Filed
by Banco
Bilbao Vizcaya Argentaria, S.A.
Pursuant
to Rule 425
under the Securities Act of 1933
and
deemed filed
pursuant to Rule 14a-12
of
the Securities Exchange Act of 1934
Subject
Company:
Compass
Bancshares,
Inc.
(Commission
File No.
1-31272)
First
half results for
2007
BBVA
increases net profit 20.4% to
€2.6 bn
excluding extraordinary
items
BBVA
launches a strategic innovation
and transformation
plan
to expand its customer base by 20%
(adding 8.5 million
customers) and to lower
the
cost/income
ratio to 35% by
2010
Main
margins and profit in the second
quarter are the highest ever in the Group’s
history
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BBVA's
operating profit before
non-recurrent
items in the first half rose
20.2% compared to 2006, to€4.87
billion,
thanks to strong growth of
recurrent revenues
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The
Group’s cost/income ratio
recorded an important advance, improving to 41.6%, compared to 44.3%
in
the first half of
2006
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BBVA
continues to lead European
banks in terms of profitability, with return on equity (ROE) at 31.5%,
and
return on assets (ROA) at
1.28%
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Spain & Portugal increased
operating profit 20.6% to €2.02
billion and net attributable profit rose 28.3%
to €1.17
billion
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Global
Businesses recorded strong
growth in operating profit, which rose 31.2% to €658m and net attributable
profit increased 5.7% to
€451m
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In
local currencies Mexico&
USA
increased operating
profit 26.5% to
€1,783m and net attributable profit climbed 25% to
€949m
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South
America increased
operating profit 25.7%
to €699m and net attributable profit rose 22.7% to
€326m
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In
the year to June, BBVA generated
€2.62
billion in net attributable profit
before non-recurrent items. This was 20.4% higher than the same period last
year. A sharp rise in recurrent revenues pushed profit and the Group’s
main margins to record highs
in the second
quarter. In the first half operating profit grew
steadily at
20.2% to €4.87 billion.
Efficiency (measured by the cost/income ratio) improved from 44.3% to 41.6%
and
return on equity stands at 31.5%, ahead of other European
banks.
At
the end on the first half BBVA has
once again demonstrated its
capacity to generate profitable growth in a recurrent manner. It has just
launched an innovation and transformation plan to carry this strategy forward.
The plan pursues ambitious goals for 2010, improving productivity 15%, lowering
the cost/income
ratio to 35% and increasing
the customer base by 20% –
adding 8.5 million between Spain,
Mexico
and South America.
At the same time, the Group will
continue to push ahead with its growth strategies in the USA
and Asia.
Halfway
through 2007, BBVA has again demonstrated
its considerable
ability to generate recurrent earnings in all business areas. It has achieved
important improvements in
key
management
indicators, boosted organic growth
plans through innovation and set ambitious goals in terms of productivity and
efficiency.
At
the same time, BBVA remains committed
to its Asian development plans through
the agreement with CITIC Group
and the first BBVA board meeting in Beijing
in June. Furthermore,
it hopes to move the acquisition of
Compass Bancshares forward
to the third quarter of this year and start integration of its US
banks ahead of the initial
calendar.
After
including extraordinary items net
attributable profit in the year to June rose 1.1% to €3.37 billion. However
this is not
indicative of the outlook
for the full year because of considerable profit on non-recurrent operations
in
the first half of 2006. In the second half last year the impact of non-recurrent
items was negative. Therefore the comparison of earnings centres on the
figures
before non-recurrent
items.
In
the second quarter of 2007 the
business volumes and earnings of the BBVA Group maintained their high cruising
speed. Strong marketing at
all units resulted in higher volumes of business and sharp growth in recurrent
revenues. This further
improved the cost/income ratio and was the main driver of operating profit
and
net attributable profit.
The
most relevant financial aspects of
the Group’s
performance and strategy in the second
quarter and first half of 2007 are summarised below:
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The
extraordinary general meeting
of shareholders, held in Bilbao
on 21st June, approved a capital
increase by issuing 196 million new ordinary shares to be used for
the
acquisition of Compass Bancshares Inc. The operation has been authorised
by the US Federal
Reserve, by the State of Alabama
and by the Bank of Spain.
Furthermore on 8th August, Compass will hold its annual general meeting
at
which its board of directors will propose acceptance of BBVA’s
offer.
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The
BBVA Group announced a
strategic innovation
and transformation plan. Under the slogan “Something new
every
day” it plans to
create value through innovation, distinguishing the Group from its
competitors in all the markets in which it operates. The plan will
finish
in 2010 and the main goals
are expansion of the customer
base and improvements in productivity and
efficiency.
