .
226
GRUPO BANCO POPULAR
8. Business combinations and other corporate
transactions with dependent and jointlycontrolled companies and associates.
In 2008 the Group carried out no business combinations.
However, various corporate transactions were completed
through the merger, formation or winding-up of Group
companies. The main transactions are detailed below:
The following entities were formed:
Cédulas TDA 11, F.T.A., that is a special purpose vehicle,
consolidated proportionately, in which the Group holds
40% of the voting rights and that was set up by Banco
Popular Español S.A., together with another two Spanish
credit institutions, as vehicle for the securitization of assets
and issuance of securitization bonds amounting to
€5,000,000k.
IM Cédulas Grupo Banco Popular 4, F.T.A., also set up as a
bond issuance vehicle, in which the Group holds 100% of
the voting rights and in which bonds that were securitized
for an amount of €1,000,000k, had been issued and
assigned by the Group’s banks.
IM Grupo Banco Popular Leasing 1, F.T.A., a special purpose
entity, formed for the securitization of debt claims relating
to finance leases of the Group’s banks amounting to
€1,680,000k.
IM Grupo Banco Popular Financiaciones 1, F.T.A., that was
formed in June to carry out the securitization of receivables
relating to individuals and independent professionals
deriving from the Group’s banks for an amount of
€1,100,000k.
IM Banco Popular FTPYME 2, F.T.A., also set up as a vehicle
for the securitization of debt claims relating to SMEs,
amounting to €1,000,000k.
IM Banco Popular MBS 1 FTA, also formed as an entity for
the securitization of asses and issuance of securitization
bonds, carried out an issue of €6,000,000k, backed by
mortgages to individuals and independent professionals
assigned by Banco Popular Español, S.Á. 93.28% has been
assigned the maximum credit rating by S&P and Moody´s.
The most significant information concerning securitization is
set out in Note 69.
Moreover, in 2008 a number of real estate companies were
formed in order to manage the Group’s properties:
Inversiones Inmobiliarias Cedaceros, S.L., Inversiones
Inmobiliarias Canvives, S.L., Inversiones Inmobiliarias
Gercebio, S.L., Inversiones Inmobiliarias Jeráguilas, S.L,
Inversiones Inmobiliarias Tamadaba, S.L and Velázquez 34,
S.L.
In 2008 Aula 2000, S.L., Sicomi, S.L., Proasurances, S.A.R.L
and Banco Popular France were sold. The disposal of the
first two companies had no notable effect on equity or
consolidated results. However, the sale of Banco Popular
France constituted the disposal of a business unit that
operated in a specific geographical area. Therefore, in
accordance with IFRS 5, it has been recognized as a
discontinued operation in the financial statements. More
detailed information is provided in Note 9.
Late 2008 the General Shareholders’ Meetings of Banco
Popular Español, S.A., Banco de Castilla, S.A., Banco de
Crédito Balear, S.A., Banco de Galicia, S.A. and Banco de
Vasconia, S.A., approved the vertical merger of these four
entities with Banco Popular Español, S.A., with the
extinguishment of the four target entities and the transfer en
bloc, on a universal title, of their respective assets and
liabilities to Banco Popular Español, S.A.
The merger entailed the restructuring of the Group to
improve its operation and increase liquidity and add depth
to the price of shares held by the shareholders of subsidiary
banks.
This transaction aims to avoid the regulatory obligations
imposed on listed companies and reduce costs by securing
major economies of scale and improving the application of
corporate governance recommendations.
Additionally, shares in the target companies were trading at
low levels in terms of frequency and volume as a result of
the lack of market depth. Generally speaking, the merger
will entail for the target companies’ shareholders a
significant increase in the liquidity of their investments as
they will become shareholders of Banco Popular Español,
S.A.
From a commercial viewpoint, the Group will maintain its
identity in the respective territories of the target entities,
that may be adapted to new operational needs and the
increased specialization and sophistication that the
financial sector has undergone in the last few years.
As a result of the merger, minority interests in the target
companies received in exchange shares in the acquiring
company, plus, where appropriate, a complementary
amount in cash to pay the part of the total price agreed that
it was not possible to deliver through a whole number of
shares in Banco Popular Español, S.A.
The exchange equation has been determined on the basis
of the valuation of the investees, calculated using different
valuation methodologies. The criteria applied to select the
proposed exchange equations are as follows: (i) the
transaction should create value for the shareholders of all
the companies involved; (ii) the resulting premium,
calculated on the basis of the latest market price on
September 24, should be positive and (iii) the price paid
for each share in the target companies should be higher
than the carrying value at June 30, 2008, adjusted for
dividends payable against equity at that date.
227
As a result of the application of the above, the share
exchange ratio, determined on the basis of the real value of
equity of the entities involved in the merger, was as follows:
- Five shares in Banco Popular Español, S.A. for three
shares in Banco de Castilla, S.A.
- 16 shares in Banco Popular Español, S.A. for seven shares
in Banco de Crédito Balear, S.A.
- Two shares in Banco Popular Español, S.A. for one share
in Banco de Castilla, S.A.
- Seven shares in Banco Popular Español, S.A. for five
shares in Banco de Vasconia, S.A.
entities in accordance with the agreed exchange ratio. The
increase amounted to €175,867,375.26 of which
€2,030,801.10 relates to capital and the remainder,
€173,836,574.16 to the share premium Note 40 offers
additional information on Shareholders’ Funds of Banco
Popular Español, S.A.
The table below sets out individually the most significant
figures of the exchange equation that has given rise to the
capital increase in Banco Popular Español, S.A.
In order to cover the result of the exchange ratio, Banco
Popular Español, S.A. increased capital by the amount
required to complete the exchange of shares in the target
€ thousand
Banco de Castilla . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Crédito Balear . . . . . . . . . . . . . . . . . . . . . .
Banco de Galicia . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Vasconia . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No, shares
exchanged
2,101,876
5,008,270
1,965,610
1,018,710
Lastly, and as a result of the merger, the carrying value of
the shares of Banco de Castilla, Banco de Crédito Balear,
Banco de Galicia and Banco de Vasconia already held by
Banco Popular were replaced by the relevant net assets of
the target companies, which were then extinguished.
In 2007 the Banco Popular Group formed the following
special purpose entities, asset securitization funds, whollyowned by the Group:
IM Cédulas Grupo Banco Popular 3, FTA is a special
purpose entity, wholly owned by the Banco Popular Group,
which was formed as a vehicle for the securitization of
assets and issuance of bonds amounting to €2.000.000k.
The Cédulas that gave rise to these bonds were issued by
the subsidiaries of Banco Popular Español, S.A.: Andalucía,
Popular Hipotecario, bancopopular-e, Castilla, Crédito
Balear, Galicia and Vasconia, the last four of which are
currently integrated in Banco Popular Español, S.A.
IM Grupo Banco Popular Empresas 2, FTA was formed as
a vehicle for the securitization of assets and issuance of
bonds. The aforementioned issue was carried out for an
amount of €2,500,000k, backed by debt claims deriving
from the financing of companies assigned and administered
by Banco Popular Español, S.A. and its subsidiaries
Andalucía, Castilla, Crédito Balear, Galicia and Vasconia, the
last four of which were merged with Banco Popular Español,
S.A., in 2008. These securities are listed on the AIAF fixed
income market of Madrid The issue consists of three series
228
No. shares
BPE*
subsidiaries
5*
16 *
2*
7*
3
7
1
5
Banco Popular Español, S.A
Capital increase
Shares
amount €
issued
3,503,125
30,337,062.50
11,447,472
99,135,107.,52
3,931,220
34,044,365.20
1,426,194
12,350,840.04
20,308,011 175,867,375.26
of bonds with €2.225.000k being concentrated in series A
which has an AAA rating (Fitch Ratings). The most
significant information concerning this operation is set out
in Note 69. Given that some of the debt claims assigned
were approaching maturity in 2008, the Group has
delivered new loans amounting to €1,070,282k.
IM Grupo Banco Popular FTPYME II, FTA was formed as
a vehicle for the securitization of assets and issuance of
bonds. The issue was carried out for an amount of
€2,039,000k, backed by debt claims deriving from the
financing of SMEs,, assigned and administered by Banco
Popular Español, S.A. and its subsidiaries Andalucía,
Castilla, Crédito Balear, Galicia and Vasconia, the last four
integrated in Banco Popular Español, S.A, in 2008. 92,45
% of these bonds are rated AAA/Aaa by S&P and Moody´s.
The series A3 (G) amounting to €221,700k is secured by
central government. The most significant information
concerning these operations is set out in Note 69.
In 2007 the financial special purpose entities BPE Capital
International Limited and Popular Commercial Europe, B.V.
were wound up with no effect on equity or consolidated
results. In addition, during this year the Group disposed of
its holding in the associate Global Ends, S.A.. The effect on
results and equity was immaterial.
GRUPO BANCO POPULAR
On November 9, 2007 the Banco Popular Group acquired
100% of TotalBank, a US banking institution operating in
the county of Miami Dade, Florida, USA. This entity is the
single shareholder of three companies, one an operational
special purpose entity Gold Leaf Title Company and two
dormant companies Total Sunset, Inc. and FIB Realty
Corporation, with scant importance for equity.
€ thousand
Assets
Loans and receivables . . . . . . . . . . . . . . . . . . . . .:
Credit institutions . . . . . . . . . . . . . . . . . . . . . .
Other debtors . . . . . . . . . . . . . . . . . . . . . . . . .
Investments :
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TotalBank in BPE . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . .
Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments and accrued income . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . .
Liabilities
Deposits from credit institutions . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . .
Provisions for exposures . . . . . . . . . . . . . . . . . . . . .
Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and deferred income . . . . . . . . .
Other liabilities
..........................
Total liabilities . . . . . . . . . . . . . . . . . . . . .
Equity:
Valuation adjustments . . . . . . . . . . . . . . . . . . .
Shareholders’ funds
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity and liabilities . . . . . . . . . .
Standardized
balance sheet
of TotalBank
TotalBank
In balance
sheet of BPE
9,446
284,208
681,863
1,344
680,519
428
257
257
7,021
9,291
8,886
405
669
702
993,885
238,908
238,908
238,908
(548)
(548)
(238,908)
(238,908)
6,254
150,485
128,799
21,686
(82,717)
9,446
284,208
681,315
1,344
679,971
428
257
257
13,275
159,776
137,685
22,091
669
702
1,150,076
904,788
284,744
615,735
4,309
135
3,744
2,465
36
911,168
82,717
82,717
1,573
81,144
993,885
238,908
206,536
32,372
238,908
238,908
(82,717)
(82,717)
(1,573)
(81,144)
(82,717)
1,143,696
491,280
615,735
32,372
4,309
135
3,744
2,465
36
1,150,076
1,150,076
For the acquisition of TotalBank, the Banco Popular Group
paid USD300.000k, assumed subordinated debt of
USD47.532k and reflected USD3,294k as directly
attributable costs. Therefore the carrying value of the
holding amounted to USD 350.736k which at the exchange
rate at the transaction date (1.4683 USD/EUR) and date of
Figures in thousands
Payment in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . .
Costs directly attributable to the operation . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Set out below is the balance sheet of TotalBank at the date
of acquisition using the standard format of Banco Popular,
translated to euros at the exchange rate prevailing at that
date (1.4683 USD/EUR) and which, for clarity, includes the
specific records of the transaction in the balance sheet of
Banco Popular Español, S.A, together with the relevant
consolidation adjustments, The last column shows the
effect of the aforementioned acquisition on the balance
sheet of the Banco Popular Group at that date.
USD
300,000
47,532
3,204
350,736
Consolidation
adjustments
Effect of
TotalBank
on BPE group
payment of directly attributable costs, amounts to
€238.908k.
These amounts, expressed in USD thousand and €
thousand, at the exchange rates indicated, are summarized
below:
Euros
204,318
32,372
2,218
238,908
229
The difference between the carrying value of the holding
acquired and the equity value of TotalBank amounts to
€153,880k. Of this figure, €6.254k was assigned to
tangible assets, €21,686k to intangible assets, mostly
amortizable over 5 years and other adjustments, deferred
taxes amounting to €2,311k and other adjustments, that
represent a decrease of €548k.
Carrying value of TotalBank in BPE . . . . . . . . . . . . .
Equity of TotalBank . . . . . . . . . . . . . . . . . . . . . . . . .
Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocation to:
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
Loans at fair value . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation goodwill . . . . . . . . . . . . . . . . . . . . . .
All amounts are reflected in the above balance sheet which
summarizes the basic information on the operation and its
impact on the Banco Popular Group..
The part not assignable which was recognized as
consolidation goodwill, resulting from the business
combination amounts to €126.488k and is calculated as
follows:
USD
350,736
125,097
225,639
EUR
238,908
85,028
153,880
9,183
31,842
(804)
3,645
189,003
6,254
21,686
(548)
2,311
128,799
This goodwill which is definitive in nature is measured at
the end of each period at the year-end exchange rate and
the difference is reflected as an Adjustment to equity due to
exchange differences.
In 2008, various companies included in the consolidation
increased capital: Banco Popular Español increased capital
by €2,031k in order to cover the exchange equation
approved under the merger plan of Banco Popular Español,
S.A and Banco de Castilla, Banco de Crédito Balear, Banco
de Galicia and Banco de Vasconia, as discussed in Note 8.
Total Bank increased capital by USD223k . Banco Popular
Portugal increased capital by €200,000k, which was fully
subscribed by Banco Popular Español, S.A., Mundocredit,
S.A increased capital by €11,000k, which was subscribed
by Group companies and Aliseda, S.A increased capital by
€300,007k, which was also paid in by Group companies.
Sistema 4B, S.A. reduced capital by €829k as a result of the
split of this company that resulted in the new company
Redes y Procesos, S.A., with capital of precisely €829k.
9. Discontinued operations
In 2008 the subsidiary Banco Popular France, which was a
cash generating unit for the Group, was sold. In addition, it
operated in an independent geographical area. For both
reasons, all conditions to consider its sale as a discontinued
operation were met and both the gain generated on the
operation to its disposal and that recorded on its sale, net
of taxes, were reflected under “Net gains on discontinued
operations”.
In order to comply with IFRS 5, it has been necessary to
restate the consolidated income statement for 2007 that is
included herein. The reclassifications in the 2007 income
statement, for comparative purposes, may be observed in
the reconciliation table in Note 2.d) and 66.
The breakdown between the profit on the sale and profit on
the operation, reclassified under Gains on discontinued
operations is as follows:
In 2007 the companies included in the consolidation of the
Banco Popular Group that have increased share capital are
as follows: Mundocredit, S.A by €10,000k, fully subscribed
and and paid by the Group and Popular Gestión Privada,
S.G.I.I.C, S.A which has increased capital by €1.000k, paid
in by Popular Banca Privada,S.A, in which the Group has a
60% holding.
2008
Profit on discontinued operation . . . . . . . . . . . . . . .
Profit on disposal of the entity . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
230
4,227
35,796
40,023
2007
7,269
7,269
GRUPO BANCO POPULAR
10. Remuneration of the directors and senior
management of Banco Popular Español, S.A.
The amounts in the above table for directors' fees, executive
remuneration and risk exposure relate to Banco Popular
Español, S.A. and some of the consolidated subsidiaries.
The names of the Board members at December 31, 2008,
together with additional information about them, are
shown below.
€’ thousand
Execuive remuneration
Risk exposure
Direct
Directors
fees
5
8
171
103
1,220
9
59
-
Francisco Aparicio . . . . . . . . . . . . . . . . . . . . . . . .
Asociación de Directivos BPE . . . . . . . . . . . . . . . .
Américo Ferreira de Amorim . . . . . . . . . . . . . . . .
Eric Gancedo . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luis Herrando . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roberto Higuera . . . . . . . . . . . . . . . . . . . . . . . . . .
José María Lucía . . . . . . . . . . . . . . . . . . . . . . . . . .
Casimiro Molins . . . . . . . . . . . . . . . . . . . . . . . . . .
Luis Montuenga . . . . . . . . . . . . . . . . . . . . . . . . . .
Manuel Morillo . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miguel Nigorra . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nicolas Osuna . . . . . . . . . . . . . . . . . . . . . . . . . . .
Helena Revoredo . . . . . . . . . . . . . . . . . . . . . . . . .
José Ramón Rodriguez . . . . . . . . . . . . . . . . . . . . .
Angel Ron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vicente Santana . . . . . . . . . . . . . . . . . . . . . . . . . .
Sindicatura de Accionistas . . . . . . . . . . . . . . . . . .
Miguel Angel de Solís . . . . . . . . . . . . . . . . . . . . . .
Vicente Tardío . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allianz SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,575
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The related 2007 figures were as follows: €2,928k in
remuneration and €1,635k in direct exposure.
Exposure in 2008 breaks down into €1,473k in loans and
credit facilities, €102k in guarantees. Interest rates on
loans and credit facilities vary between 4.53% and 5.38%
and guarantee fees at 0.40% a quarter. With respect to
2007, loans and credit facilities amounted to €1,533k,
with interest rates between 3.90% and 4.75%, while
guarantees amounts to €102k, with fees of 0.40% a
quarter.
Mr José Mª Lucía Aguirre resigned as Managing Director and
from his other executive duties in the Group on health
grounds in 2008. In 2008 he received remuneration
amounting to €754k. He received no variable
remuneration.
Mr Roberto Higuera Montejo has been the Managing
Director since September 10, 2008. Mr Higuera has also
been a director and deputy chairman of the Board of
-
Fixed Annual
Total
56
-
470
646
1,000
-
180
300
371
-
650
946
56
1,371
-
56
2,116
851
3,023
Directors since May 30, 2008. Previously, his participation
on the Board was limited to the physical representation of
the Professional Association of Banking Managers. . The
above table sets out his overall remuneration for the entire
year although until his appointment as a Director and
Deputy Chairman he received remuneration as the General
Finance Manager and not as a Director.
The cost borne by the Bank in 2008 for coverage of pension
commitments to the directors who are beneficiaries,
namely, Messrs Ron, Higuera, Lucía and Aparicio, amounted
to €1,609k, €3,432k, €350k and €2070k, respectively,
and the total was therefore €3,135k. They were also
beneficiaries of the health and other insurance premiums
totaling €19k. The vested rights and mathematical reserves
linked or pensionable rights of the current directors,
Messrs. Ron, Higuera, Aparicio and Lucia, amounted to
€5,105k, €10.856k, €928k and €8,405k, respectively,
giving a total of €25,294k which, together with the
€30,837k of other previous directors, lead to a total of
€56.132k at December 31, 2008. At December 31, 2007,
the figure was €41,384k.
231
The gross remuneration of the 20 members of the top
management team, and of the General Managers and
Deputy General Managers of Banco Popular Español, S.A.,
excluding the remuneration of the directors which is
detailed in the above table, amounted in aggregate to
€7,066K in the year 2008. The breakdown of this figure
being: €6.897k of monetary compensation, of which
€1,624k related to variable remuneration, and €169k in
kind (basically life and health insurance premiums and use
of accommodation). In 2007 aggregate remuneration of this
group, then made up of 17 members, amounted to
€6,570k.
The cost borne by the Group in 2008 for coverage of
pension commitments to this group of individuals, by
means of pension plans and supplementary insurance
contracts, amounted to €3,647k. In 2007 this amount
totaled €3,477k.
232
The vested rights and mathematical reserves linked to the
pensionable rights of this group of individuals amounted at
December 31, 2008 and 2007, to €26,927k and
€27,603k, respectively. The Bank does not have in place
any executive remuneration system directly or indirectly
linked to the price of Banco Popular shares or other Group
securities, or to stock options.
The Entity’s loans and credit facilities to this group amount
to €5,973k.
GRUPO BANCO POPULAR
11. Agency contracts
The list of agents of the Group at December 31, 2008, as
required for reporting purposes by Royal Decree
1245/1995, relates to:
- The agency contract of Banco Popular Español, S.A. with
its subsidiary MUNDOCREDIT, S.A. from May 10, 2006
which covers the Spanish market.
- The list of agents of Popular Banca Privada, SA is contained
in Exhibit II hereto.
12. Environmental impact
The overall operations of the Group are subject to
environmental protection legislation. The Group considers
that it has adopted appropriate measures with respect to
environmental protection and enhancement and to the
minimization, where appropriate, of the environmental
impact, in compliance with the relevant current regulations
and maintaining procedures designed to guarantee and
encourage the matters regulated in those specific legal
provisions. In 2008 and 2007 the Group carried out the
necessary environmental investments and it was not
deemed necessary to record any provisions for
environmental risks and charges. Lastly, Management
considers that there are no significant contingencies related
to environmental protection and improvement.
13. Guarantee Funds
The contributions to the Deposit Guarantee Funds (Spain
Portugal and USA), in the case of the credit institutions,
and to the Investment Guarantee Fund, for securities
companies and agencies, are booked in the "Other
operating expenses" account (Note 56) in the
consolidated income statements. The Investment
Guarantee Fund was introduced in 2001 by Royal Decree
948/2001, regulating investor indemnity systems. These
contributions are expensed currently.
The contribution by the consolidated banks operating in
Spain to the Deposit Guarantee Fund was 0.06 per
thousand of the calculation base amount in 2008 and
2007. For these Group banks as a whole, the
contributions amounted to €19,269k and €17,369k in
2008 and 2007, respectively.
The contribution to the Investment Guarantee Fund by the
consolidated companies to which it is applicable
amounted to €63 in 2008 and €44k in 2007,
respectively. The contribution of Banco Popular Portugal
to the Deposit Guarantee Fund of Portugal in 2008
amounted to €727k and €672k in 2007. Additionally, in
accordance with Portuguese legislation, other contingent
commitments continue to be recorded in suspense
accounts amounting to €5,244k and €5,163k, for
possible future risks which the Fund may be required to
cover, in 2008 and 2007, respectively.
The consolidated income statement for 2008 and 2007
reflects €318k and €5k relating to the contribution by
Total Bank to the US Guarantee Fund (FDIC).
14. Audit fees
The fees of PricewaterhouseCoopers for the audit of the
consolidated and individual financial statements for 2008
of the controlling company and the dependent companies
and for other related services amounted to €1.359k. The
fees for the tax advisory services provided in 2008
amounted to €70k in 2008 while the fees for other services
provided by that firm amounted to €275k. The amounts
recorded for these services in 2007 totaled €1,054.64k
and €4,828k, respectively.
