“Argentaria” means Argentaria, Caja Postal y Banco Hipotecario, S.A. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

“BBV” means Banco Bilbao Vizcaya, S.A. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

“BBVA”, “Bank” or “Group” means Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires. BBVA was formed by the merger of BBV and Argentaria, which was approved by the shareholders of each institution on December 18, 1999.

“Consolidated Financial Statements” means BBVA’s audited consolidated balance sheetsConsolidated Financial Statements as of December 31, 2003, 2002 and 2001 and BBVA’s audited consolidated statements of income for the years ended December 31, 2003, 20022006, 2005 and 2001 included2004 prepared in this Annual Report.accordance with the International Financial Reporting Standards previously adopted by the European Union (“EU-IFRS”).

“Item 3. Key Information—Risk Factors”;

“Item 4. Information on the Company”;

“Item 5. Operating and Financial Review and Prospects”; and

“Item 11. Quantitative and Qualitative Disclosures About Market Risk”

general political, economic and business conditions in Spain, the European Union (“EU”), Latin America and other regions, countries or territories in which we operate;

changes in applicable laws and regulations, including taxes;

the monetary, interest rate and other policies of central banks in Spain, the EU, the United States and elsewhere;

changes or volatility in interest rates, foreign exchange rates (including the euro to U.S. dollar exchange rate), asset prices, equity markets, commodity prices, inflation or deflation;

the effects of competition in the markets in which we operate, which may be influenced by regulation or deregulation;

changes in consumer spending and savings habits, including changes in government policies which may influence investment decisions;

our ability to hedge certain risks economically;

the ability to obtain regulatory approvals of the proposed transaction to acquire Compass Bancshares, Inc. (“Compass”) on the proposed terms and schedule;

the failure of BBVA or Compass shareholders to approve the capital increase or the proposed transaction, respectively;

the risk that the businesses of BBVA and Compass will not be integrated successfully;

the risk that the cost savings and any other synergies from the proposed transaction to acquire Compass may not be fully realized or may take longer to realize than expected;

disruption from the proposed transaction to acquire Compass making it more difficult to maintain relationships with customers, employers or suppliers;

our success in managing the risks involved in the foregoing, which depends, among other things, on our ability to anticipate events that cannot be captured by the statistical models we use; and

Average balances, when used, are based on the beginning and the month-end balances during each year. We do not believe that such monthly averages present trends that are materially different from those that would be presented by daily averages.

The book value of BBVA’s ordinary shares held by its consolidated subsidiaries has been deducted from stockholders’ equity.

Unless otherwise stated, any reference to loans refers to both loans and leases.

Disclosures in this Annual Report with respect to the amount of “substandard loans” at any date reflect Bank of Spain classifications at such date. See “Item 4. Information on the Company—Selected Statistical Information—Assets—Loan Loss Reserve”, “—Substandard Loans” and “—Foreign Country Outstandings”. These classifications differ from the classifications applied by U.S. banks in reporting loans as non-accrual, past due, restructured and as potential problem loans. One of the most important differences is that under Bank of Spain classifications, in the case of loans which are classified as substandard because any payment of principal or interest is 90 days or more past due, initially only past due payments of principal or interest (to the extent accruing at the time that the relevant loan is classified as substandard) are treated as substandard. If any payment on a loan is past due for more than one year, or if, regardless of the time past due, the aggregate amount of past due principal and interest exceeds 25% of the principal amount of the loan, then the entire principal amount of the loan is required to be classified as substandard.

Translation into Euro Currency

The Consolidated Financial Statements are stated in euro. Financial data as of and for periods prior to December 31, 2001 included elsewhere in this Annual Report have been restated from pesetas into euro using the exchange rate in effect as of January 1, 1999 of Ptas.166.386 = €1.00. Data in pesetas converted to euro at such exchange rates show the same trends as would have been presented if the data had been presented in pesetas.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

Not Applicable.

Not Applicable.

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

Spanish GAAP Data

The historical financial information set forth below has been selected from, and should be read together with, the Consolidated Financial Statements included herein. For information concerning the preparation and presentation of financial information contained herein, see “Presentation of Financial Information”. Also see Note 32.262 of the Consolidated Financial Statements for a presentation of our balance sheetstockholders’ equity and net income statement reconciled to U.S. GAAP.