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China
CITIC Bank (CNCB) has been
listed on the stock exchange at a price higher than the cost of
BBVA’s
4.83% holding. At the end
of June, the Group
enjoys capital gains
of €400 million
in
its investments in CITIC
Group.
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BBVA
will own a new corporate
headquarters in Madrid.
From
2010 onwards it will house
6,500 employees who are presently dispersed in ten separate buildings,
improving efficiency. The project entails the sale of four
buildings owned by
BBVA and the second quarter profit and loss account includes €235m capital
gains.
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The
quarter’s
accounts contain a €200m charge
for the promised
contributions to the BBVA Microcredit Foundation. Its goal is to
promote
accesses to credit
to
the under-developed communities of Latin America.
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The
net effect of the
non-recurrent items mentioned in the last two points is additional
net
attributable profit of €54m in the
second quarter of 2007.
This complements
€696m of capital
gains from Iberdrola
obtained in the first quarter. Furthermore in the second quarter
of 2006
capital gains from the sale of holdings in Repsol, BNL and Andorra
contributed €1,157m of net
attributable profit
after tax. The remarks below exclude these one-time
operations unless otherwise
stated because that provides a better picture of the Group's underlying
performance.
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Despite
BBVA's active management
of structural exchange-rate risk, the effect of variations in exchange
rates in the Americas
against the euro was negative.
However,
their impact was less
than the first quarter (as foreseen in the previous quarterly
report).
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Net
attributable profit in the
second quarter of 2007 came to €1,369m (excluding
non-recurrent
items), rising 18.1% over last year’s
figure of €1,159m for
the same period. The
increase would be 20.0% at constant exchange rates. This result is
supported by operating
profit, which grew 19.2%
to €2,522m (up
21.7%
at constant rates).
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It
should be noted that in the
second quarter of 2007 all the main margins and the profit figures
on the
income statement set new all-time
records.
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As
a result net attributable
profit for the
first
half came to €2,624m,
an increase of 20.4% over last year’s
€2,179m
for the same period (up
25.0% at constant exchange rates). Earnings per
share came to
€0.74, a rise
of
14.9% compared to €0.64 for the
first half of 2006,
and ROE stands at
31.5% (lower than the 35.8% in the same period of last year due to
the
November capital increase). Including non-recurrent
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items,
net attributable profit is €3,374m, earnings per
share are €0.95 and ROE is 36.0%.
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The
increase in net profit is the
result of solid
operating profit. In
the year to June it grew 20.2% to €4,872m (up
25.1% at constant
exchange rates). The impact of items on the lower part of the income
statement was negligible.
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Operating
profit was supported, in
turn, by the growth of recurrent income.
Net
interest income was up 13.9%
(thanks to higher volume and to widening spreads). Net fee income
and
insurance income rose 7.4% and ordinary revenues increased
13.8%.
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Operating
expenses including
depreciation grew more slowly, at 7.4%, and therefore
the cost/income ratio
improved to 41.6% (44.3% in the first half last year). This ratio
improved in all
business areas.
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The
quality of BBVA’s
loan portfolio remains high.
The non-performing
loan ratio stands at 0.86%, compared to 0.82% at the same point last
year. The slight
rise is due to the greater weight of consumer finance, credit cards
and
SMEs because this type of lending is more profitable but more susceptible
to default. The coverage ratio remains high, at 253.8%. At 30-Jun-07
total
coverage
funds amount to
€7,407m, of
which
€5,310m are
generic
provisions (€4,305m a
year earlier).
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The
Group’s
capital base continues to
reflect the high level of capital adequacy. Core capital
stands at 6.2% (6.2%
at 31-Mar-07 and 6.0% at 30-Jun-06), Tier I capital is
7.8% and the BIS
ratio is 11.8%.
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On
10th July a first interim
dividend of €0.152
per share was paid against 2007 results. This is an
increase of 15.2%
compared to the first interim dividend paid in
2006.
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In
the Spain
and Portugal Area
lending rose 15.5%
and customer funds increased 7.1%. Helped by the
improvement in
spreads, net interest income increased 13.7%. Other revenues also
performed well, the recent innovative products in particular (insurance,
derivatives, etc), and expenses remained under control
(up 2.1%). This led
to a new improvement in the cost/income ratio and operating profit
rose
20.6%. Net
attributable profit rose 28.3% to €1,172m.
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Earnings
in the Global Businesses
Area were also based on strong revenues. The figure
that best reflects this
area’s
performance is ordinary
revenues, which increased 28.6% year-on-year (with high growth in
lending
and customer funds).
Operating profit rose 31.2%. Net attributable profit came to €451m (up only
5.7% year-on-year
due to sale of equity holdings in
2006).