15. Accounting principles and valuation methods
The significant accounting principles and standards and
valuation methods applied in preparing the accompanying
consolidated financial statements in addition to those
disclosed in Note 2 “Bases of Presentation” to the
consolidated financial statements, are described below:
a) Going concern principle
In preparing the consolidated financial statements, it was
considered that the companies included in the Group will
continue to operate for the foreseeable future. Accordingly,
the application of accounting standards is not intended to
determine the value of consolidated equity for the purposes
of their total or partial sale, nor the amount resulting in the
event of their liquidation.
b) Accrual basis of accounting
In 2008, on the basis of the European Commission
proposal to promote the convergence of the deposit
guarantee systems, it was approved to increase the
Spanish banks’ guarantee under that Fund to €100,000
per holder and entity.
Except in connection, where appropriate, with the
consolidated cash flow statements, the accompanying
consolidated financial statements were prepared on the
basis of the actual flows of goods and services, regardless of
their payment or collection dates.
La aportación al Fondo de Garantía de Inversiones por las
sociedades consolidadas a las que les es de aplicación
esa normativa ha supuesto 63 y 44 miles de euros en
2008 y 2007, respectivamente.
c) Other general principles
The consolidated financial statements have been prepared
based on the fair value approach, except in the case of land
and buildings or financial assets or liabilities, which are
carried at cost or at amortized cost.
233
The preparation of the consolidated financial statements
required the use of certain accounting estimates and
required Management to exercise judgment in applying
the Group’s accounting policies. Such estimates may
affect the amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the amount of
revenues and expenses in the consolidated financial
statements. Although the estimates were based on
management’s best knowledge of current and foreseeable
circumstances, the final results might differ from these
estimates.
d) Financial derivatives
Financial derivatives are instruments whose value
changes in response to changes in an observable market
variable, sometimes called the “underlying”, such as an
interest rate, foreign exchange rate, financial instrument
price or market index, including credit ratings; they do not
require any initial investment or one that is much smaller
than would be required for other similar financial
instruments, and are generally settled at a future date.
Financial derivatives are instruments which, in addition to
giving rise to a loss or a gain, may under certain
conditions offset all or part of the credit and/or market
risks associated with balances and transactions, using as
underlying elements interest rates, certain indexes, the
prices of certain securities, currency exchange rates or
other similar references. The Group uses financial
derivatives traded in organized markets or traded
bilaterally with counterparties outside organized markets
(OTC).
Financial derivatives are used to trade with customers
requesting them, to manage the risks of the Group’s own
positions (hedging derivatives), or to benefit from changes
in their prices. Financial derivatives that have not been
designated as accounting hedges are considered to be
trading derivatives. The conditions for a financial
derivative to be deemed to be a hedging instrument are as
follows:
i) The financial derivative should cover the risk of
changes in the value of assets and liabilities due to
fluctuations in the interest rate and / or exchange rate
(fair value hedges) or the risk of changes in estimated
cash flows resulting from financial assets and
liabilities, highly probable foreseeable commitments
and transactions (cash flow hedges) or the risk of the
net investment in a foreign operation (hedges of net
investments in foreign operations).
ii) The financial derivative must effectively eliminate any
risk inherent to the element or position hedged
throughout the foreseen hedging period. It must
234
therefore be prospectively effective, be effective at the
time of arrangement of the hedge in normal conditions
and be effective retrospectively, with sufficient
evidence that the effectiveness of the hedge will be
maintained throughout the life of the element or
position hedged.
iii) Fulfillment of the requirements for accounting
treatment of the hedge is evidenced by the
performance of tests to make it possible to consider
the hedge as highly effective, both at the time of its
arrangement, by evaluating a prospective valuation of
the derivative against a similar prospective valuation
of the risk intended to be hedged, and throughout the
life of the transaction by means of retrospective tests
to confirm the effectiveness of the hedge made, by
observing that the results arising from variations in the
value of the hedging derivative have fluctuated within
a variation range from 80% to 125% with respect to
the variation of the result of the item hedged; this
tolerance interval is that admitted by the accounting
standards.
Adequate documentary evidence must be provided
that the arrangement of the contract for the financial
derivative took place specifically in order to hedge
certain risks or transactions and the way in which it
was intended to achieve and measure that effective
hedge, provided that this way is coherent with how the
Group manages its own risks.
Hedges may be applied to individual elements or balances
(microhedges) or to portfolios of financial assets and
liabilities (macrohedges). In the latter case, the set of
financial assets or liabilities to be hedged must share a
common type of risk, this requirement being understood
to be fulfilled when the sensitivity of the individual
elements hedged to interest rate changes is similar.
Financial derivatives aim to hedge, when interest rate
expectations so advise, the risk existing for gaps in the repricing of balance sheet assets and liabilities, by using
instruments making it possible to compare the dates of
rate revisions on both sides of the balance sheet or to
convert fixed rate elements to variable rate elements or
vice versa, in such a way that interest rate variations affect
the asset and liability items equally.
The financial derivatives embedded in other financial
instruments or other principal contracts are carried separately
as derivatives when their risks and characteristics are not
closely related to the principal contracts and provided that
such principal contracts are not classified as Financial assets
held for trading or Other financial assets or liabilities at fair
value profit or loss.
GRUPO BANCO POPULAR
Finally, hybrid financial instruments, although separable for
accounting purposes, are not individually transferable.
e) Financial assets
Financial assets are classified in the consolidated balance
sheet as follows:
i) Cash and balances with central banks, relating to the
cash balances and the balances held at Bank of Spain
and other central banks.
ii) ii) Financial assets held for trading, including the
financial assets which have been acquired for
realization at short term, form part of a portfolio of
financial instruments identified and managed jointly for
which recent actions have been performed in order to
obtain short-term gains, or are derivatives not
designated as accounting hedge instruments. This item
also includes derivates that are used as economic
hedges of other derivatives.
iii) Other financial assets at fair value through profit or loss:
this includes financial assets which, not forming part of
the financial assets held for trading, are classified as
hybrid financial assets and are valued in full at fair
value, and those managed jointly with insurance
contract liabilities valued at fair value or with financial
derivatives whose purpose and effect are to materially
reduce their exposure to variations in fair value, or are
managed jointly with financial liabilities and derivatives
in order to materially reduce the overall exposure to
interest rate risk.
iv) Available-for-sale financial assets, which are debt
securities not classified as held-to-maturity investments,
such as other financial assets at fair value profit or loss,
loans and receivables, financial assets held for trading
equity instruments in companies that are not dependent
or jointly-controlled companies or associates and have
not been included in the categories of financial assets
held for trading, other non-current assets held for sale
and other assets at fair value through profit or loss.
v) v) Loans and receivables, which includes financial
assets that are not traded in an active market and are
not required to be valued at fair value, whose cash
flows are of a determined or determinable amount,
and in which all the disbursement made by the Group
will be recovered, absent reasons imputable to the
debtor’s solvency. This category includes both the
lending arising from the typical credit activity and the
amounts of cash drawn and pending repayment by the
customers as loans or the deposits placed with other
companies, however legally instrumented, financial
guarantees, unlisted debt securities, and the debts of
purchasers of goods or users of services that form part
of the Group’s business.
vi) Held-to-maturity investment portfolio, which includes
debt securities negotiable on an active market, with
fixed maturity and cash flows of determined or
determinable amount that the Group has decided to
hold until redemption, basically because it has positive
intention and the financial capability to do so.
vii) Adjustments to financial assets for macro-hedging,
corresponding to the contra-item for amounts credited
to the consolidated income statement arising in the
valuation of the portfolios of financial instruments of
which the interest rate risk is effectively hedged by fair
value hedging derivatives.
viii)Hedging derivatives that include the positive fair value
of the entity of the financial derivatives acquired or
issued by the Group that have been designated as
accounting hedges
ix) Non-current assets held for sale, corresponding to the
value of individual assets, irrespective of their nature,
whose sale is highly probable, given the current
conditions of these assets, within one year from the date
on which they are included in this category. Therefore,
the recovery of the book value of these items, which
may be of a financial or non-financial nature, will
foreseeably occur through the price obtained in disposal
of them. Also included are property, equity instruments
or other non-current assets foreclosed by the Group in
full or partial fulfillment of the payment obligations of its
debtors.
x) Investments, which includes the equity instruments of
associates, since jointly-controlled companies are
consolidated by the proportionate consolidation
method.
xi) Pension-linked insurance contracts, corresponding to
the reimbursement rights claimable from insurance
companies for all or part of the disbursement required
to cancel a defined-benefit obligation, when the
insurance policies do not meet the conditions for
classification as a plan asset.
xii) Reinsurance assets, which include the amounts that the
Group is entitled to receive arising from its reinsurance
contracts with third parties and, specifically, the
participation of the reinsurance in the mathematical
reserves set up by the insurance companies included in
the Group as dependent companies.
235
Generally financial assets are initially carried at fair value,
which, unless otherwise evidenced, will be the transaction
price. Subsequent valuations at each accounting close are
made as follows:
i) Financial assets are measured at fair value except for
loans and receivables, the held-to-maturity investment
portfolio, equity instruments whose fair value may not be
determined with sufficient objectivity and financial
derivatives whose underlying asset is such equity
instruments and which are settled by delivery thereof.
ii) The fair value of a financial asset on a given date is
deemed to be the amount at which it could be traded
between two duly informed interested parties in a
transaction performed on an arm’s length basis. The
best evidence of fair value is the quoted price in an
active, organized, transparent and deep market.
If there is no market price for a particular financial
asset, its fair value is estimated based on that
established in recent transactions involving similar
instruments and, failing that, on sufficiently tested
valuation models such as discounting of flows,
multiples etc. Regard must also be had to the specific
peculiarities of the assets to be value and particularly to
the different types of risk associated with the financial
asset.
iii) The fair value of financial derivatives with quoted prices
in an active market that are included in the financial
assets held for trading is the daily quoted price; if for
exceptional reasons, the quoted price on a given date
cannot be established, they must be valued, as must be
OTC financial derivatives, by sufficiently tested methods
such as the Black-Scholes or Montecarlo methods.
iv) Loans and receivables and the Held-to-maturity portfolio
are carried at amortized cost, which is determined using
the effective interest rate method. Amortized cost is
understood as the acquisition cost of a financial asset,
adjusted for the reimbursement of the principal and the
part allocated to the income statement, through the use of
the effective interest rate method, of the difference
between the initial cost and the relevant reimbursement
value at maturity and less any reduction for impairment
recognized directly as a decrease in the amount of the
asset or through a value adjustment account. If covered
through fair value hedges, those variations in fair value
related to the risk or risks hedged through hedging are
recorded. The effective interest rate is the discount rate that
brings the value of a financial instrument exactly into line
with estimated cash flows over the expected life of the
instrument, on the basis of its contractual terms, such as
early amortization options, but not taking into account
losses on future credit risk. For fixed rate financial
instruments, the effective interest rate agrees with the
236
contractual interest rate at the time of the acquisition plus,
if appropriate, the fees and commissions, which, by
nature, may be likened to an interest rate. For variable rate
financial instruments, the effective interest rate agrees with
the current rate of return for all items up to the first time
review of the reference rate
v) Shares in the capital of other entities whose fair value may
not be determined objectively and financial derivatives in
respect of which the underlying assets are such
instruments and which are settled through the delivery of
the same are carried at acquisition cost, adjusted, where
appropriate, for any impairment losses experienced.
The variations in the carrying value of financial assets are
generally recorded with a contra-item in the consolidated
statement of income, separating those arising from the
accrual of interest and similar items which are recorded
under the interest and similar income caption, from those
arising for other causes, which are recorded at the net
amount in the Gains or losses on financial assets and
liabilities (net) caption in the consolidated statement of
income or in the Impairment losses on financial assets (net)
caption, if this were the reason for the variation in value.
However, the variations in the carrying value of the
instruments included under the caption of available-for¬sale financial assets are temporarily recorded under the
consolidated equity valuation adjustments caption, net of
the tax effect, unless they arise from exchange differences.
The amounts included under the valuation adjustments
caption continue to form part of consolidated equity until
the asset giving rise to them is removed from the
consolidated balance sheet at which time they are charged
to the consolidated income statement.
Similarly, the variations in the carrying value of the items
included under the non-current assets for sale caption that
meet certain conditions are recorded with a contra-item
under the consolidated equity valuation adjustments
caption.
The valuation differences in financial assets designated as
hedged items and accounting hedging items are recorded
having regard to the following criteria:
i) In fair value hedges the differences arising both in the
hedging elements and in the hedged elements, as
regards the type of risk hedged, are recognized directly
in the consolidated statement of income under the
Gains or losses on financial assets and liabilities (net)
caption.
GRUPO BANCO POPULAR
ii) The valuation differences relating to the ineffective
portion of cash flow and net investment hedges in
foreign operations are taken directly to the consolidated
income statement under the Gains or losses on financial
assets and liabilities (net) caption.
assets acquired temporarily or received on loan.
iii) In cash flow hedges, the valuation differences arising in
the effective hedge portion of the hedged elements are
recorded temporarily in the consolidated equity
valuation adjustments caption, net of the tax effect..
ii) Other financial liabilities at fair value through profit or
loss, corresponding to those which, not forming part of
the financial liabilities held for trading, are by nature
hybrid financial instruments and it is decided to include
in this category, irrespective of whether or not the
embedded derivative is separated, or those which are
managed jointly with financial assets at fair value
through profit or loss.
iv) In hedges of net investments in foreign operations, the
valuation differences arising in the effective portion of
the hedge elements are recorded temporarily in the
consolidated equity valuation adjustments caption, net
of the tax effect.
iii) Financial liabilities at amortized cost, corresponding to
financial liabilities that cannot be classified in other
consolidated balance sheet captions and which relate to
typical fund-raising activities by the Group, regardless of
how instrumented and of their maturity.
In these two latter cases, the valuation differences are not
recognized in income until the gains or losses on the hedged
element are recorded in the consolidated statement of
income or until the maturity of the element hedged.
iv) iv) Adjustments to financial liabilities due to macrohedging relating to the balancing entry of the amounts
credited to the consolidated income statement resulting
from the measurement of the financial instrument
portfolios which are efficiently hedged against the
interest rate risk through fair value hedging derivatives.
With regard to the hedges applied, no macrohedges were
arranged, in the sense of relating asset and liability
portfolios; however, the campaigns to obtain deposits with
identical characteristics of start, term and remuneration
offered to each depositor were considered to be microhedging transactions with individual treatment. In order to
justify the accounting treatment, the derivative was arranged
for the total of the specific campaign to be hedged, with
flows receivable, by the financial derivative, similar to those
payable to all the depositors, with distribution thereof in
proportion to their balances.
In cash flow interest rate hedges in a portfolio of financial
instruments, the effective portion of the variation in the
value of the hedging instrument is recorded temporarily in
the consolidated equity valuation adjustments caption, net
of the tax effect until the transactions envisaged take place
and then are recorded in the consolidated income
statement. The variation in the value of the hedging
derivatives for the ineffective portion of the hedge is
recorded directly in the consolidated income statement.
f)Financial liabilities
Financial liabilities are classified in the consolidated
balance sheet as follows:
i) Financial liabilities held for trading, including the
financial liabilities acquired for realization at short term,
form part of a portfolio of financial instruments that are
identified and managed jointly for which recent actions
have been performed in order to obtain short-term gains
or are derivatives not designated as accounting hedge
instruments, or arise from outright sales of financial
v) Hedging derivatives that include the negative financial
derivatives acquired or issued by the Group that have
been designated as accounting hedges.
vi) Liabilities associated with non-current assets for sale,
corresponding to the credit balances on non-current
assets for sale.
vii) Liabilities related to insurance contracts refer to the
technical reserves recorded by the Group to cover claims
associated with insurance contracts which are in effect
at the year end and the fair value of the amounts
pending receipt from technical guarantees .
Financial liabilities are recorded at amortized cost, as
defined for financial assets in Note 15.e), except in the
following cases:
i) The financial liabilities included under the financial
liabilities held for trading, other financial liabilities at fair
value through profit or loss and financial liabilities at fair
value through equity captions are valued at fair value, as
defined for financial assets in Note 15.e. The financial
liabilities hedged by fair value hedges are adjusted, and
the variations in their fair value with respect to the risk
hedged in the hedging transaction are recorded.
237
ii) Financial derivatives whose underlying element is
equity instruments the fair value of which cannot be
determined with sufficient objectivity and are settled by
delivery thereof are valued at cost.
Variations in the carrying value of financial liabilities are
generally recorded with a contra-item in the consolidated
income statement, differentiating those arising on the accrual of
interest and similar items, that are recorded under Interest and
similar charges, and those arising for other reasons which are
recorded at the net amount under Gains/ losses on financial
transactions in the consolidated income statement.
However, the variations in the carrying value of the
instruments included under the financial liabilities at fair
value through equity caption are recorded temporarily
under the Consolidated equity valuation adjustments
caption, net of the tax effect. The amounts included under
the valuation adjustments caption continue to form part of
consolidated equity until the liability which gave rise to
them is removed from the consolidated balance sheet, at
which time they are charged to the consolidated income
statement.
For financial liabilities designated as hedged items and
accounting hedges, valuation differences are recorded,
having regard to the criteria indicated for Financial Assets in
Note 15.e.
g) Transfers and removals from the consolidated balance
sheet of financial instruments
Transfers of financial instruments are recorded having
regard to whether or not the risks and benefits associated
with the financial instruments transferred are retained, on
the basis of the following criteria:
i) If all the risks and benefits are substantially transferred to
third parties, such as in unconditional sales, sales under
repos at fair value on the repurchase date, sales of
financial assets with a call option acquired or put option
issued deeply OTM, asset securitization in which the
assignor retains no subordinated financing and nor grants
any type of credit enhancement to the new holders etc,
the financial instrument transferred is written off the
consolidated balance sheet and at the same time any
right or obligation retained or created as a result of the
transfer is recognized.
ii) If the risks and benefits associated with the financial
instrument transferred are substantially retained, as in sales
of financial assets with agreement to repurchase at a fixed
price or at the sale price plus interest, securities loan
contracts in which the borrower is obliged to return the
securities or similar assets, etc., the financial instrument
transferred is not removed from the consolidated balance
sheet and continues to be valued using the same criteria as
those used before the transfer. Nonetheless, the associated
238
financial liability is recognized for accounting purposes in
an amount equal to the price received, which is
subsequently measured at amortized cost. In order to
reflect the net financing received under liabilities, entities
should deduct financial instruments (securitization bonds)
acquired from the entity to which the financial assets have
been transferred.
AAlso, the Group includes in its scope of consolidation,
by the full or proportionate consolidation method of
consolidation, as appropriate, the special purpose
securitization vehicle companies to which the assets
were transferred. In consolidation the related
eliminations were therefore made between the
associated financial liability by the companies which
individually recognized the transfer and the financial
assets recorded for accounting purposes by the special
purpose company. Also eliminated was the interest
income and interest expense arising from the
aforementioned assets and liabilities eliminated in
consolidation. Consequently, the consolidated balance
sheet reflects the original assets not removed and
recognition is given to the liabilities issued by the
securitization vehicle which are held by third parties
outside the Group.
Notes 35 and 69 to these financial statements offer more
information on securitizations in the Group.
iii) If the risks and benefits associated with the financial
instrument transferred are not substantially transferred or
retained, as in sales of financial assets with an option to
purchase acquired or an option to sell issued which are not
deeply in or out of the money, the securitizations in which
the transferor assumes subordinated financing or another
kind of credit improvement for a portion of the asset
transferred, a distinction is made between the following
cases:
- If the Group does not retain control of the financial
instrument transferred, in which case it is written off
the consolidated balance sheet and any right or
obligation retained or carted as a result of the transfer
is recognized.
- If the Group does retain control of the financial
instrument transferred, it continues to recognize it in
the consolidated balance sheet at an amount equal to
its exposure to changes of value that it may experience
and recognizes a financial liability associated with the
financial asset transferred. The net amount of the asset
transferred and of the associated liability will be the
amortized cost of the rights and obligations retained if
the asset transferred is measured by its amortized cost,
or the fair value of the rights and obligations retained
if the asset transferred is measured by its fair value.
GRUPO BANCO POPULAR
Therefore, financial assets are only removed from the
consolidated balance sheet when the cash flows they
generate are extinguished or when the implicit risks and
benefits have been substantially transferred to third parties.
Similarly, financial liabilities are only removed from the
consolidated balance sheet when the obligations arising
have been extinguished or when they are acquired with the
intention of canceling them or re-placing them again.
h) Impairment of financial assets
The carrying value of financial assets is generally adjusted
with a charge to the consolidated statement of income
when there is objective evidence that a loss has arisen by
impairment, which occurs:
i) i)
In the case of debt instruments, i.e. credits and
securities representing debt, if after their initial
recognition an event occurs or the combined effect
arises of several events with a negative impact on their
future cash flows. Possible events suggesting objective
evidence of impairment include:
a) When the obligor of the payment has significant
financial difficulties.
b) When the contract conditions have been breached,
for example by non-payment of principal or interest on
the pacted date.
c) When the obligor of the payment has been granted
financing or the debt has been restructured on account
of financial difficulties.
d) When there are data evidencing a quantifiable
diminution in the future cash flows from a group of debt
instruments.
ii) In the case of equity instruments, if after their initial
recognition an event occurs or the combined effect
arises of several events signifying that it will not be
possible to recover their carrying value. Evidence of
impairment exists when any of the following cases
arises:
a) The issuer has entered, or is likely to enter into an
agreement with creditors or has significant financial
difficulties.
b) There have been significant changes in the issuer’s
economic environment which may have adverse effects
on recovery of the investment.
c) The fair value of the instrument suffers a significant or
prolonged decrease below the carrying value.
As a general rule, the adjustment of the book value of
financial instruments for impairment is charged to the
consolidated income statement of the period in which such
impairment is disclosed, and the recovery of the previously
recorded losses for impairment, if it arises, is recognized in
the consolidated income statement of the period in which
the impairment is eliminated or reduced. If the recovery of
any recorded amount for impairment is considered remote,
it is eliminated from the consolidated balance sheet,
although the Group may take the necessary action to
attempt to achieve collection until the statute of limitations
of its rights has definitively expired, they are forgiven or for
other reasons.