		At December 31,
Consolidated balance sheet data		2003			2002			2001			2000			1999(1)
		(in millions of euro, except per share/ADS data (in euro) and percentages)
Total assets(2)		287,150			279,542			309,062			296,345			157,545
Loans and leases, net		148,827			141,315			150,220			137,467			68,494
Deposits		141,049			146,560			166,499			154,146			79,155
Marketable debt securities and subordinated debt		41,782			34,010			32,986			31,571			16,071
Minority interests		5,426			5,674			6,394			6,304			4,379
Capital and reserves(2)		11,473			11,842			12,770			13,047			5,516
Consolidated ratios
Profitability ratios:
Net interest margin(6)		2.4	%		2.70	%		2.92	%		2.58	%		3.33	%
Return on average total assets(7)		1.04	%		0.85	%		0.82	%		0.98	%		1.24	%
Return on average capital and reserves(8)		12.45	%		13.07	%		13.96	%		18.68	%		26.12	%
Credit quality data
Loan loss reserve		4,736			5,346			6,320			8,155			2,277
Loan loss reserve as a percentage of total loans and leases		3.09	%		3.65	%		4.05	%		5.71	%		3.23	%
Substandard loans(9)		3,126			3,531			2,743			2,862			1,365
Non-Performing loans as a percentage of total loans and leases		1.74	%		2.37	%		1.75	%		2.00	%		1.93	%
Loan loss reserve as a percentage of substandard loans		151.5	%		151.42	%		230.40	%		284.94	%		166.81	%

EU-IFRS

U.S. GAAP Information

U.S. GAAP Information

Exchange Rates

On January 1, 1999,Spain’s currency is the euro was introduced as a new currency in the following 11 European Union (“EU”) member states, forming the European Monetary and Economic Union at such date: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. As of January 2001, the euro was also introduced as the new currency in Greece. The currencies of the participating member states were nondecimal subdivisions of the euro until January 1, 2002 and for up to six months thereafter. The exchange rate at which the peseta has been irrevocably fixed against the euro is Ptas.166.386 = €1.00. Beginning January 1, 2002, the participating member states issued new euro-denominated bills and coins for use in cash transactions. By July 1, 2002, the participating member states withdrew from circulation the bills and coins denominated in their respective currencies, and they are no longer legal tender for any transactions.

The following table sets forth, for the years indicated, the average exchange rate for each year, which reflects the average of the noon buying rates for euro from the Federal Reserve Bank of New York on the last date of each month during the relevant period, for the years ended December 31, 1999 through 2003, and for the year ended December 31, 2004 (through June 30), expressed in dollars per €1.00.

The following table describes, for the periods and dates indicated, information concerning the noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00.

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on June 25, 2004, was $1.2145.euro. Unless otherwise indicated, the amounts that have been converted to euro in this Annual Report have been done so at the corresponding exchange rate published by the European Central Bank (“ECB”) on December 31 of the relevant year.

For convenience in the analysis of the information, the following tables describe, for the periods and dates indicated, information concerning the noon buying rate for euro, expressed in dollars per €1.00. The term “noon buying rate” refers to the rate of exchange for euros, expressed in U.S. dollars per euro, in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes.

At

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on March 28, 2007, was $1.3331.

As of December 31, 2003,2006, approximately 30.8%31% of our assets and approximately 33.2%33% of our liabilities were denominated in currencies other than euro (principally dollars).

For a discussion of our foreign currency exposure, please see “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Market Risk Management—Market risk in 2003—Structural Non-Trading Activities in 2006—Exchange Rate Risk”.

Not Applicable.

Not applicable.

Not applicable.Applicable.

Risks Relating to us

Since our loan portfolio is highly concentrated in Spain, adverse changes affecting the Spanish economy could have a material adverse effect on our financial condition.