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In
the Mexico
and USA Area, the dominant factor
was net interest income. At constant
exchange rates, this
grew 29.8%, helped
by
increases in lending and customer funds (up 39.5% and 21.9%, respectively,
in local currencies). The
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improvement
in customer spreads also contributed. After
adding other income, ordinary revenues rose 24.2%, outpacing the
rise in
expenses, and thus the cost/income ratio improved and operating profit
increased 26.5%. This offset higher provisions linked to the increase
in
lending and net attributable profit thus came to €949m for the first half
(up 25.0% at constant exchange rates).
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In
the South America
Area, business grew
faster (loans were up 35.2% and customer funds increased 23.1% in
local
currencies). This
helped net interest income to rise 28.3% at constant rates. Aided
by net
fee and insurance income (up 16.3%), it pushed operating profit up 25.7%
and net attributable
profit grew 22.7% to €326m.
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Forward-Looking
Statements
This
document may include “forward-looking statements”
within the meaning of the “safe harbor”
provisions of the United States
Private
Securities Litigation Reform
Act of
1995. Forward-looking statements may be identified by the use of
words such as “anticipate,”“believe,”“expect,”“estimate,”“plan,”“outlook,”
and “project”
and other similar expressions that
predict or indicate future events or trends or that are not
statements of historical
matters. Investors are cautioned that such forward-looking statements
with respect to revenues, earnings, performance, strategies, prospects and
other
aspects of the businesses of Banco Bilbao Vizcaya Argentaria, S.A.
(“BBVA”),
Compass Bancshares, Inc. (“Compass”)
and the combined group after
completion of the proposed transaction are based on current expectations
that
are subject to risks and uncertainties. A number of factors could cause actual
results or outcomes to differ materially
from those indicated by such
forward-looking statements. These factors include, but are not limited to,
the
following risks and uncertainties: those set forth in BBVA’s
and Compass’s
filings with the Securities and
Exchange Commission (“SEC”),
the
failure to obtain and retain expected
synergies from the proposed transaction, failure of Compass stockholders
to
approve the transaction, failure of BBVA stockholders to approve the related
capital increase, delays in obtaining, or adverse conditions contained
in, any required regulatory
approvals, failure to consummate or delay in consummating the transaction
for
other reasons, changes in laws or regulations and other similar
factors. Readers are referred to BBVA’s
and Compass’s
most recent reports filed
with the SEC. BBVA and
Compass are under no obligation to (and expressly disclaim any such obligation
to) update or alter their forward-looking statements whether as a result
of new
information, future events or otherwise.
Additional
Information and
Where to Find
It
This
document may be deemed to be
solicitation material in respect of the proposed transaction involving BBVA
and
Compass. In connection with the proposed transaction, BBVA has filed
with the SEC a registration statement on Form F-4 (File no. 333-141813) (the
“Registration
Statement”) to register the BBVA
ordinary shares
to be issued in the proposed transaction and that includes a definitive proxy
statement of Compass dated June 29, 2007 that also constitutes a prospectus
of
BBVA. BBVA and Compass
have also filed, and intend to
continue to file, additional relevant materials with the SEC. The Registration
Statement and the related proxy statement/prospectus contains and will contain
important information about BBVA, Compass, the proposed transaction
and related matters.
SHAREHOLDERS OF COMPASS ARE URGED TO READ THE REGISTRATION STATEMENT AND
ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors
and
security holders may obtain a free copy of the disclosure documents (including
the Registration Statement) and other documents filed by BBVA and Compass
with
the SEC at the SEC’s
website at www.sec.gov,
from BBVA’s
Investor Relations department or from
Compass’s
Investor Relations
department. BBVA has also filed certain documents with the Spanish
Comisión Nacional del
Mercado de Valores in connection with its June 21, 2007 shareholders’
meeting held in connection
with the proposed
transaction, which are available on the CNMV’s
website at www.cnmv.es.
Participants
in the
Transaction
BBVA,
Compass and their respective
directors and executive officers and other members of management
and employees may
be deemed to be participants in the solicitation of proxies in respect of
the
proposed transactions. Information regarding BBVA’s
directors and executive officers is
available in BBVA’s
annual report on Form
20-F/A,
which was filed with the SEC on June
28, 2007, and information regarding Compass’s
directors and executive officers is
available in Compass’s
proxy statement for its 2006 annual
meeting of shareholders, which was filed with the SEC on March 17,
2006. Additional
information regarding the
interests of such potential participants is also included in the Registration
Statement and in the definitive proxy statement/prospectus for the proposed
transaction and the other relevant documents filed with the
SEC.
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