In the case of debt instruments valued at amortized cost,
the amount of the losses incurred for impairment is equal
to the negative difference between their book value and the
present value of their estimated future cash flows. In the
case of listed debt instruments, market value is used
provided that this is sufficiently reliable to be considered
representative of the value that may be recovered by the
Group.
The estimated future cash flows of a debt instrument are all
the amounts of principal and interest which the Group
estimates it will obtain during the life of the instrument.
Consideration is given in this estimate to all relevant
information available at the date of preparation of the
consolidated financial statements which provides data
about the possibility of future collection of the contractual
cash flows. Also, in estimating the future cash flows of
secured instruments, regard is had to the flows which
would be obtained from realization thereof, less the amount
of the costs necessary to obtain and subsequently sell them,
regardless of the probability of execution of the guarantee.
In calculating the present value of the estimated future cash
flows, the discount rate used is the original effective interest
rate of the instrument, if the contractual rate is fixed; if the
contractual rate is floating, the discount rate used is the
effective interest rate at the date of the consolidated
financial statements determined in accordance with the
contract conditions.
The portfolios of debt instruments, contingent exposures
and contingent commitments, regardless of by whom
owned, of how instrumented or how guaranteed, are
analyzed to determine the Group’s credit risk exposure and
to estimate the coverage requirement for impairment of
value. For preparation of the consolidated financial
statements, the Group classifies its operations based on its
credit risk, analyzing separately the risk of insolvency
attributable to the customer and the country risk, if any, to
which the operations are exposed.
239
Objective evidence of impairment is individually determined for
all significant debt instruments and individually or collectively
for groups of debt instruments which are not individually
significant. If a specific instrument cannot be included in any
group of assets with similar risk characteristics, it is analyzed
exclusively on an individual basis in order to determine
whether it is impaired and, if appropriate, to estimate the loss
for impairment.
The collective evaluation of a group of financial assets to
estimate their losses for impairment is performed as
follows:
i) Debt instruments are included in groups which have
similar credit risk characteristics, indicating the capability
of the debtors to pay all the amounts of principal and
interest in accordance with the contract conditions. The
characteristics of the credit risk that are taken into
account in order to group assets together are, inter alia,
the type of instrument, the debtor’s sector of operation,
the geographical area of activity, the type of guarantee, the
age of the amounts that have fallen due and any other
factor that may be relevant in order to estimate future
cash flows.
ii) The future cash flows of each group of debt instruments
are estimated on the basis of past experience of losses
in the sector as calculated by the Bank of Spain for
instruments with credit risk characteristics similar to
those of the group concerned, after making the
necessary adjustments to adapt the historical data to
current market conditions.
iii) The loss for impairment of each group is the difference
between the book value of all the debt instruments in
the group and the present value of their estimated future
cash flows.
Debt instruments not measured at fair value through the
income statement are classified on the basis of the insolvency
risk attributable to the customer or transaction in the following
categories: standard risk, subprime risk, doubtful risk due to
customer arrears, doubtful risk for reasons other than customer
arrears and write-off risk. In the case of debt instruments not
classified as standard risk, an estimate is made, based on the
experience of the Group and of the sector, of the specific
coverage required for impairment, taking into account the age
of the unpaid amounts, the guarantees provided and the
economic situation of the customer and, if appropriate, of the
guarantors. This estimate is generally based on arrears
schedules based, in turn, on the experience of the Group and
the information it has of the sector and, in particular for
balances doubtful for reasons other than arrears, on case-bycase analysis.
Similarly, debt instruments not valued at fair value
through profit or loss and contingent exposures, regardless
240
of who the customer may be, are analyzed to determine
their credit risk attributable to country risk. Country risk is
deemed to arise with customers resident in a given
country because of circumstances other than habitual
commercial risk.
In addition to the specific allowances for impairment
indicated above, the Group covers the inherent losses
incurred on debt instruments not valued at fair value
through profit or loss and on contingent exposures
classified as standard risk items, by means of a collective
allowance. Such collective coverage, which relates to the
statistical lost, is carried out, taking into account historical
experience of impairment and other circumstances known
at the time of assessment and relate to inherent losses
incurred at the date of the financial statements, calculated
through statistical procedures, which are pending
assignment to specific operations.
In this respect, the Group has used the parameters set by the
Bank of Spain on the basis of its experience and information
about the sector, which determine the method and amount to
be used for the coverage of the inherent losses for impairment
incurred on the debt instruments and contingent exposures
classified as standard risk, with periodic modification based
on the evolution of the aforementioned data. This method of
determining the allowance for the inherent losses for
impairment incurred on debt instruments is implemented by
applying certain percentages to the debt instruments not
valued at fair value through profit or loss and to the
contingent exposures classified as standard risk. The
percentages vary depending on the classification of the debt
instruments within standard risk, with the following
subcategories: negligible risk, low risk, medium-low risk,
medium risk, medium-high risk and high risk.
Recognition in the consolidated income statement of the
accrual of interest based on the contract terms is halted for all
debt instruments individually classified as impaired and for
those for which losses for impairment had been collectively
calculated because of amounts past due for more than three
months.
The amount of impairment losses incurred in debt
securities and equity instruments included under Availablefor-sale financial assets is equal to the positive difference
between their acquisition cost, net of any repayment of the
principal, and their fair value less any impairment loss
previously recognized in the consolidated income
statement..
When there is objective evidence that the decrease in fair
value is due to impairment, the unrealized losses directly
recognized in the consolidated equity valuation
GRUPO BANCO POPULAR
adjustments caption, net of the tax effect, are
immediately recorded in the consolidated statement of
income. If all or a portion of the losses for impairment are
subsequently recovered, the amount is recognized, in the
case of debt securities, in the consolidated income
statement of the period of recovery and, in the case of
equity instruments, in the consolidated equity valuation
adjustments caption.
In the case of debt and equity instruments classified as
non-current assets for sale, the losses previously recorded
in consolidated net worth are considered to be realized by
recognition in the consolidated statement of income at their
date of classification.
i) Valuation of accounts in foreign currency
The Group’s functional currency is the euro. Therefore all
balances and transactions denominated in currencies other
than the euro are deemed to be denominated in foreign
currency.
The equivalent value in euro of assets, liabilities and
contingent exposures denominated in foreign currency,
classified by nature, recorded by the Group at December
31, 2008 and 2007 is as follows:
Losses for impairment of equity instruments valued at
acquisition cost represent the difference between their
book value and the present value of the expected future
cash flows, discounted at the market rate of return for other
similar securities. These losses for impairment are recorded
in the consolidated statement of income for the period in
which they arose as a direct deduction from the cost of the
financial assets, and their amount can only be recovered in
the event of sale.
In the case of investments in associates, the Group
estimates the amount of the losses for impairment by
comparing the recoverable amount with their carrying
value. These losses for impairment are recorded in the
consolidated statement of income of the period in which
they arise and subsequent recoveries are recorded in the
consolidated statement of income of the period of recovery.
241
€ thousand
ASSETS
Cash and balances with central banks . . . . . . . . . . . . . . . . . . .
Financial asset held for trading . . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,508
4,032
353,850
3,486,551
136
581
113
16,481
28,217
46,153
3,960,622
26,083
313,723
2,648,658
134
581
108
13,532
8,694
3,842
3,015,355
LIABILITIES
Financial liabilities at amortized cost . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,784,226
5,505
5,789,731
7,837,554
8,265
7,845,819
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
614,577
616,279
The notes concerning the most significant captions of the
consolidated balance sheet set out detailed information on
the basis of the principal currencies in which foreign
currency balances are denominated. These notes are 22,
23 and 35, which relate to Available-for-sale financial
€ thousand
Currencies
USD
GBP
CHF
JPY
2008
1,718,455
128,975
308,074
1,282,503
2007
assets, Loans and receivables and financial liabilities at
amortized cost, respectively. A summary of the currencies
other than the euro in which the Group carries out most of
its operations is as follows:
Assets
Liabilities
2007
1,683,310
208,789
341,176
571,851
2008
2,817,712
1,142,050
1,196,545
51,220
According to this information, the USD is the principal
currency other than the euro in which the Group operates
and accounts for 43.3% of assets and 39.6% of liabilities,
in foreign currency at December 31, 2008 (55.5% and
53.7% , respectively, in 2007).
On initial recognition, the balances receivable and payable
denominated in foreign currency are translated to euros at
the spot exchange rate on the date of recognition, i.e. the
exchange rate for immediate delivery. Subsequent to initial
recognition, the following rules are applied for translation of
balances denominated in foreign currency to euros:
i) Monetary assets and liabilities are translated at the
year-end exchange rate, i.e. the average spot exchange
rate on the date of the financial statements, as
published by the European Central Bank.
ii) Non-monetary items valued at historical cost are
translated at the exchange rate prevailing on the date of
acquisition.
242
2008
2007
5,037,772
783,848
1,093,226
482,084
iii) Non-monetary items valued at fair value are translated
at the exchange rate prevailing on the date on which the
fair value is determined.
iv) iv) Revenues and expenses are translated at the
exchange rate on the transaction date. However, an
average exchange rate for the period may be used for all
transactions during the period, unless there have been
significant variations. Amortization/depreciation is
translated at the exchange rate applied to the related
asset.
Exchange differences arising in the translation of balances
receivable and payable denominated in foreign currency are
generally recorded in the consolidated statement of income.
However, in the case of exchange differences arising on nonmonetary items valued at fair value whose adjustment to
fair value is allocated to the consolidated equity valuation
adjustments caption, the exchange rate component of the
revaluation of the non-monetary item is disclosed.
GRUPO BANCO POPULAR
At the investees whose functional currency is other than the
euro, the balances in their financial statements are
translated to euros as follows:
financial statements of any investee to correct them for the
effects of inflation
j) Offset of balances
i) Assets and liabilities are translated at the year-end
exchange rate.
Debit and credit balances arising in transactions which
contractually or by legal imperative envisage the
possibility of offset and are intended to be settled at their
net amount or by simultaneous realization of the asset
and payment of the liability are presented in the
consolidated balance sheet at their net amount.
ii) Revenues and expenses and cash flows are translated at
the average exchange rates during the year.
iii) Equity is translated at historical exchange rates.
The exchange differences arising in the translation of the
financial statements of investees whose functional currency
is other than the euro are recorded under the consolidated
equity valuation adjustments caption.
Balance offsetting focuses basically on reciprocal accounts
with credit institutions. The following table shows the
starting total amount for the Group’s credit institutions and
the offsets of balances of €93,163k in 2008 and
€268,719k in 2007. The intragroup eliminations leading
to the balances in the consolidated balance sheet are made
from the total net balances at individual level of the
companies.
None of the functional currencies of the investees relate to
economies classified as highly inflationary by currently
established criteria. Consequently, at the accounting close
of 2008 and 2007 it was not necessary to adjust the
Balances offset
2007
2008
€ thousand
Assets
Book balances . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net balances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,389
(93,163)
37,226
(36,142)
1,084
k) Recognition of revenues and expenses
Interest and similar income and interest and similar charges
are generally recorded for accounting purposes on the basis
of their accrual period and by applying the effective interest
rate method. Dividends received from other companies are
recognized as revenues when the right to receive them
arises.
Financial service fee and commission expense or income,
however contractually denominated, are classified in the
following categories, which determine their allocation to the
statement of income:
i) Financial fees and commissions are those which are an
integral part of the effective cost or yield of a financial
transaction and are allocated to the consolidated
income statement in two stages: first, recognition is
given in the consolidated income statement to the
portion of the fee or commission compensating direct
costs, and second, the remainder is accrued over the
expected term of the transaction as an adjustment to the
effective cost or yield thereof. The amount of these fees
is disclosed in Note 48 and 49.
Liabilities
129,125
(93,163)
35,962
(35,962)
-
Assets
305,229
(268,719)
36,510
(36,510)
-
Liabilities
347,473
(268,719)
78,754
(36,238)
42,516
-those arising from the provision of a service over a
period of time, which are recognized in the consolidated
statement of income over the period of the service.
-those arising from the provision of a service in a single
act,
which are accrued and recorded in the
consolidated statement of income when the service is
carried out.
Fee and commission income and expense and similar items
are generally recorded in the consolidated statement of
income as follows:
i) Those related to financial assets and liabilities
measured at fair value through the income
statement are recorded at the time of collection.
ii) Those relating to transactions or services taking place
over a period of time are recorded during the period
of such transactions or services.
iii) Those relating to a transaction or service performed in a
single act are recorded when such act takes place.
ii) Non-financial fees or commissions are those arising from
the rendering of services and can be of two kinds:
243
Non-financial fee and commission income and expense are
recorded on an accrual basis. Collections and payments
deferred over time are recorded in the accounts at the
amount resulting from financially discounting the projected
cash flows at market rates.
appropriate, the need is estimated for recording provisions
for them using criteria similar to those indicated in Note
15.h. for debt instruments valued at amortized cost, based
on estimates of the amounts considered to be nonrecoverable.
l) Asset Swaps
ñ) Leases
Exchanges of tangible and intangible assets are
acquisitions of such assets in exchange for the delivery of
other non-monetary assets or a combination of monetary
and non-monetary assets, except for foreclosed assets
which are treated in accordance with the rules for noncurrent assets for sale.
Lease contracts are presented on the basis of the economic
substance of the transaction, irrespective of its legal form,
and are classified from inception as finance or operating
leases.
The asset received in an exchange of assets is recognized at
the fair value of the asset delivered plus, if appropriate, any
monetary consideration given up in exchange, unless there
is clearer evidence of the fair value of the asset received..
m) Securities lending agreements
Securities lendings are transactions in which the borrower
receives full ownership of securities merely by paying
certain fees, with the commitment to return to the lender
securities of the same class as those received.
Securities lending agreements in which the borrower is
obliged to return the same assets or substantially identical
assets or other similar assets with an identical fair value are
considered as transactions in which the risks and benefits
connected with ownership of the asset are substantially
retained by the lender. The lender entity maintains them in
portfolio, because they do not meet the conditions for
removal from the balance sheet, and the borrower entity
does not reflect them in its balance sheets.
n) Financial guarantees
Contracts under which the Group is required to pay specific
amounts to reimburse the creditor for the loss incurred
when a specific debtor fails to comply with his payment
obligation under the contract terms are considered financial
guarantees, irrespective of their legal form which may be a
guarantee, a financial guarantee, an insurance contract or a
credit derivative.
i) A lease is considered a finance lease when substantially
all the risks and benefits attaching to the ownership of
the assets subject to the contract are transferred.
Whenever the Group acts as a lessor of an asset, the sum
of the present values of the amount that will be received
from the lessee plus the guaranteed residual value,
usually the purchase option price when the lease
terminates, are recorded as financing provided to third
parties. It is therefore included in the heading Loans and
receivables in the consolidated balance sheet, in
accordance with the nature of the lessee.
When the Group acts as lessee, the cost of the assets
leased is recorded in the consolidated balance sheet,
depending on the nature of the asset addressed in the
contract and simultaneously a liability is recorded for
the same amount, which will be the lower of the fair
value of the asset leased or the sum of the present
values of the amounts payable to the lessor plus, if
appropriate, the purchase option exercise price. These
assets are depreciated by methods similar to those used
for all the tangible assets for own use.
The financial revenues and expenses arising from these
contracts are credited and charged, respectively, to the
consolidated statement of income so that the return
remains constant over the term of the contracts.
ii) Lease contracts not considered to be finance leases are
classified as operating leases.
Financial guarantees are valued at fair value, which will be
the premium received plus the present value of the cash
flows to be received over the term of the contract. The
classification as doubtful of a financial guarantee contract
entails its reclassification to Provisions for contingent
exposures and commitments.
When the Group acts as lessor of an asset, the sum of the
present values of the amounts which it will receive from
the lessee plus the guaranteed residual value, These
assets are depreciated in accordance with the policies
adopted for similar tangible assets on the basis of their
estimated useful lives and initial direct income and costs
allocable to the lease contracts are recognized in the
consolidated income statement on a straight-line basis.
For calculation of loss for impairment, financial guarantees
are classified on the basis of the risk of insolvency
attributable to the customer or to the transaction and, if
Leased tangible assets are depreciated using the same
general policy as that applied by the Group for similar
assets.
244
GRUPO BANCO POPULAR
When the Group is the lessee, the lease expenses,
including incentives, if any, granted by the lessor, are
recorded on a straight line basis in the consolidated
statement of income.
Fees generated by this activity are recorded under Fees
received in the consolidated income statement.
The detail by nature of these assets managed by the Group
is as follows:
o) Assets managed
Equity managed by the Group which is owned by third
parties is not included on the consolidated balance sheet.
€ thousand
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
p) Personnel expenses – post-employment remuneration
Post-employment remuneration is defined as remuneration
paid to employees after the end of their period of
employment. Post-employment remuneration, including
that covered by internal allowances or external pension
funds, is classified into defined-contribution plans or
defined-benefit plans, based on the conditions of these
obligations, taking into account all the commitments
undertaken within and outside the terms formally pacted
with the employees.
Banks in Spain
At December 31, 2008 and 2007, the Group banks
operating in Spain had externalized the full amount of the
pension commitments to their serving and retired
employees and these employees' beneficiary right holders
under the current collective bargaining agreement, or
similar regulation, by means of defined-contribution and
defined-benefit pension plans and insurance contracts,
pursuant to the terms of Royal Decree 1588/1999. As a
result of these transactions, the banks have transferred to
the insurance company, either directly or through the
pension plans promoted by them, all their pension
commitments and have ceased to have any actuarial,
financial or other insurable risk in relation to the
commitments assumed.
Serving employees
On November 8, 2001, Banco Popular Español, S.A. and
its subsidiaries Banco de Andalucía, Banco de Castilla,
Banco de Crédito Balear, Banco de Galicia, Banco Vasconia,
(the last four were merged with Banco Popular Español in
December 2008), and with accounting effects as from June
30, 2008 bancopopular-e and Popular Hipotecario
instrumented the externalization of their defined benefit
pension commitments with serving employees by
contributing the recorded internal allowances to the
2008
8,649,348
875,706
3,905,595
13,430,649
2007
12,097,212
1,571,305
4,271,852
17,940,369
respective defined benefit pension plans that had been set
up – which simultaneously entered into contracts
insurance to cover said commitments, or to insurance
contracts covering the financial limit overrun. The insurance
company is Allianz, Compañía de Seguros y Reaseguros,
S.A. with an irrevocable joint and several guarantees from
this company's parent company Allianz AG. Contributions
were fully paid in at December 31, 2001 to cover past
service costs at that date. This represented the completion
of the externalization agreements signed in 2000 and 2001
by the Banks and employee representatives.
The occupational pension plans are included in the
Europopular Integral pension fund which is managed by
Europensiones, S.A., which is owned 51% by Banco
Popular Español and 49% by Allianz. The fund depositary
is Banco Popular Español, S.A.
The plan covers two groups of employees, the commitments
to whom are as follows:
GROUP A
- Employees entitled to supplementary pension payments
and additional coverage for loss of spouse and loss of
parent and occupational hazards. Contributions in respect
of personnel expenses amounted to €19,824k and
€17.004k in 2008 and 2007, respectively. Net
appropriations to provisions amounted to €(83)k and
€2.576k. For net actuarial gains and losses, an amount of
€14,863k and €4,043k was recognized against reserves in
2008 and 2007, respectively.
GROUP B
-All other employees. The commitments for occupational
hazards are the same as those for the first group. The
annual contribution in this connection is included in the
figure shown in the immediately preceding paragraph. The
Bank also undertakes to make annual contributions to the
fund for employees with more than two years of service, of
1.25% or 1.30% of their gross salaries per collective
245
bargaining agreement based on their age, plus an additional
amount, up to a specified limit, conditional upon a
voluntary contribution of the same amount by the
employee. The contributions by the banks promoting the
defined-contribution pension plans, included under the
personnel expenses caption, amounted to €3,056k in
2008 and €2,777k in 2007.
At December 31, 2008 and 2007, the mathematical
reserves for the insurance contracts covering defined-benefit
commitments at retirement of serving employees amounted
to €529.001k and €526,994k, respectively, for the
pension plan insurance contracts and to €36.392k and
€24.106k, respectively, for those relating to financial limit
overruns. Members of the pension plans include both
serving employees and employees in a situation of preretirement, who will become plan beneficiaries on reaching
the definitive retirement age.
The main actuarial and financial hypotheses used in the
actuarial studies conducted at the end of 2008 and 2007
were as follows:
Mortality tables: PERM/F 2000-P
Permanent disability tables: Ministerial Order of January
1977, adjusted to 85%
Interest rate:
Years 1-40: Tied to the Euribor IRS per the insurance
contract
Subsequent period: Maximum rate permitted by the
Directorate General of Insurance and Pension Funds for
transactions not included in the situation of matched
policies, per Ministerial Order of December 23, 1998, as
implemented by Article 33.2 of the Private Insurance
Ordering and Supervision Regulations, with a 95% profitsharing clause.
Growth rate of salaries: 2.5% per annum plus shifts for
three-year service periods and line-management. Growth
rate of social security pensions: 1.5% per annum
Actuarial valuation method: Projected credit unit, with the
number of years in the group of employees at initial
retirement age per the collective bargaining agreement as a
reference.
The interest rates used in the contribution with respect to
the annual accrual are as follows:
- In years 1 to 40, 4.73% and 4.77% in 2008 and 2007,
respectively.
- For other years, the rates were 2.60% in 2008 and
2.42% in 2007.
246
The actuarial gains and losses originate in the differences
between prior actuarial and financial assumptions and
actual fact and in differences resulting from changes in the
actuarial assumptions used.
For defined benefit, immediate recognition of the
obligations accrued is generally required, except for serving
employees in the case of past service costs that will be
allocated on a straight-line basis in the period to the vesting
of the right to receive it. Nonetheless, in view of the
characteristics of the acquisition of employee rights under
post-employment plans in Spain, past service costs are
recognized immediately in the income statement. Actuarial
gains and losses are also recognized at the time they arise
against reserves.