We historically have developed our lending business in Spain, which continues to be our main place of business. As of December 31, 2003,2006, business activity in Spain accounted for 76.25%70.2% of our loan portfolio. See “Item 4. Information on the Company—Selected Statistical Information—Loans by Geographic Area”. Any adverse changes affecting the Spanish economy are likely to have a significant adverse impact on our loan portfolio and, as a result, on our financial condition and results of operations.

A substantial percentage of our customer base is particularly sensitive to adverse developments in the economy, which renders our lending activities relatively riskier than if we lent primarily to higher-income customer segments.

Medium- and small-size companies and middlemiddle- and lower middlelower-middle- income individuals typically have less financial strength than large companies and high-income individuals and accordingly can be expected to be more negatively affected by adverse developments in the economy. As a result, it is generally accepted that lending to these segments of our existing and targeted customer base represents a relatively higher degree of risk than lending to other groups.

A substantial portion of our loan portfolio consists of residential mortgages and consumer loans to middlemiddle- and lower middle incomelower-middle-income customers and commercial loans to mediummedium- and smallsmall-size companies. Consequently, during periods of slowdown in economic activity we may experience higher levels of past due amounts which could result in higher levels of allowance for loan losses. We cannot assure you that we will not suffer substantial adverse effects on our base loan portfolio to these customer segments in the event of adverse developments in the economy.

Increased exposure to real estate in Spain makes us more vulnerable to developments in this market.

The sound economic growth, the strength of the labor market and a decrease in interest rates in Spain hashave caused an increase in the demand offor mortgage loans in the last few years. This has had repercussions in housing prices, which have also risen significantly. As residential mortgages are one of our main assets, comprising 30%26%, 40%27% and 42%26% of our loan portfolio at December 31, 2001, 20022006, 2005 and 2003,2004, respectively, we are currently highly exposed to developments in real estate markets. AWe expect the worsening financial conditions in Spain to cause a gradual adjustment process in the Spanish real estate sector, after several years of price increases.

In addition, a strong increase in interest rates or unemployment in Spain might have a significant negative impact in mortgage payment delinquency rates. An increase in such delinquency rates could have an adverse effect on our business, financial condition and results of operations.

Highly-indebted households and corporations could endanger our asset quality and future revenues.

Spanish households and firms have reached, in recent years, a high level of indebtedness, level, which represents increased risk for the Spanish banking system. The increase of loans referenced to variable interest rates makemakes debt service on such loans more vulnerable to changes in interest rates than in the past. In fact, the debt burden of the Spanish households on disposable income has increased substantially from 12.5% in 2003 to 16.4% in 2006. The increase in households’ and firms’ indebtedness also limits their ability to incur additional debt, decreasing the number of new products we may otherwise be able to sell them.

A sudden shortage of funds could cause an increase in our costs of funding and an adverse effect on our operating revenues.

Historically, one of our principal sources of funds has been savings and demand deposits. Time deposits represented 36.2%23.3%, 35.0%25.4% and 31.1%27.6% of our total funding at December 31, 2001, 20022006, 2005 and 20032004, respectively. Large-denomination time deposits may, under some circumstances, such as during periods of significant changes in market interest rates for these types of deposit products and resulting increased competition for such funds, be a less stable source of deposits than savings and demand deposits. In addition,

since we rely heavily on short-term deposits for our funding, we cannot assure you that, in the event of a sudden or unexpected shortage of funds in the banking systems or money markets in which we operate, we will be able to maintain our current levels of funding without incurring higher funding costs or having to liquidate certain of our assets.

We face increasing competition in our business lines.

The markets in which we operate are highly competitive. Financial sector reforms in the markets in which we operate have increased competition among both local and foreign financial institutions, and we believe that this trend will continue. For example, the adoption of the euro as the common currency throughout the EU is making it easier for European banks to compete against us in Spain. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which we must now compete.

This is particularly the case of the consumer credit market, where foreign entrants are operating in the segment of small credits to subprime households.

We also face competition from non-bank competitors, such as:

We cannot assure you that this competition will not adversely affect our business, financial condition and results of operations.

Our business is particularly vulnerable to volatility in interest rates.

