Isabel Goiri - Head of Investor Relations Ángel Cano Fernández - President, Chief Operating Officer, Director, Member of Executive Committee and Member of Global Asset Allocation Committee Tomas Blasco Sánchez Manuel González Cid - Chief Financial Officer and Head of Finance Division

Good morning, everyone, and welcome to this webcast with the presentation of the BBVA Group earnings for the fourth quarter of 2013. As we usually do, Angel Cano, the Group Chief Operating Officer, will give the presentation, and then we'll have questions and answers, which he will talk through, along with Manuel González Cid, who is the CFO. And any questions that we can't deal with during this webcast will be dealt with by the Investor Relations team sometime during today. Ángel, you have the floor. Ángel Cano Fernández: Good morning, and welcome to today's presentation of the results of the BBVA Group for 2013. As we've been discussing the different webcast and presentations we've had this year, 2013 has been a difficult and intense year, not just in regulatory terms that it was, but also in terms of the macro environment. The developed economies have begun to show signs of recovery, maybe most important is the big drop in the risk premium we've seen during the year. And in the second part of the year, the improvement in the economic outlook, not just with respect to the year-end, but also with respect to this year, 2014, starting in Europe which is where we've seen probably the clearest signs of recovery. First of all, we see good progress being made to -- as we move towards close of banking union. And then the economic outlook has been reinstated several times the end of the year. If we look at the growth of GDP for the whole region, it should be minus 0.4 according to our research department. And for 2014, the average that we are expecting would be a growth of about 1%. Here in Spain, looking at what's been happening over the last few months, we can say that…

Now let's move on to the block with respect to the different business units, starting with Spain. Mario Ropero from Fidentiis, Antonio Ramirez from KBW, Rohith Chandra from Barclays, Paco Riquel from N+1, Britta Schmidt from Autonomous, Stefan Nedialkov from Citi, and Raoul Leonard from Deutsche Bank asked the following questions. More or less, they asked the same. So I'll group them together. The first question has to do with Spain, what is the outlook for growth in lending for 2014 in the BBVA? Secondly, more or less, what's the cost of the term deposit stock that we have? And do we have plans for cost saving in Spain over and above the integration of Unnim? Fourth question, with respect to the expectations regarding spreads on credit to business in 2014. The fifth question is what are we expecting to see in 2014 in the net trading income and net interest income? And then, we've got another question, yes, what's the impact in the fourth quarter of the elimination of the floor clauses for mortgages in the fourth quarter, that is. What was the impact of getting rid of the mortgage forecloses? And then with respect to impairment and provisions in Spain. A single question regarding the peaking of the NPA ratio in Spain. When do we expect to see that? And what do we think will happen with gross additions to NPA in the quarter? As you saw, that was negative but what kind of performance are we expecting in 2014? There are a lot of questions, but I think that they pretty well cover everything that's been asked about our business here in Spain.

Okay. Let's have a look at it. First of all, lending. In 2014, we're going to have to separate or differentiate between business and individuals. For individuals, I don't think we're going to see any growth year-on-year in the balances, basically, because the natural maturity date, for instance, of mortgages. Obviously, these are greater -- the stock I'm talking about, they are clearly greater than the new flow of loans. So I think this is where we're going to see the greatest uncertainty with regards to the information in 2014. Then I think what we're looking at full, in a balance of between 4% and 6% per individual, that's what we're going to see in 2014. On the business side on the other hand, we do have possible -- positive data for the final quarter, and we're talking about loans to companies. Forgetting about real estate developers, we've seen positive growth in this and what we're seeing for the fourth[ph] -- for 2014 as a whole, and especially in the second half of the year, more than in the first half, especially if we're comparing with higher balances in the first part of 2013 and in the second part. So what we're looking at here is a year-on-year, December-to-December, with positive growth in lending. I'm not sure whether it's going to be 2%, 3% or 4%, but there's going to be positive growth in lending to companies. So if lending is positive in 2014, then we're talking about lending falling between 1% or 2% for Spain as a whole. So we'll see a bit more deleveraging but far less than we've seen in 2013, and I think we're going to start to see a growth in -- when those -- starting growth in balances in 2015. The integration of Unnim…