Post-employment remuneration payments are recorded in
the income statement or reserves as follows:
i)
The service cost of the current period
corresponding to the increase in the present value of the
obligations as a result of the services provided by the
employees during the year is recorded as personnel
expenses.
ii)
The interest cost of the increase in the year in the
present value of the obligations as a result of the passage of
time is recorded as interest and similar charges. Whenever
the obligations are presented, net of the assets of the plan,
under liabilities, the cost of the liabilities recorded in the
income statement corresponds entirely to the obligations
recorded under liabilities.
iii)
The return expected from the assets assigned to
cover the commitments minus any cost arising from their
administration and any applicable taxes, is recorded as
interest and similar income.
The method elected by the Banco Popular Group to
instrument the post-employment commitments of the
Group banks in Spain to their serving and retired personnel
makes it possible to present the obligations net of the assets
assigned thereto which, since they are of the same amount,
does not involve recognition of interest expenses and
charges or of interest and other income.
iv)
The amortization of actuarial gains and losses is
reflected in reserves while unrecognized past service costs
are reflected in Provisioning expense (net).
GRUPO BANCO POPULAR
Retired employees
Banco Popular Español, S.A. and its subsidiaries Banco de
Andalucía, Banco de Castilla, Banco de Crédito Balear,
Banco de Galicia and Banco de Vasconia (the last four were
merged with Banco Popular Español in December 2008)
externalized their pension commitments to employees
retired prior to November 8, 2001 in October 1995 by
means of insurance contracts between these banks and
Allianz Compañía de Seguros y Reaseguros S.A., with an
irrevocable joint and several guarantee from the parent In
2001 these contracts were adapted to comply with the
provisions of Royal Decree 1588/1 999.
At December 31, 2008 the mathematical reserves for these
insurance contracts amounted to €469.512k (€469,512k
at December 31, 2007).
The pension commitments to employees retired on and
after November 8, 2001, at all the Group banks operating
in Spain are covered by the policies taken out directly by the
banks or by the pension plans described earlier. In 2008,
the mathematical reserves relating to the economic rights of
retired employees under these contracts amounted to
€163.149k for the pension plan policies and €13.389k for
those relating to financial limit overruns. The amounts at
the end of 2007 were €128,064k and €13,327k,
respectively.
For actuarial gains and losses, an amount of €3,860k and
€4,259k was recognized against reserves in 2008 and
2007, respectively
Under the aforementioned insurance contracts, the banks
transferred to the insurance company all their pension
commitments to their retired employees and ceased to have
any actuarial, financial or other insurable risk in this
connection.
special agreement that each pre-retiree has arranged with
the Social Security as the amounts needed to cover benefits
for non-serving employees: pension and loss of spouse and
loss of parent payments and the premiums necessary to
maintain adequate coverage of occupational risks until the
pacted retirement age is reached.
Accordingly, the Group has recorded, under the risk
allowances caption, an allowance to cover the
commitments to early retirees, both for salaries and for
other employee welfare charges, from the date of their early
retirement until that of their effective retirement, and for the
total amount of the necessary supplementary contributions
to the pension plan until effective retirement or for risks of
death of spouse and death of parent if these events were to
occur previously. The amount recorded under liabilities in
this connection totals €152,770k in
2008 and
€170.154k in 2007.
In 2008 the Group carried out a pre-retirement plan that
affected 70 employees and entailed contributions
amounting to €17,675k (which rises to €18,586k if other
pre-retirement plans implemented during the year are
included). The cost in 2007 amounted to €4,034k.
The interest expense and similar charges recognized in the
consolidated statement of income, with a contra-item in
pension allowance, amounted to €4,485k in 2008 and
€5,252k in 2007.
At the same time, for the portion covered by the Allianz, S.A.
insurance company, the Group has recognized insurance
contract assets for the same amount as that of the liability
for externalized commitments. Al December 31, 2008 and
2007, the asset recognized amounts to €88,551k and
€115,050k, respectively.
The interest relating to pension-linked insurance amounted
to €2,673k in 2008 and €3,452k in 2007.
Early retirees
The detail of the allowances recorded by the Group as a
The Group has commitments to certain of its employees of result of early retirements is as follows:
the banks in Spain under early retirement agreements, and
most of these commitments are instrumented in an annuity
income insurance contract with the insurance company
2008
2007
Allianz, S.A. which bears all the actuarial and investment € thousand
risk in relation to the commitments assumed. The Commitments externalised . . . . .
88,551
115,050
remainder relates, on the one hand, to the extraordinary Early retirement plan 2001 . .
4,974
7,677
early retirement plan carried out in 2004, which ended in Early retirement plan 2002 . .
13,540
18,736
the first quarter of 2005 and, on the other, to further early
Early retirement plan 2003 . .
69,612
88,061
retirements since them, maintained in an internal
Early retirement 2004 . . . . . .
425
576
allowance.
This insurance was designed so that the benefits
periodically received from the insurance company match, in
term and amount, the Group’s obligations to its early
retirees. These obligations consist of both income paid
monthly to pre-retiree and the amounts equivalent to the
Early retirement internal fund . .
Total . . . . . . . . . . . . . . . . . . .
64,219
40,906
2,366
3,143
17,804
152,770
55,104
48,201
3,134
3,769
170,154
247
Banco Popular Portugal, S.A.
The pension allowance of Banco Popular Portugal, SA
amounted at December 31, 2008 and 2007 to €93,532k
and €96,616k, respectively. The contributions to the
pension provision amounted to €11,379k and €11,379k
in 2008 and 2007, respectively. For net actuarial gains and
losses, an amount of €10,251k and €6,497k was credited
to reserves in 2008 and 2007, respectively
The pension commitments of Banco Popular Portugal,SA
arise from the collective bargaining agreement for
Portuguese banks.
These commitments are externalized through a fund
managed by the Portuguese insurance company Eurovida,
S.A., while the Bank is responsible for such commitments .
As of December 31, 2008 and 2007 the value of the fund
was €93,234k and €90,242k, respectively. The net
contributions made in 2008 and 2006 amounted to
€13.862k and €13.948k, respectively.
The main actuarial and financial assumptions used in the
actuarial studies conducted at the end of 2008 and 2007
were as follows:
2008
5.25%
PERM/F2000P
2.00%
3.00%
Interest rate (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortality tables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Growth rate of social security pensions . . . . . . . . . . . . . . . . . . .
Annual growth rate of salaries (**) . . . . . . . . . . . . . . . . . . . . . . .
2007
4.75%
PERM/F2000P
2.00%
3.00%
(*) The discount rate is that on high credit quality corporate debt with duration similar to the flows that it aims to cover. (**) The shifts for five-year
service periods and obligatory promotions for seniority are taken into account in addition to these percentages.
Retirement awards and other commitments
2007 year end,respectively. The pension provision for these
items amounts to €3,261k and €3,616k in 2008 and
2007, respectively.
Under the collective bargaining agreements applicable to
them, certain Group companies are obliged to pay an
amount to employees at retirement age, basically
depending on two variables: the years of service of the
employee at retirement age and the employee’s monthly
salary. This commitment is also known as a retirement
bonus. Additionally, the Group has assumed other pension
commitments for different items and companies such as
company stores, pre-retirement of non-banking employees
etc. There are therefore funds under assets on the balance
sheet amounting to €583k and €921k at the 2008 and
31/12/2008
€ thousand
Under current regulations, the Group is required to make
indemnity payments to employees terminated without just
cause. There is no labor force reduction plan making it
necessary to record an allowance in this connection.
Contributions, funds and provisions
The table below sets out for each commitment the amount
apportioned or recognized in the income statement or
reserves and the fund or provision established.
INCOME STATEMENT . RESERVES
Charges expense to Inter. and Inter. &
Personnel be provided charges Results
Mathematical reserves
Liabilities Pension
nsurance
plan
SHEE T
Reserves
Assets
BANKS IN SPAIN
Assets . . . . . . . . . . . . . . . . . . . . . . . . .
Group A . . . . . . . . . . . . . . . . . . . . . . .
Group B . . . . . . . . . . . . . . . . . . . . . . .
22,880
19,824
3,056
-
(83)
(83)
-
-
14,863
14,863
-
-
- 529,001 36,392
- - -
-
3,860
-
-
-
-
Liabilities . . . . . . . . . . . . . . . . . . . . . .
-
-
-
Early retirees . . . . . . . . . . . . . . . . . . .
-
18,917
4,485
2,673
88,551
152,770
-
BANCO POPULAR PORTUGAL . . . . . . .
RETIREMENT AWARDS AND OTHER
6,772
2,165
4,453
74
4,583 (10,251) 93,234
583
93,532
3,261
-
-
-
-
154
(23)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . 31,817 18,965
9,012
Notes Financial Statements . . . . . . . Note 37 Note 37 Note 37
y 57
y 49
y 60
248
7,256
Note 48
8,472 182,368 249,563
Note 29 Note 37
163,149 466,671
-
GRUPO BANCO POPULAR
31/12/2007
€ thousand
INCOME STATEMENT . RESERVES
Charges expense to Inter. and Inter. &
Personnel be provided charges Results
Mathematical reserves
Liabilities Pension
nsurance
plan
SHEE T
Reserves
Assets
BANKS IN SPAIN
Assets . . . . . . . . . . . . . . . . . . . . . . . . .
Group A . . . . . . . . . . . . . . . . . . . . . . .
Group B . . . . . . . . . . . . . . . . . . . . . . .
18,421
15,644
2,777
Liabilities . . . . . . . . . . . . . . . . . . . . . .
-
Early retirees . . . . . . . . . . . . . . . . . . .
-
BANCO POPULAR PORTUGAL . . . . . . .
RETIREMENT AWARDS AND OTHER
6,377
422
2,576
2,576
-
-
-
4,043
4,043
-
- 526,994
-
24.106
-
-
-
4,259
-
- 128,064
482,839
(374)
5,252
3,452
- 115,050 170,154
-
-
(1,066)
233
4,588
95
3,772
(7)
(6,497) 90,242 99,630
921 3,616
-
-
-
1,805 206,213 273,400
Nota 29 Nota 37
-
-
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . 25,220
1,369
9,935
7,217
Notes Financial Statements . . . . . . .Notas 37 y Notas 37 y Notas 37 Nota 48
57
60
y 49
q) Corporate income tax
Spanish corporate income tax and the taxes of a similar
nature applicable to investees abroad are treated as an
expense and recorded under the income tax caption in the
consolidated statement of income except when they arise as
a consequence of a transaction recorded directly in
consolidated net worth or of a business combination, in
which the deferred tax is recorded as an additional net worth
element thereof.
The corporate income tax expense is determined by tax
payable calculated with respect to the tax base for the year,
taking into account the variations during that year deriving
from temporary differences, deductions and credits and tax
losses. The taxable base for the year may differ from the
consolidated net income for the year per the consolidated
statement of income since it excludes the items of revenues
or expenses that are taxable or deductible in other years and
the items that are never taxable or deductible.
Deferred tax assets and liabilities relate to the differences
between the amounts per books of the assets and liabilities
in the financial statements and the related taxable bases,
and are quantified by applying to the relevant timing
difference or credit the tax rate at which it is expected to be
recovered or settled.
A deferred tax asset, such as prepaid tax, a tax credit and
relief and a tax credit for tax losses, is recognized provided
that the Group is likely to obtain sufficient taxable income
in the future against which to realize it. It is considered
probable that the Group will obtain in the future sufficient
tax profits when, inter alia:
i) There are deferred tax liabilities cancelable in the same
year as that of the realization of the deferred tax asset or
in another subsequent year in which the existing tax loss
or that caused by the amount prepaid can be offset.
ii) The tax losses have arisen for identified reasons which are
unlikely to recur.
Nonetheless, the deferred tax asset resulting from the
recording of investments in Subsidiaries, jointly-controlled
companies or Associates is only recognized when its future
realization is probable and sufficient tax income is expected to
be obtained in the future against which to apply it. Nor is it
recognized when a net worth element which is not a business
combination that at the time of recognition did not affect the
accounting or tax result is initially recorded.
Deferred tax liabilities are always recorded except when
goodwill is recognized or when they arise in the recording
of investments in dependent and jointly-controlled
companies or associates, if the Group is capable of
controlling the date of reversal of the timing difference and,
also, it is probable that this difference will not reverse in the
foreseeable future. A deferred tax liability is not recognized
either when a net worth element which is not a business
combination that at the time of recognition did not affect
the accounting or tax result is initially recorded.
Recorded deferred tax assets and liabilities are reviewed at
the year end in order to verify that they still valid and where
appropriate, the relevant adjustments are made.
249
At the end of 2006, Law 35/2006 on Personal Income Tax
and partial amendment of the Laws on Corporate Income
Tax, Income of Non-Residents and Wealth Tax and Navarre
Law 18/2006 amending certain taxes and other taxation
measures applicable to entities subject to central
government and Navarre regulations, respectively, and the
Local Finance Law in Portugal gave approval to a reduction
of the corporate income tax rate in the aforementioned
territories from 35% in 2006 to 32.5% in 2007 and 30%
starting in 2008, in the case of Spain, and from 27 .5% to
26.5% in the case of Portugal
This reduction in the tax rates entailed in 2007 a decrease
in deferred tax assets and liabilities of €12,060k and
€132k, respectively, and an increase in the corporate
income tax expense of €11,593k, The effect of the
valuation adjustments on equity amounted in that year to
€(335)k and the impact on results attributed to the Group
(notes 33 and 43) amounted to €11,164k.
r) Tangible assets
The tangible assets for own use are the property items of
which the Group considers it will make ongoing use, and
the property items acquired under finance lease. They are
measured at acquisition cost less the relevant accumulated
depreciation and, if appropriate, any impairment loss
resulting from comparing the net value of each asset and
the relevant recoverable amount.
The exception to the application of the foregoing method in
the Group occurs exclusively at Banco Popular Portugal, SA
where use was made of the rule of initial introduction of
IFRS-EU under which it made a net revaluation of €3,197k,
by recording two properties at fair value based on
appraisals by independent experts.
In the case of the foreclosed assets classified in non-current
assets for sale, the cost is the net amount of the financial
assets delivered in exchange for foreclosure, taking into
account the value adjustments connected with said
financial assets.
Depreciation is calculated systematically by the straight line
method, applying the years of estimated useful life of the
items to the acquisition cost of the assets minus their
residual value. Land on which buildings and other
constructions stand is understood to have an indefinite life
and is therefore not depreciated. The annual provisions for
250
depreciation of tangible assets are charged to the
consolidated statement of income and are calculated on the
basis of the following average years of estimated useful life
of the various groups of items:
Years of estimated
useful life
Buildings . . . . . . . . . . . . . . . . . . . . .
Furniture . . . . . . . . . . . . . . . . . . . . .
Installations . . . . . . . . . . . . . . . . . . .
25-50
4-8
4-16
At each accounting close, the Group analyzes whether there
are internal or external signs that the net value of its
tangible assets exceeds their recoverable amount. In this
case, the Group reduces the carrying value of the relevant
asset to its recoverable amount and adjusts future
depreciation charges in proportion to the adjusted carrying
value and new remaining useful life if it is necessary to reestimate it. Moreover, when there is an indication that the
value of an asset has been recovered, the Group records the
reversal of the impairment loss recorded in prior periods
and adjusts future depreciation charges accordingly. The
reversal of the impairment loss of an asset in no event may
entail an increase in its carrying value in excess of that
which would be obtained if such prior year impairment
losses had not been recognized.
At least at the end of each year the Group reviews the
estimated useful life of its tangible assets for own use in
order to detect significant changes therein which, if they
occur, are adjusted by correction of the charge for
depreciation in the consolidated statement of income for
that year and the following years based on the new
estimated useful life.
The expenses of upkeep and maintenance of the tangible assets
for own use are expensed currently.
GRUPO BANCO POPULAR
The investment properties included in tangible assets relate to
the net values of the land, buildings and other structures which
the Group holds for rental or for obtaining a gain on their sale
and are not expected to be realized in the ordinary course of
business.
The criteria applied by the Group to recognize the
acquisition cost of the assets assigned under operating lease
with respect to depreciation and the estimate of their
respective useful lives and the recording of impairment
loses, agree with the those described for property, plant and
equipment for own use.
s) Intangible assets
Intangible assets are non-monetary assets that are
identifiable but with no physical appearance. Intangible
assets are deemed to be identifiable when they are
separable from other assets because they can be individually
sold, leased or used or arise as a result of a contract or other
kind of legal business. An intangible asset is recognized
when, in addition to meeting the foregoing definition, the
Group estimates that economic benefits are likely to be
received from the item and its cost can be reliably estimated.
Intangible assets are initially recognized at acquisition or
production cost, and are subsequently valued at cost less, where
appropriate, accumulated amortization and any loss for
impairment.
Positive differences between the cost of investments in the
equity of the dependent and jointly-controlled companies
and associates and their underlying carrying values, adjusted
at the date of initial consolidation, are allocated as follows:
i) If they are assignable to specific equity items of the
entities acquired, they are assigned by increasing the
value of the assets or reducing the value of the liabilities,
the market value of which is higher or lower, respectively,
than the net carrying values in the predecessor balance
sheets and whose accounting treatment is similar to that
of the Group’s same assets and liabilities, respectively.
Goodwill acquired since January 1, 2004, remains valued at
its acquisition cost and goodwill acquired prior to that date
continues to be booked at its recorded net value at
December 31, 2003. At each accounting close the Group
estimates whether there has been any impairment in the
goodwill which reduces its recoverable value to below its
recorded net cost and, if appropriate, records the necessary
write-down with a contra-item in the consolidated statement
of income. Losses for impairment of goodwill cannot
subsequently be reversed.
The goodwill recorded by the Banco Popular Group in the
consolidated balance sheet is valued annually using the
following methodology:
Note 8 sets out an explanation of goodwill relating to
TotalBank, at the time of acquisition (November 2007).
The goodwill of Banco Popular Portugal, S.A and Popular
Heller Factoring (Portugal) SA and TotalBank at the end of
December 2008 and 2007 was valued by applying the
dividend discount method, for which purpose the 2008 and
2007 close figures were estimated and projected financial
statements for the following 10 years were prepared, thus
obtaining the related cash flows to be discounted. The
amounts so calculated were discounted at the discount rate
corresponding to the parameters described below, for which
the following hypotheses were used:
i) The cost of capital was considered to be the cost of
shareholders’ funds, regardless of the financing
structure of the balance sheet and of the cost of the
borrowed funds.
ii) Considering the foregoing point, the variables used to
determine the cost of capital were as follows:
- Risk-free return: The return on 10 year Spanish
Treasury bonds was used as this is a market standard,
irrespective of the years projected in the model, except
in the valuation of Totalbank where the return on US
Treasury bonds was used.
ii) If they are assignable to specific intangible assets, they
are allocated by explicit recognition in the consolidated
balance sheet, provided that their fair value at the
acquisition date can be reliably determined.
- Market premium: there are several studies analyzing
the historical evolution of the risk premium of equity
markets on an overall basis; per these studies it was
concluded that this premium was around 5%
iii) The remaining non-allocable differences are recorded as
goodwill, which is assigned to one or more specific
cash-generating units.
-Beta coefficient: Considering that the investees being
valued are wholly-owned subsidiaries of Banco Popular
and are fully included within the Group’s management
and risk criteria, the beta coefficient should be
associated with the market price of The beta coefficient
used agrees with the weekly observations over a period
of two years prior to the calculation date.
Goodwill represents the prepayment by the Group for the
future economic benefits arising from the assets of a
company acquired that are not individually and separately
identifiable and recognizable and is only recognized when
acquired for valuable consideration in a business
combination.
251
iii) )As regards the perpetual growth rate “g”, 2% was used
as an assumption of vegetative growth.
iv) For valuation purposes, and for calculating the dividend
flow, the income after taxes was considered, after
discounting the portion to be allocated to equity to
sustain the growth of the business.
Negative differences between the cost of the investments in
the equity of the dependent and jointly-controlled
companies and associates and their related underlying
carrying values, adjusted at the date of initial consolidation,
are allocated as follows:
i) If they are assignable to specific balance sheet items of
the companies acquired, they are allocated by adjusting
the value of the assets and liabilities whose fair values
were higher or lower, respectively, than the net book
values at which they were booked in their balance
sheets and the accounting treatment of which is similar
to that of the same liabilities or assets, respectively, of
the Group.
ii) The remaining amounts which may not be allocated are
recorded under Negative difference on the consolidated
income statement for the year in which capital is
acquired.
The useful lives of other intangible assets may be indefinite
when, on the basis of analyses performed of the relevant
factors, the conclusion is that there is no foreseeable limit
to the period during which net cash flows are expected to
be generated in favour of the Group or of the defined useful
life. Intangible assets with an indefinite useful life are not
amortized although at each accounting close the Group
reviews the remaining useful lives in order to ensure that
they are still indefinite or, alternatively, take the relevant
action. Intangible assets with a finite useful life are
amortized on the basis thereof, applying methods similar to
those for tangible assets. However, at the end of 2008 and
2007, the Group did not have any intangible assets of
indefinite useful life.
In any event, the Group recognizes any loss that may have
arisen in the recorded value of these assets resulting from
impairment with a balancing entry in the consolidated
income statement. The methods for recognition of losses for
impairment of these assets and, if appropriate, of recoveries
of losses for impairment recorded in prior years are similar
to those applied for tangible assets.
t) Inventories
LInventories are non-financial assets that are held for sale in
the ordinary course of business and that are under
production, construction or development for such purpose.
252
This heading also includes land and other properties that
are held for sale in the performance of property
development activities. These inventories are at all times
carried at the lower of cost and net realizable value and any
potential impairment is taken into account.
u)
Insurance operations
The dependent companies that are insurance companies
credit the consolidated statement of income for the
premiums that they write and charge to the consolidated
statement of income the cost of the claims that they must
meet when final settlement thereof is reached. Also,
accruals are recorded at the end of each year both for the
amounts credited to the consolidated statement of income
but unearned at year end, and for the costs incurred but not
charged to the consolidated statement of income.