Our results of operations are substantially dependent upon the level of our net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Interest rates are highly sensitive to many factors beyond our control, including deregulation of the financial sectors in the markets in which we operate, monetary policies pursued by the EU and national governments, domestic and international economic and political conditions and other factors.

Changes in market interest rates could affect the spread between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities and thereby negatively affect our results of operations. For example, an increase in interest rates could cause our interest expense on deposits to increase more significantly and quickly than our interest income from loans, resulting in a reduction in our net interest income.

In addition, income from treasury operations is particularly vulnerable to interest rate volatility. Since 64.30%approximately 75% of our loan portfolio consists of variable interest rate loans maturing in more than one year, rising interest rates may also bring about an increase in the non-performing loan portfolio.

Our financial statements and periodic disclosure under securities laws may not give you the same information as financial statements prepared under U.S. accounting rules and periodic disclosures provided by domestic U.S. issuers.

Publicly available information about public companies in Spain is generally less detailed and not as frequently updated as the information that is regularly published by or about listed companies in the United States. In addition, although we are subject to the periodic reporting requirements of the United States Securities Exchange Act of 1934 (the “Exchange Act”), the periodic disclosure required of foreign issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Finally, we maintain our financial accounts and records and prepare our financial statements in conformity with Spanish GAAP,EU-IFRS, which differs in certain respects from U.S. GAAP, the financial reporting standard to which many investors in the United States may be bettermore accustomed. See Note 62 of the Consolidated Financial Statements for the presentation of our stockholders’ equity and net income reconciled to U.S. GAAP.

BBVA may fail to realize all of the anticipated benefits of the proposed transaction to acquire Compass.

The success of the proposed transaction to acquire Compass will depend, in part, on BBVA’s ability to realize the anticipated benefits from combining the businesses of BBVA and Compass. However, to realize these anticipated benefits, BBVA and Compass must successfully combine their businesses, which are currently principally conducted in different countries by management and employees coming from different cultural backgrounds. If BBVA is not able to achieve these objectives, the anticipated benefits of the transaction may not be realized fully or at all or may take longer to realize than expected.

BBVA and Compass have operated and, until the completion of the proposed transaction, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of BBVA and Compass to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the transaction. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Compass and BBVA during the transition period and on the combined company following completion of the transaction.

See “Item 4. Information on the Company—Business Overview—Mexico and the United States”.

Risks Relating to Latin America

Political events in Mexico could adversely affect our operations, given that approximately 37% of our income attributed to the Group is generated in Mexico.

The devaluationMexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Mexican governmental actions concerning the economy and state-owned enterprises could have a significant effect on Mexican private sector entities in general, and on our Mexican subsidiaries in particular.

Mexico’s presidential elections were held on July 2, 2006. Felipe Calderon’s victory was confirmed by the Federal courts on September 5, 2006, and Calderon took office on December 1, 2006, but the election results were contested by Andres Manuel López Obrador and his party, the Democratic Revolutionary Party, which alleged irregularities in over 30% of the Argentinean peso,country’s polling stations, sought a vote recount, unsuccessfully appealed the adverse macroeconomic conditions prevailing in Argentinaresults of the election and emergency measures adoptedstaged street protests. The uncertainty caused by the Argentineanelection could result in political and economic instability and social unrest, which could adversely affect the business, financial condition and results of operations of our Mexican subsidiaries. Moreover, the new administration could implement significant changes in laws, public policies and government have had, and may continue toprograms, which could have a material adverse effect on ourthe business, financial condition and results of operations.

Argentina’s economic situation deteriorated sharply in late 2001. The beginning of 2002 was marked by the continued movement of capital out of Argentina, the end of convertibility of the peso, devaluation, and the return of inflation. The crisis had a strong impact on the financial system and jeopardized the solvency and liquidity of banks. In 2003, macroeconomic conditions in Latin America and Argentina improved, but significant uncertainty regarding the scope and pace of the recovery remained.

As a result of the measures described in “Item 4. Information on the Company––Business Overview—Business Areas—Argentina”, we have written off our entire investment in Argentina to date. However, despite our provisions and write-downs, the situation in Argentina may continue to have a material adverse effect on our business, financial condition and results of operations.