Real estate servicing is an activity that, as you can imagine, we've analyzed. As always, it depends on the transactions, the future flows. You have to look at the costs if we have to pay for the servicing in the future, the opportunity costs. So we have to look at all of these different factors in order to analyze real value. So it's not that we're not going to do or that we are going to do anything, but it's a matter of focusing on value, real value. Rather than just capital gains discounts in the presentation, I said that they -- we were selling more or less book value, and the EUR 59 million losses that you saw above all in Brazil that sell a very specific package. And at the end of the year, very clearly, we have evaluated our assets with updated appraisal values. And the additional losses are going to be basically those coming from the possible downward trend that we can still expect to see in the price of property, although, actually, we have seen that the falling prices are falling evermore slowly. I said earlier on the -- that one of the main contributors to the improvement of earnings in 2014 will be the banking business in Spain, but also, we're going to get improvements coming in precisely from the real estate business. But we have yet to find out what the final loss will be above all, looking at the downward trend in prices. We think in our research department that it could be between 2%, 4% more price fall in 2014. But over the last few months -- well, quarters even, we have been seeing an increased appetite among investors to buy property in Spain, and that means that sales have really been speeding up in the final quarter, but in the year as a whole; so higher appetite amongst investors, a slowdown in the fall of prices in some regions in Spain. We can say that, actually, prices aren't falling, quite the opposite. Some cities or regions are seeing prices go up now. And so that leads us to expect that in the 2014, in 2014, we'll see a more positive contribution coming from real estate. Moving on to Mexico then. I have a question which is repeated by Antonio Ramirez from KBW; Rohith Chandra from Barclays. And they can be summed up as followings. What are the main drivers in the growth of the loan book and the income in Mexico? And what is going to happen to costs in [indiscernible]?

The entire income statement, right. Well, as I was saying before, 2013 has been a difficult year and that the country has been in -- has gone through some profound reforms. There have been 7 of these reforms through the year. The last one was the energy reform. It's the most important, which just mean, public investment was grant to a halt in 2013. And that's why the balances for the investments, we'd say, has really slowed down. But the pipelines in the lending side have been filling up towards the end of the year. We've gone from 7%, 7.5% that we saw during the year to over 10% that we saw in the results. So for 2014, what we're seeing with the growth in the economy, not a 1.3%, which we think we'll end up growing, but 3 highs. Then as we see we can recover the banking activity in the public sector -- from the public sector, so I think what we're seeing is growth of between 10% and 12% on the loan book. The spreads, if we bear in mind the composition of the Mexican balance, our business over there, with spreads over 11%, with a lot of weight on consumer finance, then obviously, the spreads are not going to change radically in 2014, it's going to be around that level. So the growth in the business is what -- we'll have to see how these translate to the different margin costs, the objectives that we have there, the target that we have there in an investment process, whereby, we want to strengthen organic growth. And there have been some branches that we're opening, and we've remodeled our distribution model, as I mentioned before in the presentation, which means that our costs have gone up. But this has to be always below the growth in revenues, so that we are seeing net revenues for the group in Mexico. The risk premium in Mexico -- I also said this before, the risk premium with the business mix that we have on the balance sheet, should be around between 3.3% and 3.5% in 2014, and it should be fairly stable. Moving on to the United States, I have 3 questions. Mario Ropero from Fidentiis; Frederic Teschner from Natixis. The first question, what's our outlook for the net trading income in United States and what you're going to do in 2014? The same here with regard to attributable profit for 2014 in the American franchise. And the third question, what plans do we have for doubling our market share in the United States or increase our market share in the United States? So 3 questions. Outlook, for the net interest income in the United States, attributable profit, and plans for increasing our market share in the U.S.