The principal mathematical reserves relating to the direct
insurance activity are as follows:
i) Mathematical reserve for unearned premiums, relating
to the rate premium collected in one year allocable to
future years net of the following the deduction of the
loading for contingencies.
ii) Mathematical reserve for outstanding risks which
supplements the mathematical reserve for unearned
premiums by the amount by which the latter is
insufficient to reflect the valuation of the risks and
expenses to be covered relating to the unelapsed
coverage period at year end.
iii) Mathematical reserve for benefits, which relates to the
estimated valuations of the outstanding obligations
arising from claims occurred before year end. This
mathematical reserve includes the unsettled or unpaid
claims and the undeclared claims. The outstanding
obligations are calculated by deducting the payments
made on account and taking into consideration the
internal and external expenses of settlement of the
claims and, if appropriate, the additional reserves which
may be necessary to cover variances in the valuations of
claims requiring lengthy processing.
iv) Mathematical reserve for life insurance::
-
For life insurance with a coverage period of one year or
less, the mathematical reserve for unearned premiums
relates to the rate premium collected in the year
allocable to future years. If this mathematical reserve is
insufficient, a mathematical reserve for current risks is
calculated to supplement and cover the valuation of the
risks and expenses foreseen in the unelapsed period at
year end.
GRUPO BANCO POPULAR
-For life insurance with coverage of more than one year,
the mathematical reserve is calculated as the difference
between the actuarial present value of the future
obligations of the insurer and those of the policyholder
or insured, based on the inventory premium earned in
the year consisting of the straight premium plus the
surcharge for administration expenses per the technical
bases
-In life insurance policies in which the investment risk is
borne by the policyholders, the mathematical reserve is
determined on the basis of the assets specifically assigned
to determine the value of the rights.
v) Mathematical reserve for profit-sharing and refunds,
which relates to the profit inuring to the policyholders,
insureds or beneficiaries of the insurance and that of
premiums that must be refunded to the policyholders or
insureds, because of the conduct of the risk insured
unless they have been individually assigned to each of
the former.
The mathematical reserves for accepted reinsurance are
calculated by methods similar to those used for direct
insurance, and generally on the basis of the information
provided by the ceding companies.
The mathematical reserves of direct insurance and of
accepted reinsurance are included under the insurance
contract liabilities caption in the consolidated balance sheet.
iii) The virtually certain evolution of the regulations on
certain aspects, in particular, draft legislation which the
Group cannot disregard.
Provisions are booked on the basis of the probability of an
event occurring. Events are classified as probable when they
are more likely to occur than not; as possible, when they are
less likely to occur than not; and remote, when their
occurrence is extremely rare.
The Group includes in its consolidated financial statements
all the material provisions with regard to which it is
considered that the likelihood of having to meet the
obligation is greater than not.
Provisions are quantified based on the best information
available about the consequences of the event giving rise to
them and are estimated at each accounting close. They are
used to meet the specific obligations for which they were
recognized, and are fully or partly released when these
obligations cease to exist or decrease.
At December 31, 2008 and 2007 there were certain
litigations in progress and claims had been filed against the
Group arising from its ordinary business activities. The
Group’s legal advisers and the directors of Banco Popular
consider that the outcome of this litigation and these claims
will not have any material effect additional to that included
as a provision in the consolidated financial statements of the
years in which they are concluded.
The amounts which the Group is entitled to receive for
reinsurance contracts are recorded under the reinsurance
assets caption in the consolidated balance sheet. The Group
checks whether these assets are impaired and if so
recognizes the related loss in the consolidated income
statement with a direct charge to that caption.
This caption of the balance sheets includes the provisions
for pensions, for taxes and other legal contingencies, for
contingent exposures and commitments and other
provisions.
v) Provisions
Contingent assets are possible assets arising as a result of
past events whose existence is conditional and must be
confirmed when events outside the control of the Group
occur or do not occur. Contingent assets are not recognized
in the consolidated balance sheet or in the consolidated
statement of income. The Group reports their existence
provided that the increase in resources including economic
benefits for this reason is probable.
Provisions are deemed to be present obligations of the
Group arising as a result of past events which are clearly
specified as to nature at the date of the financial statements
but are undetermined as to amount and time of
cancellation; at the due date thereof and in order to settle
them, the Group expects to have to deprive itself of funds
which include economic benefits. These obligations may
arise as follows:
i) A legal or contractual requirement.
ii) An implicit or tacit obligation, arising from a valid
expectation created by the Group for third parties for the
assumption of certain kinds of responsibilities. These
expectations arise when the Group publicly accepts
responsibilities, and derive from past performances or
business policies in the public domain.
w) Contingent assets and liabilities
Contingent liabilities are the possible obligations of the Group
arising as a result of past events whose existence is
conditional on the occurrence or not of one or more future
events which are independent of the Group’s decision.
Contingent exposures include the current obligations of the
Group whose cancellation will probably not give rise to a
decrease of the funds that include economic benefits or
whose amount, in extremely rare cases, cannot be quantified
with sufficient reliability.
253
x) Remuneration of staff based on equity instruments
In 2008 and 2007 the Banco Popular Group did not have
in place any system of remuneration of staff based on its
own equity instruments.
y) Non-current assets for sale and Liabilities associated with
non-current assets for sale
Non-current assets for sale on the consolidated balance
sheet include assets, irrespective of their nature, which, not
forming part of operating activities, include amounts whose
initial realization or recovery period exceeds 1 year, but
which the Group intends to dispose of within no more than
1 year of the date to which the annual accounts refers. The
carrying value of foreclosed assets the sale of which is
highly probably in the assets' current condition is reflected,
among other things.
In the performance of its operations, the Group has
obtained assets through either the enforcement of the
guarantees taken to ensure collection or dation in payment
of debts. Note 27 sets out information on the amounts and
coverage arranged for the impairment of this kind of assets.
subsequent increases in the fair value of the assets, the
Group reverses the losses previously recorded and increases
the carrying value of the assets up to the limit of the amount
prior to their possible impairment.
Nonetheless, financial assets, deferred tax and insurance
contracts which form part of a disposal group or
discontinued operation are not valued as described.
Instead, they are valued in accordance with the principles
and standards applicable to these items, as explained in
earlier in this Note.
The results in the year of disposal groups classified as
discontinued operations are recorded under the result of
discontinued operations (net) caption in the consolidated
statement of income both if the disposal group has been
eliminated from the assets and if it is still included in the
assets at year end. Note 9 sets out further information on
discontinued operations.
z) Consolidated cash flow statement
The following are used in the consolidated cash flow
statement:
Consequently, the recovery of the carrying value of these
items, which may be of either a financial or non-financial
nature, will foreseeably be obtained through the price at
which they are disposed of rather than through continuing
use.
i) Cash flows that are inflows and outflows of cash and
cash equivalents, the latter being defined as high
liquidity short-term investments with low risk of
alteration in value, irrespective of the portfolio in which
they are classified.
Therefore, the property and other non-current assets received
by the Group for total or partial settlement of payment
obligations to it of its debtors are classified as non-current
assets for sale, unless the Group has decided to make
continuing use of them, in which case they are classified as
assets for own use or investment properties.
ii) Operating activities that are typical Group activities and
other activities that cannot be classified as lending or
funding and the interest paid on any lending received.
The Liabilities associated with non-current assets for sale
caption includes the credit balances connected with disposal
groups or discontinued operations of the Group, if any; at the
end of 2008 and 2007, the Group did not have any balance
of this nature.
The assets classified as non-current assets for sale are
generally valued at the lower of their carrying value when
classified as such and fair value net of the estimated cost
of sale of the asset. For so long as they continue to be
classified as non-current assets for sale, depreciable
tangible assets and amortizable intangible assets are not
depreciated or amortized. In the event that the carrying
amount exceeds the fair value of the assets, net of cost of
sales, the Group adjusts the carrying amount of the assets
by the amount of the excess and makes a balancing entry in
the caption Gains/losses on non-current assets held for sale
not classified as discontinued operations in the
consolidated income statement. In the event of any
254
iii) Investing activities relating to the acquisition, sale or
disposal by other means of long-term assets and other
investments not included in cash and cash equivalents.
iv) Financing activities are the activities that give rise to
changes in the size and composition of consolidated
equity and the liabilities that do not form part of
operating activities.
GRUPO BANCO POPULAR
16. Duty of loyalty of directors
As required by 127.ter.4 of the Spanish Companies Act,
the following table details the companies engaging in
business activity identical, analogous or complementary
to that constituting the objects of Banco Popular
Español, S.A., in which the members of the Board of
Directors have shareholdings and the offices and
functions they hold in these companies:
2008
Director
Aparicio, Francisco
Asociación de Dir. BPE
F. de Amorim, Américo
Gancedo, Eric
Higuera, Roberto
Herrando, Luis
Molins, Casimiro
Montuenga, Luis
Morillo, Manuel
Nigorra, Miguel
Osuna, Nicolás
Revoredo, Helena
Ron, Ángel
Santana, Vicente
Sindicatura de Accs. BPE
Solís, Miguel Ángel de
Tardío, Vicente
Allianz, SE
Company
Banco de Andalucía
-
Interest
%
Office or function
0.00
Director
-
-
Millenium bcp
Banco BIC (Angola)
Banco BIC Portugués
Banco LJ Carregosa
Bancopopular-e
Totalbank
Banco de Andalucía
BBVA
-
0.00
25.00
25.00
9.08
-
Director
Chairman
Director
Director
Chairman
-
Banco de Andalucía
0.00
Director
Banco de Andalucía
Banco Santander
Banco Sabadell
Bankinter
Banesto
BBVA
BBVA
BBVA
0.01
0.00
0.27
0.00
0.00
0.00
0.00
-
Banco de Andalucía
Banco Santander
BBVA
Bulbank AD
Zagrebacka banka d.d.
Oldenburgische Landesbank AG
Gruppo Banca Leonardo S.p.A.
Dresdner Bank AG
-
0.00
0.00
-
-
-
-
Chairman
0.03
0.00
0.00
0.00
3.50
11.7
64.3
2.9
100.0
Chairman
-
Director
-
255
2007
Nombre o denominación
social del consejero
Denominación de
la sociedad objeto
Francisco Aparicio ..................................... Banco de Andalucía, S.A.
Banco de Castilla, S.A.
Banco de Crédito Balear, S.A.
Banco de Galicia, S.A.
Banco de Vasconia, S.A.
Asociación de Directivos BPE ..................... José María Lucía ......................................... Popular Banca Privada, S.A.
Banco de Andalucía, S.A.
Banco Bilbao Vizcaya Argentaria, S.A.
Américo Ferreira de Amorim...................... Millenium bcp
Banco BIC
UBS
Barclays Bank
Eric Gancedo............................................... Banco de Castilla, S.A.
bancopopular-e, S.A.
Banco Popular France, S.A.
Luis Herrando ............................................. Banco de Galicia, S.A.
Popular Banca Privada, S.A.
Casimiro Molins ......................................... Luis Montuenga .......................................... Banco de Andalucía, S.A.
Banco de Castilla, S.A.
Manuel Morillo........................................... Miguel Nigorra............................................ Banco de Andalucía, S.A.
Nicolás Osuna............................................. Banco Santander, S.A.
Banco Sabadell, S.A.
Sovereign Bancorp
Helena Revoredo........................................ Banco Santander, S.A.
Royal Bank of Scotland
José Ramón Rodríguez................................ Banco de Castilla, S.A.
Banco Popular Hipotecario, S.A.
Ángel Ron .................................................. Vicente Santana.......................................... Popular Banca Privada, S.A.
Sindicatura de Accionistas BPE .................. Miguel Ángel de Solís................................. Banco de Andalucía, S.A.
Vicente Tardío ............................................ Banco Santander, S.A.
Herbert Walter............................................ Dresdner Bank AG
Deutsche Börse AG
Banco Portugués do Investimento, S.A.
256
%
Participación
Cargo o función
desempeñado
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.52
25.00
0.06
0.02
0.01
0.00
0.00
0.00
0.00
0.00
0.01
7.69
0.03
0.48
2.09
0.00
0.00
0.03
0.01
0.00
0.04
0.02
0.02
0.01
0.00
0.00
0.00
-
Director
Representing BPE
Director
Director
Representing BPE
Chairman
Chairman
Representing BPE
Chairman
Representing BPE
Director
Director
Chairman
Representing BPE
Chairman
Chairman
Director
Chairman
Director
Director
Chairman
Director
Director
GRUPO BANCO POPULAR
17. Customer care
This report states that a total of 5,631 complaints, claims
and enquiries were made to the Group in 2008, 5.9%
down on the previous year. The number of matters resolved
in 2008 totaled 5,352, of which 352 related to 2007. At
year-end 2007, 631 cases were pending resolution. The
5,352 cases resolved in 2008 represented an increase of
26% on 2007.
Ministry of Economy Order 734/2004 laid down, inter alia,
the obligation for the customer services departments and
units of finance companies to prepare a report on the
conduct of their functions during the preceding year. The
Order also required a summary of this report to be included
in the notes to the financial statements of companies.
In 2008, the Banco Popular Group’s Customer Service office
issued a total of 4,641 findings, which are set out below
together with comparative data for 2007.
In accordance with this legal requirement, the Banco
Popular Group’s Customer Service Office prepared the
report on its activities in 2008, which was submitted to the
Board of Directors of Banco Popular in its meeting on
January 22, 2008.
2008
Findings
In favor of the customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If favor of the BPE Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In favor of both parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
1,793
1,483
52
329
3,657
2,440
1,790
38
373
4,641
Of the above matters, 167 were handled through the
Financial Services Customer Ombudsman Offices, which
issued 82 findings:
Bank of Spain
Findings
2008
C.N.M.V.
2007
2008
Dir. General for Insurance
2007
2008
2007
Totals
2008
2007
In favor of the complainant .
In favor of the BPE Group . .
No findings issued . . . . . . . .
38
44
9
13
38
11
8
12
1
3
10
-
5
1
1
6
-
46
61
11
17
54
11
Totals . . . . . . . . . . . . . . .
91
62
21
13
6
7
118
82
18. Risk exposure and management
There are different types of risks implicit in the banking
business. Effective risk management is a critical aspect of
the business. The prudence principle must therefore take
precedence, reflected in adequate risk diversification as a
core aspect of banking activities, without losing sight of
profitability, solvency, efficiency, optimal asset health and
adequate liquidity, which are the permanent objectives of
Group management.
The Group has developed risk control and management
systems that incorporate formal procedures separating
functions and responsibilities for analysis, authorization,
follow-up and control, supervised by the Risk Committee,
General Management and the Assets and Liabilities
Committee, which define the mechanisms for the delegation
of functions and establishment of limits for day-to-day risk
management purposes. The Directors’ Report contains
further analysis and comments.
257
Market risk
This is the risk that future cash flows or the fair value of a
financial asset or liability might fluctuate due to changing
market prices.
The fair value measurement of financial instruments has
been performed by observing variables obtained from
active markets and the market prices of certain instruments,
Expressed as %
using generally accepted procedures, or internal models in
the absence of observable market variables or because a
market becomes illiquid.
Set out below is information on the balance sheet items
carried at fair value, showing the measurement method
used in 2008, in percentage terms:
Financial instru- Financial instruments,
ments quoted in fair value based on market observations
active markets
Financial assets
Trading portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . .
Hedge derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets at fair value through profit or loss . .
Hedge derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments,
fair value calculated
using internal models
30.1
100.0
45.1
-
35.7
54.0
64.5
34.2
0.9
35.5
1.2
100.0
-
41.0
73.6
57.8
26.4
Market risk may be divided into the following types of risk:
b)Interest rate risk
a) Foreign exchange risk
Interest rate risk is the consequence of fluctuations in
market interest rates affecting financial assets and liabilities
in the Group’s consolidated balance sheet.
Foreign exchange risk arises from fluctuations in the
exchange rates of different currencies. In view of the Group’s
business, foreign exchange risk is immaterial because
surplus cash positions in currencies other than the euro are
placed in the market in the same currencies and for similar
periods such that positions are usually matched. Moreover,
the activities of Group entities whose functional currencies
are not the euro, relating basically to TotalBank, generate
consolidated exchange differences for the Group as a result
of the different measurement methods applied to items on
the entity’s balance sheet. Balancing items are recognized
for these exchange differences in the Group’s equity (see
Note 15.i.).
The Group has tools to control and analyze interest rate risk
by assessing the sensitivity of the balance sheet to changes
in the interest rate curve and establishing short- and
medium-term policies to manage prices, terms and volumes
of funds in different scenarios. The variables used in the
models to measure the sensitivity of the interest margin are
basically movements in assets and liabilities and
fluctuations in interest rate curves. The Assets and
Liabilities Committee evaluates scenarios to control and
manage this type of risk.
The gap between maturities and the appreciation of items
in the consolidated balance sheet is also assessed based on
nature and sensitivity or lack of sensitivity to interest rate
fluctuations, as may be observed in the following table:
258
GRUPO BANCO POPULAR
Miles de euros
Total
Up to 1
month
3,243.4 93,363.4 19,750.7
350.0 4,548.0 3,984.6
4,458.2 88,815.5 15,766.1
Not sensitive
Sensitive
From 1 to From 2 to
2 months 3 months
9,923.6 14,376.5
124.7
137.8
9,798.9 14,238.7
From 3 to
6 months
19,792.7
37.6
19,755.0
96,606.8
Loans and receivables . . . . . . . .
Loans and advances to credit institutions . 4,898.0
Loans and advances to other debtors . . . . 93,273.7
Other assets and valuation adjustments . .
-1,564.9 -1,564.9
Securities market . . . . . . . . . . . .
5,466.2 2,599.7 2,286.5
420.8
98.2
183.8
259.9
Other assets . . . . . . . . . . . . . . .
8,303.1 8,303.1
Total assets . . . . . . . . . . . . . . . .
Financial liabilities at amortized cost . . . . 110,376.1 14,146.2 96,229.9 20,171.5 10,021.8 14,560.3 20,052.6
98,957.1 13,721.5
14,123.1
526.0
Deposits from other creditors . .
Debt certificates including bonds . . . . . . . 51,494.5 12,976.7
Subordinated and preference liabilities . . 29,846.3
1,622.5
Other financial liabilities . . . . . .
1,202.9 1,167.9
Valuation adjustment . . . . . . . .
667.8
667.8
4,361.3 4,361.3
Equity . . . . . . . . . . . . . . . . . . .
7,057.7 7,057.7
Total liabilities . . . . . . . . . . . . . .
110,376.1 25,140.5
Off-balance sheet transactions . .
Gap
(10,994.3)
Accumulated gap . . . . . . . . . . . .
3,271.2
758.3
27,394.4 4,029.5
8,859.7
778.0
6,780.5
1,301.2
85,235.6 27,496.9 11,320.5 16,432.3
(1,961.4) (787.8) (1,315.5)
10,994.3 (9,286.8) (2,086.6) (3,187.5)
(9,268.8) (11,373.4 (14,560.9)
8,859.7
7,960.6 13,130.5
(2,437.1) (4,522.1) 10,988.8
8,755.8 14,911.7 1,887.8
(5,805.1) 9,106.5 10,994.4
c) Other price risks
This risk category arises from changes in market prices,
other than the two previous categories, due to factors
specific to the instrument itself or to factors that affect all
similar instruments traded in the market.
Average VaR 2008
1,145.5
More than
12 months
3,271.2
85,235.6 27,496.9 11,320.5 16,432.3
13,597.2 9,484.8
586.4 1,068.4
38,517.8 10,085.6 3,158.8 10,880.0
31,463.1 7,926.5 7,575.3 3,461.4
1,622.5
1,022.5
35.0
Interest rate risk is generally managed using derivative
financial instruments as accounting or economic hedges
that are as perfect as possible in order to be really effective.
€ thousand
From 6 to
12 months
26,248.8
263.2
25,985.6
7,960.6 13,130.5
883.6
796.0
5,077.7 2,535.3
1,999.4 9,199.2
600.0
14
21
Market risk is measured in terms of value at risk (VaR),
which may be defined as the limit of potential losses for a
specified time period (such as one day) and a 99%
confidence level, resulting from a percentage change in
prices. In addition to calculating VaR, additional stress
testing is performed to measure VaR sensitivity in changing
scenarios.
Money and
capital market
Equity instruments
Structured
derivatives
1,397
718
71
Aggregate
VaR
1.733
The Directors’ Report included in this document provides
further information on this matter, in the chapter on risk
management.
259
Credit risk
- Initial analysis of the risk authorization powers held by
each hierarchical level in the organization.
Credit risk is the risk that one of the parties to a contract for
a financial instrument fails to fulfill its obligations, causing
financial harm to the other party.
The Group’s exposure to credit risk derives basically from its
main business area, commercial banking (loans and
advances to other debtors and off-balance sheet risks such
as contingent liabilities and available credit lines, mainly).
The credit quality of the risks assumed is analyzed in the
following table, which shows internal ratings for credit risk
exposure, including credit institutions, companies and
institutions, 13.04% of which have an A or higher rating.
Rating
AA
A
BBB
BB
B
Resto
Total
% exposure
6.70
6.34
6.08
27.46
39,64
13.78
100,00
The Group has implemented methodological procedures,
approved at the highest level to ensure adequate credit risk
management, based on:
- Internal validation using internal risk measurement
models, which are in line with the minimum capital
requirements of the Basel II Accord.
- Permanent monitoring and control of credit risk,
including individual risks and analyses of business sectors
and areas, which often allows difficulties to be anticipated
and measures to be designed to prevent or mitigate risks
over time.
- Management of bad debts by analyzing and claiming
past due receivables. This analysis is performed individually
and the most effective claim and recovery strategy is
designed, taking into account the specific circumstances of
each customer and transaction.
At the organizational level, the Group takes commercial
banking decisions based on a decision pyramid that
virtually encompasses the Group’s entire business.
Branches are on the first level for risk decision-taking
purposes. Immediately above branches are the Territorial
Managers (Regional or Delegated Managers at Banco
Popular and Zone or General Managers at subsidiary banks
and companies). The third step is occupied by the Group’s
General Risk Manager and the top step pertains to the Risk
Committee.
Set out below is an analysis of the Group’s maximum
exposure to credit risk in 2008 and 2007:
2008
Commercial banking activity:
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . .
Contingent exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
...........................................
Market activity (counterparty risk) . . . . . . . . . . . . . . . . . . . . . . . .
Total exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused portion of credit lines . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum credit risk exposure . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes 23, 46 and 47 contain detailed information on this
type of risk, including guarantees. In addition, the risk
management section of the Directors’ Report provides
further comments and quantitative information, analyzing
credit risk, related monitoring and control, bad debt
management, total exposure to credit risk, risk
concentration and country risk, including information by
geographic segment, counterparty and unused credit
facility.
Credit risk includes an additional category named country
risk, which may be defined as the risk arising from
customers resident in a specific country due to
circumstances other than ordinary commercial risks.