We cannot assure you that the laws and regulations currently governing the Argentinean economy will not change in the future, or that any changes which may occur will not adversely affect our business, financial condition or resultsoperations of our operations in the country, or the business which we transact with counterparties located in the country.Mexican subsidiaries.

Risks relating to our investments in Argentina in light of the current social and political crises include the potential for: (i) civil unrest, rioting, looting, nationwide protests, widespread social unrest and strikes, (ii) expropriation, nationalization and forced renegotiation or modification of existing contracts, (iii) additional restrictions on repatriation of investments and transfer of funds abroad, (iv) adverse changes to taxation policies, including retroactive tax claims and (v) further changes in laws and policies of Argentina affecting foreign trade and investment.

Our Latin American subsidiaries’ growth, asset quality and profitability may be affected by volatile macroeconomic conditions, including government default on public debt, in the Latin American countries where they operate.

The Latin American countries wherein which we operate have experienced significant economic volatility in recent decades, characterized by slow growth, declining investment and significant inflation. This volatility has resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the economies to which we lend. Negative and fluctuating economic conditions, such as a changing interest rate environment, also affect our profitability by causing lending margins to decrease and leading to decreased demand for higher-margin products and services.

The results of several recent electoral processes entail an increased risk of greater state intervention in the domestic economy, especially in Bolivia and Venezuela.

Negative and fluctuating economic conditions in some Latin American countries could result in government defaults on public debt. This could affect us in two ways: directly, through portfolio losses, and indirectly, through instabilities that a default in public debt could cause to the banking system as a whole, particularly since commercial banks’ exposure to government debt is generally high in several Latin American countries in which we operate.

While we seek to mitigate these risks through thewhat we believe to be conservative risk policies, described in “Item 11. Quantitative and Qualitative Disclosures About Market Risk”, no assurance can be given that our Latin American subsidiaries’ growth, asset quality and profitability will not be affected by volatile macroeconomic conditions in the Latin American countries in which we operate.

Latin American economies can be directly and negatively affected by adverse developments in other countries.

Financial and securities markets in Latin American countries in which we operate, are to varying degrees, influenced by economic and market conditions in other countries in Latin America and beyond. Negative developments in the economy or securities markets in one country, particularly in an emerging market, may have a negative impact on other emerging market economies. These developments may adversely affect the business, financial condition and operating results of our subsidiaries in Latin America.

We are exposed to foreign exchange and, in some instances, political risks as well as other risks in the Latin American countries in which we operate, which could cause an adverse impact on our business, financial condition and results of operations.

We operate commercial banks in 10 Latin American countries and our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We are confronted with different legal and regulatory requirements in many of the jurisdictions in which we operate. These include, but are not limited to, different tax regimes and laws relating to the repatriation of funds or nationalization of assets. Our international operations may also expose us to risks and challenges which our local competitors may not be required to face, such as exchange rate risk, difficulty in managing a local entity from abroad, and political risk which may be particular to foreign investors. Our expansion in these markets requires us to respond to rapid changes in market conditions in these countries. We cannot assure you that we will continue to succeed in developing and implementing policies and strategies that are effective in each country in which we operate or that any of the foregoing factors will not have a material adverse effect on our business, financial condition and results of operations.

Regulatory changes in Latin America that are beyond our control may have a material effect on our business, financial condition and results of operations.

A number of banking regulations designed to maintain the safety and soundness of banks and limit their exposure to risk are applicable in certain Latin American countries in which we operate. Local regulations differ in a number of material respects from equivalent regulations in Spain and the United States.

Changes in regulations that are beyond our control may have a material effect on our business and operations.operations, particularly in Venezuela. In addition, since some of the banking laws and regulations have been recently adopted, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. No assurance can be given that laws or regulations will be enforced or interpreted in a manner that will not have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Other Countries

ITEM 4. INFORMATION ON THE COMPANYOur strategic growth in Asia exposes us to increased regulatory, economic and geopolitical risk relating to emerging markets in the region, particularly in China.