Okay. We can talk on the basis of what we know at the moment. We always want to increase our size in United States, but we have to look at the opportunities, and work out how much value they generate and compare them against other opportunities. And we talked about CorpBanca, for example. At the end of the presentation, I said our balance sheet in the U.S.A. is ready for being very sensitive to hikes in the interest rates. We're not expecting these to rise, however, in 2014. So in 2014, we'll see stable spreads and that will be good. We've seen that in 2013 and 2012, spreads have gradually reduced with the change of maturities on our stock. With new flows coming in at lower rates, we're seeing the change in our spreads across the board. And I'd say, that our target is to have a spread pretty stable throughout 2014, and business volumes will grow maybe low double-digit growth, we could see that. And that should be reflected in the different income items, keeping costs at a lower level in 2014, 1%, 2% below what they were in 2013. So the cost of risk will be pretty stable, as I said in the presentation. In 2013, it was pretty stable, and that means that already the growth of business volumes will all be passed on to the different items in the income statement, including net profit. And with the expectation at some stage, interest rates will go up, probably in 2015. We're expecting that to happen around mid '15. From then on, we'll see a rally in the returns we get. And I talked about the opportunities that we are analyzing. We're always analyzing on the basis of value. We want to increase our market share as we always have done, but we'll see marginal increases in market share in all the states where we're already operating. And of course, we'll analyze any opportunities that we consider worthwhile to see what their value is. Okay. Two final questions, one regarding Turkey. Mario Ropero from Fidentiis and Benjie Creelan from Macquarie asked about any guidance we might be able to give regarding the hike in interest rates. What do you expect to get in 2014 in Turkey? Do you see any kind of risk, long-term risks because of the exposure that we have in our loan book in foreign currency in Turkey? So those are the questions regarding Turkey.

During the presentation, when I was talking about Turkey, and Manolo, maybe you can give us some greater color on this, but we were saying the first part of the year, there'll be a clear improvement -- 2013, there was a clear improvement in spreads. The second part of the year, there was an increase in the cost of funding. So taking the year as a whole, the margins have grown, but there's been a slowdown because of the increase in prices in the second part of the year, which, basically, is going to continue throughout 2014. The beginning of 2014, we're seeing an increase in interest rates as we saw in the beginning of the week. And an increase in interest rates from a business point of view has seen a parallel increase both on the asset and the liable side -- the liabilities side. So in summary, what we're going to see for 2014, I would think would be it will take it as a whole, it's going to be slightly negative, because the spreads in Turkey, or in other words, the lending side will grow less than in 2013 because of the increase in treasure rates and would not offset the negative evolution of spreads. I don't think it's going to be very grave, but I think there will be a slight slip in the main lines of the income statement. If we look first at the effect of guidance yesterday guarantee -- talked extensively in the presentation of their results. They talked about the forecast for 2014, so I'll just add as you all know, the guarantee is negatively sensitive to increase in the treasure rates of around 6%, and the duration mismatch of about 2 quarters, so the liability comes out today faster than the assets. So in the short term, we see a suffering until these -- the assets are repriced, which is when the effect of the increase in interest rates will even have a positive effect. With regards to loans in foreign currencies, it is true that guarantee does have certain weight in loans in foreign currency. I think it's around 38% of their asset at the moment, but also has 44% of its liabilities in foreign currencies. So there's no real liquidity or risks or mismatch from this point of view. And we don't think there's a very high risk of NPAs in these portfolios where -- because most of these, we are talking about corporate, sophisticated groups and some of the largest group, the business group in Turkey. So this really doesn't create any great concern for us in the current environment. And the final question, as we're almost finished, Mario Ropero from Fidentiis asks about whether we can make any comments about the news that we've seen with the ruling on the sale of the Iraqi Group products, could this have an impact -- or what impact could be expected during 2014?

Well, maybe first of all, of course, the information we have with respect to what we've done with Iraski products -- we've got EUR 200 million. There is a total quantity, and most of the customers where we placed this kind of product has been with customers within the Mondragón Cooperative workers within the Iraski group. So that's the type of customer, which is a pretty uniform type. And the ruling has to do with 68 customers, fundamentally employees of the group, and the maximum impact would not even be EUR 500,000. So that's absolutely limited in terms of the impact of ruling only effects those specific customers, it wouldn't affect even all of the customers that have been involved in the placement that the bank did, so limited effect. Obviously, we will be appealing the ruling nonetheless. Okay. Well, in that case, having dealt with that final question, I just like to thank you for attending this webcast, and remind you that any questions that we couldn't answer because of time will be answered by the Investor Relations team sometime today, and we'll be getting back to you today. Thank you very much.

Thank you.

Thank you.