Country risk also includes sovereign risk, transfer risk and
other risks arising from international finance activities.
260
93,452,619
15,132,009
108,584,628
4,541,980
113,126,608
17,099,900
130,226,508
2007
88,513,558
12,314,679
100,828,237
8,192,095
109,020,332
19,707,259
128,727,591
% variation
5.6
22.9
7.7
(44.6)
3.8
(13.2)
1.2
a) Sovereign risk arises when legal actions against a
borrower or guarantor may be ineffective by reason of
sovereignty.
b) Transfer risk arises when a country undergoes a
generalized incapacity to pay its debts or lacks the
currencies in which the debts are denominated.
c) Other risks derive from serious economic or political
events such as wars, revolutions, nationalizations, etc.
resulting in contractual default.
GRUPO BANCO POPULAR
Set out below is a breakdown of the balance sheet captions
affected by country risk and the related hedges contracted
by the Group at 31 December 2008:
Credit institutions
€ thousand
No significant risk . . . . . . .
Sub-standard risk . . . . . . .
Doubtful risk . . . . . . . . . . .
Total . . . . . . . . . . . . . . .
Balances
Non-resident sector
Hedges
Balances
28
47
75
1,995
568
56
2,.619
Hedges
55,343
3,608
2,236
61,187
2,171
949
3,120
Total
Contingent liabilities
Balances
33,005
9,390
410
42,805
Hedges
Balances
408
259
667
Hedges
90,343
13,566
2,702
106,611
2,607
1,255
3,862
Liquidity risk
Liquidity risk is the risk that the entity will have difficulties
fulfilling the obligations arising from its financial liabilities.
These difficulties may take two forms:
a) Difficulty in liquidating balance sheet assets in order
to make payments.
b) Difficulty in obtaining the necessary financing at a
reasonable cost.
Set out below is information on the liquidity gap
To March
09
Money market . . . . . . . . . . . . . .
6,281
Loans and advances to other debtors
15,648
Securities market . . . . . . . . . . . .
543
Other assets . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . .
22,472
Retail liabilities . . . . . . . . . . . . .
22,208
Wholesale liabilities . . . . . . . . .
10,247
Liabilities, official bodies . . . . . .
3,382
Equity
Total liabilities . . . . . . . . . . . . . .
35,837
GAP
...................
(13,365)
Cumulative GAP . . . . . . . . . . . . .
(13,365)
GAP (ex. Liabilities, official bodies)
(9,983)
Cumulative GAP (ex. Liabilities, official bodies) (9,983)
To June
09
The Assets and Liabilities Committee (ALCO) manages and
supervises liquidity risk by means of formal procedures for
the analysis and monitoring of variables affecting different
scenarios, including stress testing. In order to analyze each
scenario, assets and liabilities are disaggregated by
maturity. The difference between assets and liabilities is the
liquidity gap for each period that must be managed. If the
gap is negative, the additional sources of liquidity available
for that period are analyzed in order to ensure that the
necessary liquid resources may be obtained to make the
payments on the relevant dates.
To Sep.
09
275
75
4,870
7,208
49
258
5,194
7,541
3,553
6,509
1,897
2,353
10
39
5,460
8,901
(266)
(1,360)
(14,725) (14,991)
(256)
(1,321)
(11,304) (11,560)
The Group’s approach to liquidity risk management is
highly prudent and includes contingency plans for possible
departures from the most probable scenarios, irrespective
of whether the causes are internal or external.
To Dec. Between 2
09
and 5 years
102
1,218
4,880
22,825
973
746
5,955
24,789
3,195
2,646
638
10,189
5
1,144
3,838
13,979
2,117
10,810
(12,874)
(2,064)
2,122
11,954
(9,438)
2,516
More than Total
five years maturities
12
7,963
32,490 87,921
275
2,844
32,777 98,728
38 38,149
5,820 31,144
702
5,282
6,560 74,575
26,217
24,153
26,919
29,435
No matuTotal
rity
792
8,755
3,780
91,701
1,732
4,576
5,344
5,344
11,648 110,376
18,833
56,982
31,144
5,282
9,911
9,911
7,058
7,058
35,801 110,376
(24,153)
(24,153)
The risk management section of the Directors’ Report
provides detailed information on the calculation of the
liquidity gap, the composition of financing sources and the
capacity to obtain liquid resources by pledging assets with
the maximum credit quality in both the Bank of Spain and
the European Central Bank.
261
19. Cash and balances with central banks
These captions in the consolidated balance sheets reflect
the cash balances of the Group companies, basically the
banks. The balances at the Bank of Spain relate to deposits
by the Group’s Spanish banks. These deposits are
obligatory, in part, in order to maintain minimum reserves
in each central bank, based on the computable liabilities of
the credit institution. Interest is paid on the balances by the
central banks. Note 48 provides details of the interest
received.
€ thousand
Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank of Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
427,657
2007
406,995
1,286,776
142,961
2,183
1,859,577
1,484,173
61,918
2,092
1,955,178
Set out below is a breakdown of deposits at other central
banks, relating to the positions held by Banco Popular
Portugal, S.A., TotalBank and Banco Popular France in
2007:
€ thousand
2008
Bank of Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank of France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
53,092
6,929
1,897
61,918
139,869
3,092
142,961
20. Financial assets and liabilities held for trading
This reflects the amounts of asset and liability items
originally defined by the Group as realizable in the short
term or corresponding to the measurement of derivatives
not designated as accounting hedge instruments.
Set out below is a breakdown of these captions in the
consolidated balance sheets at 31 December 2008 and
2007:
Pasivo
Activo
€ thousand
2008
2007
Loans & advances to/deposits from credit institutions . . . . . . .
Credit to/deposits from other debtors/other creditors . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short securities positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,192
378,172
906,835
1,334,199
91,256
626,358
456,095
1,173,709
Memorandum item: Loaned or advanced as collateral . . . . . .
-
30,039
262
2008
1,695,180
34,562
1,729,742
2007
583,311
87,054
670,365
GRUPO BANCO POPULAR
The fair value of the items included in financial assets and
liabilities held for trading was calculated as follows:
The fair value of all the assets and liabilities was calculated
based on market quotations, prices and interest rate curves,
as applicable. All the debt securities and marketable debt
securities in this portfolio are traded in organized markets,
as are many of the derivatives. In all cases, their quotations
and prices are exactly the same as their market values. For
derivatives traded bilaterally with an individual
counterparty (OTC), the fair value is determined by
reference to derivative contracts in the organized market.
Where there is no applicable reference value in an
organized market, due to the nature of the derivative
contract, the value is obtained using techniques that include
a realistic estimate of the instrument’s price, in accordance
with habitual market practice, based on factors such as the
time value of money, credit risk, foreign exchange risk,
prices of equity instruments, volatility, liquidity, early
repayment risk and administrative overheads.
EIn the case of all the debt securities and equity
instruments, by reference to observations and prices in
active markets.
The Group has not availed itself of the option provided by
regulations to reclassify non-derivative financial assets
outside the trading portfolio in exceptional circumstances
and no reclassification has therefore been made to other
portfolios.
The year-end balances of financial assets and liabilities held
for trading are expressed in euros, except for the current
purchase and sale values, which are reflected in the item
Trading derivatives. Note 44 contains a breakdown by
maturity of this chapter.
The effect of this consolidated balance sheet caption on the
consolidated income statements, reflected in the item Gains
or losses on financial assets and liabilities (Note 53), for the
financial years ended December 31, 2008 and 2007 is set
out below:
The fair value of the financial assets and liabilities included
in this caption has been calculated as follows:
263
€ thousand
Net balance
On debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
(4,825)
(89,083)
110,396
16,488
(808)
84,627
(28,601)
55,218
a) Debt securities
The breakdown of the balances of debt securities included
in financial assets held for trading in the consolidated
balance sheets as of December 31, 2008 and 2007 is as
follows:
€ thousand
2008
Spanish government debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government debentures and bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Other book-entry debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Spanish government debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Foreign public debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by public bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other non-residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,391
22,391
15,644
1,723
1,013
710
9,434
1,608
7,826
49,192
2007
48,431
48,431
26,815
1,012
1,012
14,998
211
14,787
91,256
b) Equity instruments
Set out below is a breakdown of equity instruments
included in financial assets held for trading in the
consolidated balance sheets as of December 31, 2008 and
2007:
€ thousand
Investments in Spanish companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in foreign companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
264
2008
2007
377,702
89,285
288,417
470
378,172
609,928
575,991
33,937
16,430
626,358
CUENTAS ANUALES CONSOLIDADAS DE 2008
GRUPO BANCO POPULAR
c) Trading derivatives
Set out below is a breakdown of trading derivatives
included in financial assets and liabilities held for trading
€ thousand
Type of risk & instrument
Notional amount
Foreign exchange risk . . . . . . . . . . . . . . . . . 3,731,316
Unmatured currency purchases and sales 3,468,331
Purchases . . . . . . . . . . . . . . . . . . . . . . . 2,791,776
Sales . . . . . . . . . . . . . . . . . . . . . . . . . .
676,555
Financial swaps in different currencies
48,283
Foreign currency options . . . . . . . . . . . .
214,702
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
107,351
Sold
107,351
in the consolidated balance sheets as of December 31,
2008 and 2007:
2008
2007
Value
Positive
Negative
Notional amount
71,034
65,524
1,661,094
61,178
55,680
1,432,402
61,178
705,569
55,680
726,833
5,650
5,645
46,014
4,206
4,199
182,678
4,206
91,339
4,199
91,339
Value
Positive
Negative
45,691
35,280
35,280
8,494
1,917
1,917
-
47,095
33,970
33,970
8,494
4,631
4,631
Interest rate risk . . . . . . . . . . . . . . . . . . . . . 37,520,026
Financial futures (organized markets)
114,181
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
24,439
Sold
89,742
FRAs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial swaps (IRS, CMS, etc.) . . . . . . . 34,271,954
Interest rate options . . . . . . . . . . . . . . . . 3,055,051
Bought . . . . . . . . . . . . . . . . . . . . . . . . . 1,623,730
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,431,321
Other products . . . . . . . . . . . . . . . . . . . .
78,840
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
69,420
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,420
220,878
113,195
107,683
107,683
-
821,119
706,322
114,797
114,797
-
48,114,680
309,239
253,658
55,581
44,680,109
3,125,332
1,632,750
1,492,582
-
185,949
10
10
173,601
12,338
12,338
-
259,161
244,161
15,000
15,000
-
Risk arising from shares . . . . . . . . . . . . . . . 3,993,672
Financial futures (organized markets)
360,942
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
6,964
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
353,978
Financial swaps (IRS, CMS, etc.) . . . . . .
107,669
Securities options . . . . . . . . . . . . . . . . . . 3,525,061
Bought . . . . . . . . . . . . . . . . . . . . . . . . . 2,026,146
Sold
1,498,915
Risk arising from commodities . . . . . . . . . .
25,318
Total . . . . . . . . . . . . . . . . . . . . . . . 45,270,332
613,995
53,826
560,169
560,169
928
906,835
807,668
82,537
725,131
725,131
869
1,695,180
6,541,620
584,528
14,378
570,150
5,957,092
1,506,017
4,451,075
56,317,394
224,455
52
52
224,403
224,403
456,095
277,055
51
51
277,004
277,004
583,311
The Group contracts derivatives to hedge customer interest
rate risk through the branch office network, in the form of
financial swaps and options. The Group contracts the
derivatives with other credit institutions or in organized
futures and options markets. A breakdown of this type of
operations with customers through the branch office
network for the past two years is as follows:
2007
2008
€ thousand
Market value
Market value
Notional amount
Positive
Negative
Notional amount
Positive
Negative
Customers:
Financial swaps . . . . . . . . . . . . . . . . . . .
Options . . . . . . . . . . . . . . . . . . . . . . . . .
Total network customers . . . . . . . . . . . .
Financial institutions:
Financial swaps . . . . . . . . . . . . . . . . . . .
Options . . . . . . . . . . . . . . . . . . . . . . . . .
Total institutions . . . . . . . . . . . . . . . . . .
6,768,981
639,197
7,408,178
186,538
527
187,065
865
2,510
3,375
6,357,442
847,107
7,204,549
20,929
75
21,004
23,698
4,231
27,929
9,456,123
669,745
10,125,868
47,834
4,128
51,962
218,578
564
219,142
6,502,358
826,020
7,328,378
50,412
3,910
54,322
9,251
517
9,768
Total activity . . . . . . . . . . . . . . . . .
17,534,046
239,027
222,517
14,532,927
75,326
37,697
The notional amount of trading derivative contracts does
not reflect the risk assumed by the Group. This may be
inferred from the difference between the fair values of the
instruments recognized in assets and liabilities
265
21. Other financial assets and liabilities at fair
value through profit or loss
The other financial assets at fair value through profit or loss
caption includes hybrid financial assets that are not
included in financial assets held for trading and are entirely
carried at fair value. This caption also includes assets
managed together with other liabilities at fair value through
profit or loss, or with derivative financial instruments
contracted to significantly reduce their exposure to fair
value changes, or with financial liabilities and derivatives
in order to materially reduce overall exposure to interest
rate risk.
Financial liabilities at fair value through profit or loss
include all hybrid financial liabilities not included in the
trading portfolio that are entirely carried at fair value
because the embedded derivative cannot be separated and
measured. They also include the deposit component of life
insurance policies linked to investment funds, which are in
turn carried at fair value through profit or loss.
The balances in these items relate entirely to the Group’s
insurance companies and to Popular Banca Privada, S.A.
Set out below is a breakdown of these items in the
consolidated balance sheets for 2008 and 2007:
Financial assets may only be included in this category at the
date of origination or acquisition and must be permanently
measured, managed and controlled to identify risks, gains
and losses so as to monitor all the financial assets and
verify that risk is effectively and significantly reduced.
€ thousand
Liabilities
Assets
2008
2007
2008
2007
Loans & advances to/deposits from credit institutions . . . . . .
Credit to/deposits from other debtors/other creditors . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190,636
146,030
-
162,901
337,256
-
134,520
37,016
289,768
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
336,666
500,157
134,520
326,784
These balances relate in full to transactions denominated in
euros. Note 44 contains a breakdown by maturity.
The effect of these consolidated balance sheet items on the
consolidated income statements, reflected in the item
Gains/(losses) on financial transactions (net) (see Note 53)
for the financial years ended December 31, 2008 and
2007 is set out below:
Net
€ thousand
2008
On debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a) Debt securities
A breakdown of debt securities is as follows:
266
(65)
(3,109)
(7,056)
(10,230)
2007
24
24
€ thousand
Spanish government debt securities . . . . . . . . . . . . . . . . . . . . .
Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government debentures and bonds . . . . . . . . . . . . . . . . . .
Other book-entry debt securities . . . . . . . . . . . . . . . . . . . .
Other Spanish government debt securities . . . . . . . . . . . . . . . .
Foreign public debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fixed-income securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by public bodies . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other residents . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other non-residents . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b)
GRUPO BANCO POPULAR
2008
22,975
167,661
1,234
166,427
190,636
2007
23,379
139,522
1,975
137,547
162,901
Equity instruments
Set out below is a breakdown of equity instruments:
€ thousand
Investments in Spanish companies . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in foreign companies . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Available-for-sale financial assets
This caption includes debt securities and equity instruments
not classified in other categories.
These debt securities are debentures and other securities
that recognize a debt for the issuer, may or may not be
marketable and accrue remuneration consisting of implicit
or explicit interest. The interest rate may be fixed or linked
to other rates and is stipulated contractually, and the
securities may take the form of certificates or book entries.
2008
21,127
21,127
124,903
146,030
2007
59,324
59,324
277,932
337,256
The equity instruments item includes equity instruments
not included in the financial assets held for trading caption
and not relating to jointly-controlled companies or
associates. They are presented in the consolidated balance
sheet at fair value and value differences, net of the tax
effect, are adjusted through equity.
a) Consolidated balance sheet
Set out below is a breakdown of this caption in the consolidated
balance sheets at December 31, 2008 and 2007:
267
2008
€ thousand
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spanish government debt securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government debentures and bonds . . . . . . . . . . . . . . . . . . . . . . . .
Other book-entry debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Spanish government debt securities . . . . . . . . . . . . . . . . . . . . .
Foreign public debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by public bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by other non-residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Micro-hedge adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in Spanish companies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in foreign companies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,614,645
1,184,955
1,184,180
2
773
33,489
162,994
1,226,325
1,223,570
2,755
1,023,584
601,479
422,105
(16,702)
848
(17,530)
(20)
145,765
109,762
109,762
36,003
3,760,410
2007
4,114,837
51,045
50,070
2
973
32,462
125,490
3,082,932
3,082,932
828,722
523,291
305,431
(5,814)
119
(5,924)
(9)
96,411
67,846
67,846
28,565
4,211,248
The fair value of the financial assets included in this caption
has been calculated as follows:
recent transactions or forecast flows, and 9% have been
calculated using internal models.
i) In the case of all the equity instruments, by reference to
quotations in active markets.
b) Gains/(losses) on financial transactions
ii) In the case of debt securities, 45% are referenced to
market quotations, 46% are unlisted instruments the fair
value of which has been calculated by reference to prices of
The effect of this item on the consolidated income
statement is reflected in the item Gains/(losses) on financial
operations (net) (see Note 53).
€ thousand
On debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
49,142
380
49,522
(132)
12,602
12,470
Note 44 contains an itemized breakdown.
c) Valuation adjustments
The balance under Valuation adjustments to equity at
December 31, 2008 and 2007 resulting from changes in
€ thousand
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
268
the fair value of the assets included in Available-for-sale
financial assets (Note 41), net of the tax effect, is as follows:
2008
45,667
(36,271)
9,396
2007
2,855
11,235
14,090
GRUPO BANCO POPULAR
d) Breakdown by currency
The breakdown by currency, other than the euro, of
Available-for-sale financial assets in the consolidated
balance sheets at 31 December 2008 and 2007 is as
follows:
Debt securities
€ thousand
USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss franc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
342,056
342,056
302,475
302,475
Other equity instruments
2007
2008
11,230
564
11,794
10,742
506
11,248
e) Impairment losses
A breakdown of the impairment losses on financial assets
(net) - Available-for-sale financial assets (Note 61) in the
consolidated income statements for the years ended
December 31, 2008 and 2007 is set out below.
€ thousand
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The amount reflected in equity instruments relates mostly
to the impairment of the shareholding in Inmobiliaria
Colonial.
2008
2007
11,910
81,078
92,988
1,150
11,292
12,442
2008
2007
Impairment losses are reflected in the income statements as
follows:
€ thousand
Provisions charged to income . . . . . . . . . . . . . . . . . . . . . . . . .
Individually determined . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collectively determined . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,731
93,900
(169)
743
92,988
12,790
11,292
1,498
348
12,442
Movements during 2008 and 2007 in value adjustments
due to asset impairment relating to debt securities are as
follows:
€ thousand
Opening balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results:
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries from prior years . . . . . . . . . . . . . . . . . . . . . . . .
Allowances used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results:
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries from prior years . . . . . . . . . . . . . . . . . . . . . . . .
Allowances used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other changes and transfers . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specific
allowance
General
allowance
Total
-
4,881
4,881
-
1,578
43
348
(144)
5,924
1,578
43
348
(144)
5,924
12,822
12,822
231
400
743
(304)
4,708
13,053
400
743
(304)
17,530
269
23. Loans and receivables
This caption in the consolidated balance sheet includes
financial assets carried at amortized cost using the effective
interest method. The first table shows the data for typical
lending activities, loans and advances made to other
institutions and other debts of users of financial services.
€ thousand
Loans & advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
4,905,281
91,701,521
96,606,802
2007
9,691,916
87,048,068
96,739,984
The next table expands the above information, showing
gross lending and valuation adjustments, together with
certain additional details.
€ thousand
2008
2007
Loans & advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lending to general government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other private sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,897,986
93,452,619
561,395
92,891,224
83,700,128
9,191,096
98,350,605
9,667,709
88,513,558
129,943
88,383,615
79,880,534
8,503,081
98,181,267
Valuation adjustments (+/-):
Asset impairment adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans & advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,743,803)
(2,022,857)
(7,716)
(2,015,141)
279,054
15,011
264,043
96,606,802
(1,441,283)
(1,664,407)
(14)
(1,664,393)
223,124
24,221
198,903
96,739,984
270
GRUPO BANCO POPULAR
Set out below is a breakdown of loans and receivables in
the consolidated balance sheets at December 31, 2008
and 2007 showing euro and foreign currency balances:
€ thousand
2008
2007
Loans & advances to credit institutions . . . . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,699,511
90,148,452
94,847,963
Foreign
currency
198,475
3,304,167
3,502,642
Valuation adjustments:
Loans & advances to credit institutions . . . . . . . . . . . . . . .
Loans and advances to other debtors . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,032
(1,734,744)
(1,727,712)
93,120,251
263
(16,354)
(16,091)
3,486,551
Euros
Euros
9,057,644
86,482,707
95,540,351
Foreign
currency
610,065
2,030,851
2,640,916
16,605
(1,465,630)
(1,449,025)
94,091,326
7,602
140
7,742
2,648,658
Set out below is a breakdown of the gross amounts of loans
and advances to credit institutions by instrument:
€ thousand
Reciprocal accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clearing house . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 44 provides details of the residual terms of these
consolidated balance sheet items.
2008
1,084
1,276,824
1,984,679
1,394,964
202,902
6,917
30,616
4,897,986
2007
2,537,228
5,855,854
1,038,781
235,846
9,667,709
A breakdown of the gross amounts of Loans and advances
to credit institutions at December 31, 2008 and 2007,
excluding valuation adjustments, is set out below
271
€ thousand
2008
2007
By nature:
Banks operating in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident credit establishments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident credit establishments . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks operating in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident credit establishments . . . . . . . . . . . . . . . . . . . . . .
Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clearing house . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
556,675
200,013
6
222,469
1,693,709
1,984,679
273,302
808,516
902,861
202,902
6,917
30,616
-
267,102
107,437
7
155,227
3,046,236
5,855,854
54,950
1,393,721
23,660
4,383,523
235,846
-
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,897,986
9,667,709
In euros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,699,511
198,475
9,057,644
610,065
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,897,986
9,667,709
30,616
7,716
75
14
14
By currency
Non-performing loans and related allowances
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which: Country risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The average interest rate was 3.98% and 4.01% in 2008
and 2007, respectively, as explained in the yields and costs
section of the accompanying Directors’ Report. Set out
below is a breakdown of gross lending in the main foreign
currencies in 2008:
€ thousand
2008
US dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss franc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The balances of Loans and advances to other debtors in the
loans and receivable caption at December 31, 2008 and
272
48,385
11,420
43,960
62,530
32,180
198,475
2007
402,676
112,699
8,311
3,697
82,682
610,065
2007, excluding valuation adjustments by type, are
analyzed below:
GRUPO BANCO POPULAR
€ thousand
By type and status
2008
2007
Bill discounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand and sundry balances . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,377,878
48,276,130
144,051
1,921,419
26,345,484
3,612,091
3,743,582
178,960
2,853,024
7,709,354
46,860,392
226,062
2
26,338,589
3,788,261
2,364,628
405,690
820,580
Total loans and advances to other debtors . . . . . . . . . . . . . . . . . . . .
93,452,619
88,513,558
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which: Asset impairment adjustments . . . . . . . . . . . . . . . . . . . .
(1,751,098)
(2,015,141)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The amounts recognized in the items “Mortgage loans” and
“Other secured loans” relate to loans formally secured by
mortgages, security pledges, cash deposits or other
collateral that in itself guarantees the full repayment of the
loan. Loans that are partially secured are recognized in the
item “Other term loans”.
In the case of doubtful assets, the extension or rearrangement of the loans does not affect their doubtful
status unless there is reasonable assurance that the
customer will make payment as scheduled or new effective
guarantees are furnished and, in both cases, ordinary
outstanding interest is collected.
€ thousand
91,701,521
(1,465,490)
(1,664,393)
87,048,068
The Group has a number of guarantees for each type of risk
which partially or fully mitigate the risks to which
commercial activities are exposed and may be called in
should be principal debtor default. The Group prudently
manages its guarantee policy to minimize the risks to which
its lending activity is exposed. The following table contains
an analysis of the guarantees, which are ordered in terms of
liquidity and assurance of repayment. Surplus guarantees
for over-guaranteed loans were eliminated when the table
was prepared. The efforts made by the Group in the past
year to strengthen the collateral for its lending activities may
be observed in the table.
2008
2007
Loans and advances to other debtors . . . . . . . . . . . . . . . . . . . . . . . . .
93,452,619
88,513,558
Related collateral
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public sector and credit institutions . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank guarantees and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,305,046
3,092,628
49,925,231
2,456,838
10,028,277
71,808,020
3,751,604
994,436
44,545,352
3,521,338
9,966,460
62,779,190
Coverage %
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public sector and credit institutions . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank guarantees and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.75
3.31
53.42
2.63
10.73
76.84
4.24
1.12
50.33
3.98
11.26
70.93
Impairment adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coverage % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,015,141
2.16
1,664,393
1.88
273
GRUPO BANCO POPULAR
Set out below is an analysis of Loans and advances to other
debtors by borrower sector. Note 44 indicates the residual
terms of these balances.
€ thousand
2008
2007
Credit to general government:
Central government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regional government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Local public authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
561,395
348,810
348,810
212,582
212,582
3
129,943
76,850
76,850
53,089
53,089
4
Private sector:
Residents:
Bill discounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand and sundry balances . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,891,224
83,700,128
6,028,904
44,475,641
44,331,590
144,051
1,921,419
21,988,922
3,401,145
3,314,035
175,670
2,394,392
88,383,615
79,880,534
7,345,387
43,024,885
42,809,051
215,834
2
22,751,796
3,577,761
2,190,209
330,393
660,101
Non-residents:
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,191,096
348,974
3,944,540
3,944,540
3,795,170
210,946
429,547
3,290
458,629
8,503,081
363,967
4,061,569
4,051,341
10,228
3,456,854
210,500
174,419
75,297
160,475
Total loans and advances to other debtors . . . . . . . . . . . . . . . . . .
93,452,619
88,513,558
Of which: Asset impairment adjustments . . . . . . . . . . . . . . . . .
(1,751,098)
(2,015,141)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The balances of the securitization operations carried out by
the Group in 2008 and 2007 that were not derecognized
from assets because the risks and rewards of the operations
were not substantially transferred are recognized at amortized cost based on the instrument securitized. Note 69
provides information and comments on the securitization
274
91,701,521
(1,465,490)
(1,664,393)
87,048,068
operations completed. The amounts recognized in the items
“Public sector” and “Private sector, Residents” include
€15,065,230k and €7,892,706k at year-end 2008 and
year-end 2007, respectively, in respect of receivables that
have been securitized but remain on the balance sheet
since the legal requirements to derecognize them are not
GRUPO BANCO POPULAR
fulfilled, due mainly to the Group’s acquisition of bond
series having a lower credit rating, which reflect the expected loss on the loan portfolio assigned. Note 8 describes the
characteristics of the special purpose entities set up as asset
securitization vehicles in the past two years. Pursuant to dis€ thousand
IM Banco Popular FTPYME1, FTA . . . . . . . . . . . .
GAT FTGENCAT 2005, FTA . . . . . . . . . . . . . . . . .
IM Grupo Banco Popular Empresas 1, FTA . . . . .
IM Grupo Banco Popular FTPYME I, FTA . . . . . . .
IM Grupo Banco Popular FTPYME II, FTA . . . . . .
IM Grupo Banco Popular Empresas 2, FTA . . . . .
IM Grupo Banco Popular Leasing 1, FTA . . . . . . .
IM Grupo Banco Popular Financiaciones 1, FTA .
IM Banco Popular FTPYME 2, FTA . . . . . . . . . . . .
IM Banco Popular MBS 1, FTA. . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
closure requirements, set out below is a breakdown of the
securitized receivables, including the initial amounts and
balances outstanding at each year end, and the date of the
operations, for each securitization fund:
Date of operation
dec-04
dec-05
sep-06
dec-06
jul-07
dec-07
feb-08
jun-08
sep-08
nov-08
Balances at 31 December
2008
2007
783,970
579,674
105,143
74,219
1,257,293
905,245
1,545,809
1,131,364
1,775,457
1,250,554
2,425,034
2,305,351
1,085,883
857,902
949,901
5,925,137
7,892,706
15,065,230
Initial
amount
2,000,000
200,100
1,832,400
2,030,000
2,039,000
2,500,000
1,680,000
1,100,000
1,000,000
6,000,000
20,381,500
A breakdown by nature of these securitized lending operations is as follows:
€ thousand
Personal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 69 Securitization provides all the relevant information
on these operations, together with Note 35 Financial liabilities at amortized cost, in the section Debt securities.
€ thousand
Branches in Spain
Andalucía . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aragón . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asturias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baleares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canarias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cantabria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Castilla-La Mancha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Castilla y León . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cataluña . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Extremadura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Galicia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Madrid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Murcia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Navarra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
País Vasco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
La Rioja . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valencia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceuta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melilla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Branches in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
4,287
4,183,024
1,085,883
9,792,036
15,065,230
5,018
3,747,924
4,139,764
7,892,706
Set out below is a breakdown by Autonomous Region of
Spain, based on the location of the branches through which
the gross lending transactions with public and private sector resident borrowers were arranged, and transactions
generated in the Portuguese branch network with Spanish
residents, irrespective of the utilization of the funds:
2008
17,306,642
1,387,192
1,411,896
2,081,408
1,894,209
334,697
2,109,135
5,849,392
9,480,255
946,425
5,547,795
21,292,342
2,656,780
1,364,835
3,342,368
535,491
6,488,455
28,581
27,490
176,135
84,261,523
2007
17,217,876
1,310,040
1,382,584
1,971,348
1,880,776
332,629
1,928,424
5,548,003
9,211,062
834,232
5,377,589
18,907,956
2,386,954
1,342,314
3,472,805
515,936
6,168,093
33,272
30,098
158,486
80,010,477
275
GRUPO BANCO POPULAR
Set out below is a breakdown by country of the branches
in which the credit transactions with non-residents were
arranged:
€ thousand
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The average interest rate on loans and advances to other
debtors was 6.46% in 2008 and 5.83% in 2007. Set out
below is a breakdown of loans and advances to other
€ thousand
2007
2008
2,180,206
6,058,216
952,674
9,191,096
1,772,477
5,743,240
293,042
694,322
8,503,081
debtors into euros and foreign currencies, based on the
currency in which the loan will be repaid, irrespective of
the currency in which it was arranged:
Credit to general government:
2008
Moneda
Euros
Extranjera
561,395
-
Central government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regional government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Local public authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Social security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
348,810
212,582
3
Private sectors:
2007
Euros
Moneda
Extranjera
129,943
-
-
76,850
53,089
4
-
89,587,057
3,304,167
86,352,764
2,030,851
Residents:
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,028,342
42,875,582
42,741,692
133,890
1,921,419
21,524,496
3,387,450
3,310,168
175,670
2,390,390
562
1,600,059
1,589,898
10,161
464,426
13,695
3,867
4,002
7,345,338
42,159,120
41,944,347
214,773
2
22,406,112
3,558,414
2,189,868
330,393
660,071
49
865,765
864,704
1,061
345,684
19,347
341
30
Non-residents:
Secured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doubtful assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
348,974
3,132,933
3,132,933
3,480,081
210,946
395,706
3,290
402,950
811,607
811,607
315,089
33,841
55,679
363,967
3,493,069
3,488,622
4,447
3,234,630
210,500
171,158
72,958
157,164
568,500
562,719
5,781
222,224
3,261
2,339
3,311
Valuation adjustments (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276
90,148,452 3,304,167
(1,734,744)
(16,354)
88,413,708 3,287,813
86,482,707 2,030,851
(1,465,630)
140
85,017,077 2,030,991
GRUPO BANCO POPULAR
A breakdown of gross loans and receivables denominated
in foreign currencies by the currency in which the
transactions were arranged is as follows:
€ thousand
2008
US dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss franc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......................................................
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
1,328,843
117,555
263,550
1,219,973
374,246
3,304,167
959,675
96,090
332,359
568,154
74,573
2,030,851
The item “Other loans” in loans and advances to other
debtors is analyzed below:
€ thousand
2008
2007
Financial transactions pending settlement . . . . . . . . . . . . . . . .
Cash guarantees provided . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees for financial guarantees . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.056
42,763
20,278
104,863
183,318
41,970
27,400
153,002
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
178,960
405,690
The items are sufficiently descriptive of the content of the
investment. Fees for financial guarantees reflect the present
value of future cash flows pending collection, with a
balancing entry in “Other financial liabilities”, from where
the relevant amount is taken to the income statement, on a
straight-line basis, as fee and commission income.
€ thousand
Loans:
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current-year releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries from prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries of bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Movements in 2008 and 2007 in the impairment of loans
and receivables, through the consolidated income
statement (Note 61), are as follows:
2008
2007
1,594,901
(571,041)
(321,067)
238,483
(36,102)
530,476
(65,709)
(101,697)
22,459
(95,693)
905,174
289,836
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Set out below is a breakdown at December 31, 2008 and
2007 of asset impairment adjustments in the caption
Loans and receivables:
277
GRUPO BANCO POPULAR
€ thousand
2008
2007
888,702
7,641
716,761
164,300
1,130,960
984,622
146,338
3,195
75
3,120
2,022,857
238,156
164,273
73,883
1,422,901
1,343,392
79,509
3,350
14
3,336
1,664,407
By type of coverage:
Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Country risk allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Movements during 2008 and 2007 in asset impairment
adjustments in the caption Loans and receivables are as
follows:
€ thousand
Specific
allowance
Opening balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in consolidation scope . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results:
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other movements and transfers . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results:
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other movements and transfers . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General
allowance
Country risk
allowance
Total
221,837
1,290,485
3,714
1,516,036
364,873
48,957
82,946
203,661
(12,900)
238,156
167,496
16,688
18,569
(193)
1,422,901
833
64
1,135
2
3,350
533,202
65,709
102,650
203,661
(13,181)
1,664,407
114,190
80,029
281,599
(44,503)
1,130,960
455
26
1,698
1,114
3,195
1,595,001
571,041
321,067
332,243
(12,200)
2,022,857
1,480,356
490,986
37,770
332,243
31,189
888,702
Set out below is a breakdown showing individual and
collective provisions:
€ thousand
2008
Determined individually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Determined collectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Set out below is a breakdown of the carrying amounts of
Loans and advances to other debtors matured and not
Residents
To 1 month . . . . . . . . . . .
From 1 to 2 months . . . .
From 2 to 3 months . . . .
Total
..............
278
241,687
1,781,170
2,022,857
1,156,083
283,112
191,783,
1,630,978
17,690
1,646,717
1,664,407
impaired, by debtor residence and period from maturity to
the balance sheet date:
2008
€ thousand
2007
2007
Non-residents
74,238
46,389
12,619
133,246
Total
1,230,321
329,501
204,402
1,764.224
Residents
419,509
73,956
56,735
550,200
Non-residents
17,416
8,808
3,330
29,554
Total
436,925
82,764
60,065
579,754
GRUPO BANCO POPULAR
Accumulated interest accrued but not collected on
impaired financial assets to the interruption of interest
accrual due to their classification as doubtful assets
amounted to €48,732k in 2008 and €25,661k in
2007.Accumulated interest accrued but not collected on
impaired financial assets to the interruption of interest
accrual due to their classification as doubtful assets
amounted to €48,732k in 2008 and €25,661k in 2007.
Set out below is a breakdown of non-performing loans,
defined as the principal of impaired financial assets plus
related interest due and not collected that have been
derecognized because recovery is deemed to be remote.
Derecognition does not preclude the instigation by the
Group of legal actions to recover the receivables. The
definitive derecognition of these accounts occurs when the
amounts due are recovered, the debt is forgiven, the statueof-limitation period expires or for other reasons.
Derecognition of “Other items” in 2007, as set out below,
includes the amount of €895,235k relating to the sale of a
portfolio of non-performing assets contributed by the
following banks: Popular, Andalucía, Castilla, Crédito
Balear, Galicia, Vasconia and bancopopular-e, this
transaction giving rise to income of €51,197k in the
consolidated income statement.
€ thousand
................................
2008
312,142
2007
1,162,633
Recognition: Charged to asset impairment adjustments . . . . . . . . . . . . . . .
Charged directly to income statement . . . . . . . . . . . . . . . . . . . . . . .
Interest due but not collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in consolidation scope . . . . . . . . . . . . . . . . . . . . . . . . . . . .
310,607
238,483
38,337
-
194,379
22,458
32,549
178
-
Total recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
587,427
249,564
Derecognition: Recovery in cash of principal . . . . . . . . . . . . . . . . . . . . . . .
Recovery in cash of interest due but not collected . . . . . . . . . . . . . .
Forgiven . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statute barred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosure of tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosure of other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,102
5,839
1,779
193
3,469
145,536
84,176
13,428
7,465
433
5,852
119
988,582
Total derecognition
192,718
1,100,055
706,851
312,142
Balance at December 31, 2007
..........................................
Balance at December 31, 2008
................................
24. Held-to-maturity investment portfolio
26. Asset and liability hedging derivatives
At December 31, 2008 and 2007, the balance in the heldto-maturity investment portfolio amounted to €34,854k
and €562k, respectively. The securities classified in this
portfolio meet the applicable requirements as regards a
fixed maturity date and cash flows in determined amounts,
and the Group has the firm intention and financial capacity
to retain them to maturity.
These balance sheet captions reflect the fair values for
(Assets) or against (Liabilities) the Bank of the derivatives
designated as hedging instruments in accounting hedges.
25. Changes in the fair value of hedged items in
portfolio hedges of interest rate risk
The Banco Popular Group does not conduct transactions of
this nature.
The criteria for determining the conditions and recognition
of hedges are explained in Note 15.d). The net gain/(loss)
on hedging derivatives is reflected on the line “Other” in
the table in Note 53.
a) Fair value hedging
The following table shows the type of risks hedged, the
instruments used for fair value hedges and the notional
and carrying amounts of the hedges:
279
GRUPO BANCO POPULAR
€ thousand
Notional amount
Foreign exchange risk . . . . . . . . . . . . . . . . .
910,610
Unmatured currency purchase/sale . . . .
902,682
Purchases . . . . . . . . . . . . . . . . . . . . . . .
902,682
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial swaps (CCS) . . . . . . . . . . . . . . .
7,928
Currency options . . . . . . . . . . . . . . . . . . .
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
Sold
-
2008
2007
Value
Value
Positive
Negative Notional amount
Positive
Negative
3,602 178,075
3,891,676
30,801
103,002
2,025 178,075
30,801
102,476
3,863,890
2,025 178,075
3,863,890
30,801
102,476
1,577
526
27,786
-
Interest rate risk . . . . . . . . . . . . . . . . . . . . .
Financial swaps (IRS, CMS, etc.) . . . . . . .
19,661,402
19,661,402
955,483
955,483
147,881
147,881
15,591,429
15,591,429
27,,574
27,574
441,212
441,212
Risks arising from shares . . . . . . . . . . . . . .
Options on securities . . . . . . . . . . . . . . .
Bought . . . . . . . . . . . . . . . . . . . . . . . . .
Sold
Financial swaps (CCS) . . . . . . . . . . . . . . .
1,451,007
520,930
520,930
930,077
6,342
39
39
6,303
83,604
83,604
2,397,690
1,685,243
1,685,243
712,447
84,439
22,076
22,076
62,363
193,671
152,017
152,017
41,654
Total . . . . . . . . . . . . . . . . . . . . . . .
22,023,019
992,626
334,487
21,880,795
115,615
812,958
Risk hedged and
instrument used
Embedded derivatives:
Interest rate risk . . . . . . . . . . . . . . . . .
Risks arising from shares . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
279.363
1,773,653
2,053,016
-
15,781
54,539
70,320
391,155
1,706,782
2,097,937
-
27,074
74,280
101,354
The notional amounts of fair value hedging instruments
relate to the following hedged balance sheet items:
€ thousand
2008
2007
Asset hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances to credit institutions . . . . . . . . . . . . . .
3,161,466
90,195
375,400
2,695,871
2,867,362
40,000
132,776
2,694,586
Liability hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
18,861,553
40,000
2,692,125
16,129,428
19,013,433
148,782
4,137,049
14,727,602
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,023,019
21,880,795
b) Cash flow hedging
The following table shows the notional and carrying
amounts at year-end 2008 and 2007 of cash flows that
were all hedging marketable debt securities at those dates.
As the hedges were interrupted, no amounts are reflected
in the balance sheet at year-end 2008. As explained in
Note 41 in valuation adjustments in equity, the amount
recognized in this item is the cumulative gain/(loss)
recorded when the hedge was interrupted, which will be
recognized until the hedged transaction is completed, in
accordance with applicable regulations.
€ thousand
Risk hedged and instrument used
Interest rate risk
Swaps (IRS, IMS etc) . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
280
2008
Valuation
Positive
Negative
Notional value
-
-
-
Notional value
-
2007
Valuation
Positive Negative
-
-
GRUPO BANCO POPULAR
The amount, net of the tax effect, recognized in valuation
adjustments in equity, arising from the measurement of the
cash flow hedging derivatives at December 31, 2007, was
€4,224k (2007: €9,939k), of which €6,141k (2007:
€5,520k), net of taxes, was transferred to the consolidated
income statement (Note 41).
c) Hedges of net investments in foreign operations
In 2008 the Group interrupted the hedge of the net
investment in the foreign operation that had been contracted
following the acquisition of TotalBank in 2007. The hedge
was largely arranged through interbank deposits.
27. Non-current assets for sale
The only item under this heading in the consolidated
balance sheet of the Banco Popular Group relates basically
to foreclosed assets. The Group receives these assets from its
borrowers or other debtors for total or partial settlement of
financial assets representing debt claims against the
borrowers or debtors. Additionally, during 2008 the Group
obtained buildings through the dation in payment of debt
claims so as to avoid, in many cases, difficulties that could
be encountered by debtors when repaying their loans. The
amounts for 2008 and 2007 are analyzed below.
€ thousand
2008
Non-current assets for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to foreclosed tangible fixed assets . . . . . . . .
The Group recognized net profits of €3,360k (profit of
€4,027k and loss of €367k) and €30,889k (profit of
€31,133k and loss of €244k) on the sale of these assets
in 2008 and 2007, respectively.
Additions to this caption relate basically to foreclosed
assets, dations in payment of debt claims and purchases of
assets that secured loans that were not repaid as
€ thousand
Opening balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The impairment of foreclosed property is calculated as the
lower of the appraisal value and the estimated selling price
less costs to sell, as compared with the carrying amount of
the property. If the value of the property is high,
impairment is recognized in the amount of the difference.
The appraisal value is determined by valuation companies,
all of which are registered with the Bank of Spain.
1,660,596
1,660,596
1,746,932
(86,336)
2007
228,125
228,125
264,831
(36,706)
scheduled. Disposals arise in all cases from the sale or
transfer of the assets to tangible fixed assets for own use or
to investment property.
Movements in 2008 and 2007 in gross non-current assets
for sale and related impairment adjustments are as
follows:
Gross amount
153,017
171,691
59,877
264,831
1,598,067
65,966
1,746,932
Value
adjustments
23.983
20.086
7.363
36.706
53.508
3.878
86.336
Movements in 2008 and 2007 in value adjustments to
non-current assets for sale are as follows:
281
GRUPO BANCO POPULAR
€ thousand
Opening balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results (Note 65):
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries from prior years . . . . . . . . . . . . . . . . . . . . . . .
Provisions used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other movements and transfers . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affecting results (Note 65):
Period provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries from prior years . . . . . . . . . . . . . . . . . . . . . . .
Provisions used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other movements and transfers . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Investments
This caption in the Banco Popular Group’s consolidated
balance sheets relates solely to equity-consolidated
associates.
The carrying amount includes the balances of the
subordinated loans granted by the Group, if applicable.
€ thousand
23,983
19,789
555
276
(6,235)
36,706
74,384
1,429
(23,325)
86,336
The securities of these associates are not listed on
organized markets.