Strategic growth in Asia, particularly China, continued in 2006. The BBVA Group formed a strategic alliance with the CITIC Group, in which we committed to invest €501 million to purchase 5% of China Citic Bank (“CNCB”) as well as €488 million to purchase 15% of Citic International Financial Holdings (“CIFH”) as of December 31, 2006. See “Item 4. Information on the Company—Business Overview—Wholesale Businesses”.

As a result of our expansion into Asia, we are exposed to increased risks relating to emerging markets in the region, particularly in China. The Chinese government has exercised, and continues to exercise, significant influence over the Chinese economy. Chinese governmental actions concerning the economy and state-owned enterprises could have a significant effect on Chinese private sector entities in general, and on CNCB or CIFH in particular.

We also are exposed to regulatory uncertainty and geopolitical risk as a result of our investments in Asia. Changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could adversely affect our investments. Moreover, Asian economies can be directly and negatively affected by adverse developments in other countries in the region and beyond.

Any of these developments could have a material adverse effect on our investments in Asia or the business, financial condition and operating results of the Group.

A. Our continued expansion in the United States increases our exposure to the U.S. market.

The Group’s expansion continued in the United States in 2006 with the acquisition of Texas Regional Bancshares, Inc. (“Texas Regional Bancshares”) (for $2,141 million (approximately €1,674 million) in November 2006) and State National Bancshares, Inc. (“State National Bancshares”) (for $484 million (approximately €368 million), which closed in January 2007). These purchases, together with Laredo National Bank, Inc. (“LNB”) (acquired in 2005), have nearly tripled our presence in the United States in the past two years. In addition, we recently announced our proposed acquisition of Compass, which, if consummated, will substantially increase our presence in the United States. See “Item 4. Information on the Company—Business Overview—Mexico and the United States” and “Item 4. Information on the Company—History and Development of the CompanyCompany—Capital Expenditures”.

Our expansion in the United States makes us more vulnerable to developments in this market, particularly the real estate market. The sound economic growth, the strength of the labor market and a decrease in interest rates in the United States have caused an increase in the demand for mortgage loans in the last few years. This has had repercussions in housing prices, which have also risen significantly. As we have acquired entities in the United States, our exposure to the U.S. real estate market has increased, and this will increase further if the proposed acquisition of Compass is consummated. If there were a significant downturn in the U.S. economy in general, or the real estate market in particular, it could have a material adverse effect on our business, financial condition and results of operations.

Our legal name is Banco Bilbao Vizcaya Argentaria, S.A. BBVA’s predecessor bank, BBV, was incorporated in Spain as a limited liability company (asociedad anónima or “S.A.“S.A.”) under the Spanish Corporations Law on October 1, 1988. BBVA was formed as the result of a merger by absorption of Argentaria into BBV that was approved by the shareholders of each institution on December 18, 1999 and registered on January 28, 2000. It conducts its

business under the commercial name “BBVA”. BBVA is registered with the Commercial Registry of Vizcaya (Spain). It has its registered office at Plaza de San Nicolás 4, Bilbao, Spain, 48005, telephone number 34-94-420-3001.+34-91-3746201. BBVA’s agent in the U.S. for U.S. federal securities law purposes is Raúl Santoro de Mattos Almeida (BBVA New York, 1345 Avenue of the Americas, 45^th floor, NY, New York, 10105)10105, telephone number +1-212-728-1660). BBVA is incorporated for an unlimited term.

Recent Developments

Proposed Transaction to Acquire Compass Bancshares, Inc.

On February 16, 2007 BBVA entered into a definitive agreement to acquire 100% of the shares of Compass for a consideration made up of a combination of ordinary shares of BBVA and cash (the “Agreement”). Pursuant to the Agreement, Compass shareholders can elect to receive 2.8 BBVA ordinary shares or ADSs or $71.82 in cash for each Compass share, subject to proration. Based on BBVA’s closing stock price on Thursday, February 15, 2007, the transaction has an aggregate value of approximately $9.6 billion. See “—Business Overview—Mexico and the United States”.