All the Group’s jointly-controlled companies are
proportionately consolidated and therefore the following
table for the caption Investments contains no balances in
this respect:
2008
2007
Jointly-controlled companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,151
32,151
32,151
20,393
20,393
20,393
Asset impairment adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-
-
Movements during 2008 and 2007 in the caption
Investments are set out below:
€ thousand
Opening balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to prior-year results . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to prior-year results . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
282
In 2008, an addition and a disposal were recognized in the
same amount due to the spin-off of the company
Sistema4B. In 2007, the disposal relates to the sale of
Global Ends, S.A.
Total
17,488
821
3,726
3,920
(194)
20,393
829
829
11,758
14,356
(2,598)
32,151
Insurance
companies
-
Other
companies
17,488
821
3,726
3,920
(194)
20,393
829
829
11,758
14,356
(2,598)
32,151
GRUPO BANCO POPULAR
Set out below is a breakdown of the carrying amounts of
the companies included in this caption in 2008 and
2007:
€ thousand
Jointly-controlled companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Associates:
Sistema 4B, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redes y Procesos S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inversiones Area Sur, S.L. . . . . . . . . . . . . . . . . . . . . . . . . .
During 2008, the company Sistema 4B, S.A. was split into
two companies: Sistema 4B, S.A. and Redes y Procesos,
S.A. This operation only entailed the transfer of the assets
and liabilities to the new company and did not affect
results or equity.
In July 2007, the Group sold its investment in Global
Ends, S.A. for €1,004k and recognized a profit of
€232k.on the transaction.
2008
32,151
15,490
1,236
15,425
2007
20,393
4,968
15,425
retirement bonuses arranged under insurance contracts
with the Group’s insurance company in Spain and the fair
value of the fund administered for the commitments of
Banco Popular Portugal, S.A.
The item “Other companies” relates to mathematical
reserves for the early retirement policies and pension
commitments externalized to the insurance company
Allianz, S.A. de Seguros y Reaseguros.
29.Insurance contracts linked to pensions
This caption includes the mathematical reserves or fair
values of the funds administered in respect of pension
commitments and similar obligations externalized to
insurance companies. The item “Group entities” recognizes
€ thousand
Group entities (dependent and related) . . . . . . . . . . . . . . . . . . . .
Other companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
202
182,166
182,368
2007
327
205,886
206,213
30. Reinsurance assets
Set out below is a breakdown of this consolidated balance
sheet caption at December 31, 2008 and 2007:
€ thousand
Unearned premium reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mathematical reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
574
264
4,728
5,566
633
571
2,652
3,856
283
GRUPO BANCO POPULAR
31. Tangible fixed assets
The following table contains a breakdown of the reported
investment in tangible fixed assets, net of depreciation and
impairment adjustments. Tangible fixed assets for the
Group’s own use include, if applicable, assets leased to
€ thousand
Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For own use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IT equipment and installations . . . . . . . . . . . . . . . . . . . . . . .
Furniture, vehicles and other installations . . . . . . . . . . . . . . .
Buildings for own use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment adjustments (-) . . . . . . . . . . . . . . . . . . . . . .
Assets assigned under operating leases . . . . . . . . . . . . . . . . . .
Tangible fixed assets at amortized cost . . . . . . . . . . . . . . . . . .
Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rural properties, plots and unbuilt land . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment properties relate partly to activities carried on
by the majority of the Group’s banks and mainly to the
Group’s real estate subsidiaries, which hold the
investments to obtain income or capital gains and do not
intend to sell them in the ordinary course of business.
284
consolidated companies by Group entities engaged in
leasing operations. Property leased between Group
companies has also been classified as for own use.
2008
654,444
64,004
235,963
297,093
5,381
58,598
(6,595)
700,999
219,854
491,989
(10,844)
1,355,443
2007
643,430
71,175
235,340
335,374
7,806
330
(6,595)
18,531
18,531
67,612
23,396
44,216
729,573
Movements in this consolidated balance sheet caption
showing gross amounts, accumulated depreciation, value
adjustments and net amounts at December 2008 and
2007 are set out below:
GRUPO BANCO POPULAR
€ thousand
For own use
Investment
property
Gross
Balance at 1/1/07 . . . . . . . . . . . . . . . . . . . . . . . . .
Change in consolidation scope . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/07 . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/08 . . . . . . . . . . . . . . . . . . . . . .
Assets assigned
under operating
leases
Total
1,396,536
12,503
110,253
94,928
1,424,364
135,330
73,288
1,486,406
99,154
772
3,271
18,943
84,254
706,108
61,454
728,908
34,341
7,507
7,276
34,572
34,572
-
1,530,031
13,275
121,031
121,147
1,543,190
841,438
169,314
2,215,314
780,341
78,016
84,018
774,339
77,843
26,815
825,367
20,002
2,392
5,752
16,642
2,528
2,105
17,065
15,734
5,597
5,290
16,041
16,041
-
816,077
86,005
95,060
807,022
80,371
44,691
842,432
6,595
6,595
6,595
349
349
11,717
873
10,844
-
6,595
349
349
6,595
11,717
873
17,439
609,600
12,503
32,237
10,910
643,430
57,487
46,473
654,444
79,152
772
530
12,842
67,612
691,863
58,476
700,999
18,607
1,910
1,986
18,531
18,531
-
707,359
13,275
34,677
25,738
729,573
749,350
123,480
1,355,443
Accumulated depreciation
Balance at 1/1/07 . . . . . . . . . . . . . . . . . . . . . . . . .
Additions against results . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions against results . . . . . . . . . . . . . . . . . . . .
Additions against results . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/08 . . . . . . . . . . . . . . . . . . . . . .
Asset impairment adjustments
Balance at 1/1/07 . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/07 . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/08 . . . . . . . . . . . . . . . . . . . . . .
Net
Balance at 1/1/07 . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31.12.07 . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 31/12/08 . . . . . . . . . . . . . . . . . . . . . . .
Disposals of tangible fixed assets include both fullydepreciated assets and assets that have been sold. As
regards assets sold, in 2008 and 2007 the Group
recognized net profits of €233,020k (profit of €233,194k
and loss of €174k) and €8,497k (profit of €9,372k and
loss of €875k).
Impairment losses recognized in the consolidated income
statements for 2008 and 2007 totaled €11,717k and
€349k, respectively, as may be observed in Note 62.
During 2008, the Group undertook a market analysis for
the possible sale of own-use properties used to perform
administrative services, as indicated in Note 74 to the
2007 Financial Statements.
Following this analysis, during which advice was provided
by independent experts, who estimated selling prices,
useful lives and rental income, the decision was taken to
group the properties into packages of similar assets to
facilitate their sale, and bids were called for those
packages. As a result, several sales were completed during
the year, the majority under sale and lease-back
arrangements.
The Banco Popular recognized the results of these deals in
the income statement, as the transactions were completed
at fair value and all the leases qualify as operating leases.
The basic conditions that must be fulfilled to treat a lease
as an operating lease are as follows:
285
GRUPO BANCO POPULAR
- There must be no purchase option at the end of the lease
period, or any such option must allow the lessee to
purchase the asset at its fair value.
- At lease inception, the present value of the future lease
payments must be considerably lower than the leased
asset’s fair value.
- The lease period must not encompass virtually all the
useful life of the leased assets.
The agreed terms, which are common practice in the
operating lease market, include the provision that the
Group’s lessees have the right not to extend the lease for a
longer period than initially stipulated, although the
majority of leases include options for the Group to extend
the lease for equal periods subject to the update or
revision of rent. The Group bears related operating,
conservation and tax costs. Finally, as regards the leases
that contain a purchase option, the option exercise price is
the market value of the buildings on the lease expiration
dates. That price will be determined in all cases by
independent experts. The Group has not provided the
buyers with any additional guarantees to reduce possible
losses arising from early termination of the leases or
changes in the residual values of the leased buildings.
The main property packages sold and leased back are
analyzed below, together with the basic characteristics of
the operating leases.
€ thousand
In the first quarter of 2008, the Group sold an office
building and houses in different locations for a total price
of €38,569k and a reported profit of €31,214k. The lease
agreements linked to these sales have a term of five years
that may be extended annually to a maximum of 10 years.
The Group is therefore required to pay total rent of
€1,457k, which will be revised each year based on
inflation.
In the second quarter of 2008, the made additional sales
of properties used as offices for Regional Managers,
Delegated Managers and Central Services at different
locations around Spain. The total price obtained was
€199,072k, entailing a profit of €168,789k. Subsequent
leases have terms of between four and six years,
extendible to 10 years in some cases, entailing an annual
rental cost of around €12,066k, which will be revised
annually based on inflation.
In the final quarter of 2008, the Group sold another three
emblematic buildings in Madrid. The total selling price
was €37,471k and the profit amounted to €30,568k. The
leases linked to these sales have a term of six years for the
buildings and fifteen years for the branches. Annual rent
stands at €2,288k and will be revised based on inflation
as in the previous cases. The lease include purchase
options at market prices at the expiration date.
Set out below is an analysis of tangible fixed assets for
own use in the consolidated balance sheets for 2008 and
2007:
Gross
Accumulated
depreciation
Impairment
adjustments
Net
Furniture, IT equipment & installations . . . . . . . .
Buildings for own use . . . . . . . . . . . . . . . . . . . . . .
Other tangible fixed assets for own use . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
958,984
457,111
8,269
1,424,364
652,469
121,737
133
774,339
6,595
6,595
306,515
328,779
8,136
643,430
1,003,811
418,483
64,112
1,486,406
703,844
121,390
133
825,367
6,595
6,595
299,967
290,498
63,979
654,444
At December 31, 2008
Furniture, IT equipment & installations . . . . . . . .
Buildings for own use . . . . . . . . . . . . . . . . . . . . . .
Other tangible fixed assets for own use . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
286
GRUPO BANCO POPULAR
32. Intangible assets
Tangible assets recognized by the consolidated companies,
using the methods described in the Accounting principles
(15.s), together with sundry significant details, are shown
below.
€ thousand
All the intangible assets, other than goodwill, have a finite
useful life. The useful life of Other intangible assets is
generally three years for software and five years for other
intangible assets, except for assets deriving from the
acquisition of the Portuguese insurance company Eurovida,
which have useful lives of nine years. Intangible assets
relating to company acquisitions arose basically from the
measurement of the customer portfolio, deposits, rents and
loans, net of amortization charges.
2008
2007
Goodwill
On consolidation:
In dependent companies . . . . . . . . . . . . . . . . . . . . . . . . .
In jointly-controlled companies . . . . . . . . . . . . . . . . . . . .
In associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In company balance sheets:
Of dependent companies . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
477,412
477,412
9,375
9,375
486,787
467,688
467,688
8,863
8,863
476,551
Other intangible assets
Amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On company acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment adjustments (-) . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,789
18,092
41,697
59,789
48,241
30,686
17,555
48,241
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
546,576
524,792
Goodwill arises on consolidation when the difference
between the acquisition value of a company included in
the Group’s consolidation scope and the equity value
acquired cannot be assigned to specific assets and
liabilities.
the consolidated sheets at year-end 2008 and 2007
(€9,375k and €8,863k) relate to the goodwill in
TotalBank, as described in Note 8 above.
Set out below is a breakdown of goodwill on consolidation
by consolidated company:
Goodwill recognized in the dependent entities’ balance
sheets relates to the items already recorded by the
subsidiaries when they joined the Group as a result of
transactions completed previously. The only amounts in
€ thousand
Companies
Popular Factoring (Portugal), S.A. . . . . . . . . . . .
Banco Popular Portugal, S.A. . . . . . . . . . . . . . .
TotalBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross
2008
Impairment
adjustments
2,615
338,947
135,850
477,412
The Group has performed the necessary impairment tests
on the goodwill, using the method described in point 15.s)
of the Accounting policies, no impairment of goodwill
having been recognized in 2008 or 2007 since the values
obtained were higher than the balances recognized in the
consolidated balance sheets.
€ thousand
Intangible assets (gross) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-
Net
2,615
338,947
135,850
477,412
Gross
2007
Impairment
adjustments
2,615
338,947
126,126
467,688
Net
-
2,615
338,947
126,126
467,688
The differences observed in the goodwill attributable to
TotalBank during the two financial years analyzed relate
solely to exchange differences, since the goodwill is
denominated in US dollars.
Set out below is a breakdown of the gross amount, related
accumulated amortization and net balance of other
intangible assets:.
2008
2007
158,803
99,014
59,789
129,805
81,564
48,241
287
The following table shows movements in the past two
years in intangible assets, goodwill and other intangible
assets. Movements in scope changes in 2007 include both
the balances from TotalBank’s balance sheet and the
balances arising from the acquisition of TotalBank, which
refer to the date TotalBank joined the Banco Popular Group
(see Note 8).
The movements in exchange differences relates to the
translation of TotalBank’s intangible assets to the Group’s
functional currency at the year-end exchange rate.
€ thousand
Goodwill
On consolidation
Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in consolidation scope . . . . . . . . . . . . . . . . . . . . . . . .
Movement (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization / Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 2007 year end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in consolidation scope . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences and other movements (net) . . . . . . . . . .
Amortization / Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at 2008 year end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets
27,670
22,091
12,686
14,206
48,241
31,963
20,415
59,789
In dependent companies
8,886
(23)
8,863
512
9,375
341,562
126,488
(362)
467,688
9,724
477,412
33. Tax assets and liabilities
Set out below is a breakdown of these items in the
consolidated balance sheets at December 31, 2008 and
2007:
€ thousand
Assets
2008
Liabilities
2007
2008
2007
Current taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VAT and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
319,541
53,791
265,750
22,808
2,800
20,008
117,569
85,525
32,044
211,363
184,796
26,567
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Deferred taxes taken to equity
Actuarial gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Temporary differences (charged/credited to profit or loss) . . . .
Amortization, Royal Decree-Law 3/93 . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit loss provision . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension funds and similar obligations . . . . . . . . . . . . . .
Tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation adjustments . . . . . . . . . . . . . . . . . . . . . . .
Other deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
507,765
22,422
1,757
20,665
485,343
10,980
319,552
115,607
2,691
7,971
14,932
13,610
503,380
4,090
639
3,451
499,290
15,521
322,071
146,706
2,460
5,740
6,792
68,148
27,212
27,212
40,936
640
28,851
473
10,972
42,033
9,437
9,437
32,596
946
21,597
753
9,300
In accordance with prevailing corporate income tax
applicable to Banco Popular and its investees in 2008 and
2007, certain differences between accounting and tax
criteria gave rise to the recognition of deferred tax assets
and liabilities for corporate income tax purposes.
288
Movements in deferred tax assets and liabilities during
2008 and 2007 are set out below, including the effect of
the tax cuts approved for 2007 and applicable in future
years:
GRUPO BANCO POPULAR
€ thousand
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value adjustments in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value adjustments in profit or loss . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation Royal Decree-Law 3/1993 . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit loss provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension funds & similar obligations . . . . . . . . . . . . . . . . . . . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets
2008
503,380
18,332
(13,947)
231
(4,541)
(2,519)
(31,099)
23,981
507,765
Liabilities
2007
519,590
(2,084)
(14,126)
2,365
(7,819)
31,405
(39,231)
(846)
503,380
2008
42,033
17,775
8,340
(306)
7,254
1,392
68,148
2007
40,080
(5,725)
7,678
(247)
4,280
3,645
42,033
The following table shows the foreseeable reversal periods
for deferred taxes, including amounts arising from value
adjustments:
Assets
Reversal period
From 0 to 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From 5 to 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
More than 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following table shows the amount of the reduction in
deferred tax assets and liabilities in 2007 in the main
€ thousand
Banco Popular Español, S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Andalucía, S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Castilla, S.A (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Crédito Balear, S.A (1) . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Galicia, S.A (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco de Vasconia, S.A (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco Popular Hipotecario, S.A . . . . . . . . . . . . . . . . . . . . . . . . . .
Banco Popular Portugal, S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eurovida, S.A (España) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
377,616
64,184
65,965
507,765
2007
392,863
47,842
62,675
503,380
Liabilities
2008
34,138
34,010
68,148
2007
14,492
69
27,472
42,033
Group companies caused by the interest rate cuts referred
to in Note 15 q):
Deferred tax assets
Deferred tax liabilities
2007
2007
8,491
1,396
671
188
695
35
409
175
12,060
598
1
(222)
(245)
132
(1) Entities merged with Banco Popular Español, S.A. in 2008
289
Set out below is a breakdown of the main Group entities that details of the Group’s tax situation):
have generated current and deferred taxes (Note 43 provides
€ thousand
Assets
Type
2008
Entity
Banco Popular Español, S.A
Banco de Andalucía, S.A
Banco de Castilla, S.A (1)
Banco de Crédito Balear, S.A (1)
Banco de Galicia, S.A (1)
Banco de Vasconia, S.A (1)
Eurovida, S.A (España)
Bancopopular-e, S.A
Banco Popular Hipotecario, S.A
Popular de Factoring, S.A
Banco Popular Portugal, S.A
Popular Banca Privada, S.A
Aliseda, S.A
Inversiones inmobiliarias Cedaceros S.A
Inversiones inmobiliarias Alprosa, S.A
Inversiones inmobiliarias Canvives S.A
Resto Entidades del Grupo
33,655
353,138
1,183
57,025
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
Current
Deferred
1
2,597
881
522
16,503
1,190
9,844
61,305
1,429
1,060
240,648
18,651
4,787
5,268
6,388
14,425
319,541
507,765
Total Grupo Consolidado
Liabilities
2007
10.701
308,575
1,600
59,146
1,087
26,514
534
15,810
729
22,438
726
6,927
1
3,368
9
257
10,740
12
1,091
3,106
33,509
39
1,311
11
4,253
13,694
22,808
503,380
2008
64,890
53,801
15,894
266
2,396
2,908
108
2
549
1,931
2,603
3,553
1,928
7
87
25,738
10,070
117,569
68,148
2007
87,669
30,695
29,155
232
13,058
17
5,145
11
12,076
141
15,693
5
3,094
1,241
254
1
4,122
1
656
17,340
3,070
1,270
13
20,420
9,465
209,965
42,033
(1) Entities merged with Banco Popular Español, S.A. in 2008
34. Other assets
This caption includes inventories, non-financial assets
under construction, including land and other properties
€ thousand
Assets
2008
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrying amount . . . . . . . . . . . . . . . . . . . .
Asset impairment adjustments . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrual accounts . . . . . . . . . . . . . . . . . . . .
Transactions in transit . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
290
held for sale in the real estate activities, and other assets
not recognised in other balance sheet captions.
350,730
354,225
(3,525)
490,181
95,004
76,373
318,804
840,911
2007
233,760
65,365
35,635
132,760
233,760
GRUPO BANCO POPULAR
35. Financial liabilities at amortized cost
This consolidated balance sheet caption includes repayable
amounts received in cash, except for marketable securities.
It also includes guarantee deposits and consignments
received in cash by the Group. These liabilities are valued
at amortized cost using the effective interest method.
A breakdown by residual term of the items in this caption
is presented in Note 44.
Set out below is a breakdown of Financial liabilities at
amortized cost in the consolidated balance sheets at
December 31, 2008 and 2007:
€ thousand
Deposits from central banks . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from credit institutions . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Of which:
euros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
3,644,312
10,619,566
51,665,410
30,208,172
1,616,757
1,202,921
98,957,138
9,417,398
42,577,395
41,881,373
1,794,537
985,225
96,655,928
93,172,912
5,784,226
88,818,374
7,837,554
2008
2007
6,058,276
3,734,922
728,027
2,319
96,022
10,619,566
42,516
7,478,877
1,236,203
540,074
6,692
113,036
9,417,398
Set out below is a breakdown of deposits from credit
institutions by type of financial instrument used:
€ thousand
Reciprocal accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clearing house . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A breakdown by counterparty and by currency (euros or
foreign currency) is as follows:
€ thousand
2008
Euros
Banks operating in Spain . . . . . . . . . . . . . . . . . . .
Savings banks . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit cooperatives . . . . . . . . . . . . . . . . . . . . . . . .
Official Credit Institute . . . . . . . . . . . . . . . . . . . . .
Non-resident credit institutions . . . . . . . . . . . . . .
Specialized credit institutions . . . . . . . . . . . . . . . .
Clearing house . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,028,987
1,521,236
41,261
1,336,890
2,157,205
196,022
2,183
84,064
9,367,848
2007
Foreign currency
3
86,225
1,153,396
136
11,958
1,251,718
Euros
1,636,569
268,692
29,107
1,234,890
1,922,937
60,211
6,073
52,279
5,210,758
Foreign currency
88,120
623,072
3,434,072
619
60,757
4,206,640
291
Set out below is a breakdown of foreign currency balances
showing the currencies in which the balances are
repayable:
€ thousand
US dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swiss franc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The average annual interest rate in 2008 and 2007 on
deposits from credit institutions was 4.06% and 3.75%,
respectively. Set out below is a breakdown by sector of
€ thousand
General government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits from other creditors . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
841,075
26,618
114,712
36,731
232,582
1,251,718
2007
2,833,907
371,416
229,648
469,244
302,425
4,206,640
deposits from other creditors in the consolidated balance
sheets at December 31, 2008 and 2007:
2008
6,491,790
6,344,732
147,058
45,002,713
38,639,457
6,363,256
51,494,503
170,907
51,665,410
2007
6,092,873
5,467,973
624,900
36,684,001
31,026,210
5,657,791
42,776,874
(199,479)
42,577,395
Set out below is a breakdown of valuation adjustments by
sector:
€ thousand
General government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector – residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private sector - non-residents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
4,389
88,104
78,414
2007
5,628
(277,661)
72,554
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170,907
(199,479)
Set out below is a breakdown of these balances by type of
instrument:
€ thousand
Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset repos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
292
2008
14,026,839
4,806,340
25,719,428
6,692,298
249,598
170,907
51,665,410
2007
15,360,499
5,578,768
18,300,051
3,257,756
279,800
(199,479)
42,577,395
GRUPO BANCO POPULAR
The following table contains an itemized breakdown of
valuation adjustments:
€ thousand
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Micro-hedging transactions (+/-) . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums and discounts (+/-) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Set out below is a breakdown at year-end 2008 and 2007
of deposits from customers resident in Spain, including
general government and private sector customers, by
€ thousand
Branches in Spain
Andalucía . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aragón . . . . . . . . . . . . . . . . .

annual report 2008

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