Capital Expenditures

Our principal investments are financial, in subsidiaries and in affiliates. The main capital expenditures from 20012004 to the date of this Annual Report were the following:

2007

On July 12, 2006, BBVA entered into an agreement to purchase the U.S. banking group, State National Bancshares, which is domiciled and conducts its main business activity in the State of Texas. Upon receipt of the required shareholder approval and other necessary administrative authorizations, the transaction concluded on January 3, 2007. The agreed purchase price was $484 million (approximately €368 million) at this date.

On December 22, 2006, BBVA reached an agreement with the Chinese banking group CITIC Group to develop a strategic alliance in the Chinese market. In accordance with this agreement, BBVA will acquire a 5% ownership interest in CNCB with a call option to acquire 9.9% of its share capital. The price for the initial 5% share capital is approximately €501 million. Additionally BBVA will acquire a 15% ownership interest in the banking entity CIFH, which is headquartered in Hong Kong and is quoted on the Hong Kong Stock Exchange. The price for this 15% share is approximately €488 million. As of the date of the filing of this Annual Report, certain regulatory and other approvals remain pending.

2006

On November 30, 2006 the Group acquired all the shares of the Italian vehicle rental company Maggiore Fleet S.p.A., for €70.2 million, giving rise to goodwill of €35.7 million.

On November 10, 2006, the Group acquired Texas Regional Bancshares through the investment of $2,141 million (€1,674 million). The goodwill recognized as of December 31, 2006 amounted to €1,257 million.

On July 28, 2006, BBVA acquired 100 % ownership of Uno-E Bank, S.A. The process to acquire all of Uno-E Bank S.A.’s shares commenced on January 10, 2003 when Telefónica España, S.A., pursuant to the agreement entered into by Terra Networks, S.A. (subsequently merged into Telefónica España, S.A.) and BBVA, proceeded on January 10, 2003 to start selling to BBVA its 33 % ownership interest in Uno-E Bank, S.A. for an aggregated amount of €148.5 million.

On June 12, 2006, BBVA reached agreements to acquire State National Bancshares, Inc. and Texas Regional Bancshares, each of which are U.S. banking groups domiciled in Texas. The acquisition price agreed for State National Bancshares was approximately $480 million while the acquisition price agreed for Texas Regional Bancshares was approximately $2,164 million. In both cases, the acquisitions were subject to both shareholder and regulatory approvals. The acquisitions closed on January 3, 2007 (State National Bancshares) and in November, 2006 (Texas Regional Bancshares). The acquisition of Texas Regional Bancshares added €3,115 million in lending and €4,651 million in deposits to the Group’s accounts as well as 73 branches and 2,009 employees, in each case at December 31, 2006.

In May 2006, BBVA acquired a 51% ownership interest in Forum, a Chilean company specializing in car purchase financing, through the Chilean entities Forum Distribuidora, S.A. and Forum Servicios Financieros, S.A. (which in turn own all the shares of ECASA, S.A.), giving rise to the incorporation of BBVA Financiamiento Automotriz. The goodwill recognized as of December 31, 2006 amounted to €51 million.

On March 3, 2006, BBVA purchased 0.43% of BBVA Chile’s share capital for 2,318 million Chilean pesos (€3.7 million), increasing BBVA’s share capital in BBVA Chile to 67.05%. As the share capital of BBVA in BBVA Chile is higher than two thirds of BBVA Chile’s total share capital, BBVA, in compliance with Chilean legislation launched a public tender offer for all of BBVA Chile’s share capital. The public tender offer was effective from April 3, 2006 to May 2, 2006. After the acceptance of the public tender offer by 1.13% of BBVA Chile’s outstanding shares, BBVA’s share capital in BBVA Chile increased to 68.18%.

2005

On January 6, 2005, pursuant to the agreement entered into in September 2004 and after obtaining the mandatory authorizations, the Group, through BBVA Bancomer, S.A. de C.V. (“BBVA Bancomer”), acquired all the shares of Hipotecaria Nacional, S.A. de C.V., a Mexican company specializing in the mortgage business. The price paid was 4,121 million Mexican pesos (approximately € 276,048 thousand) and the goodwill recognized amounted to € 259,111 thousand at December 31, 2005.

On April 28, 2005, pursuant to the agreement entered into on September 20, 2004 and after obtaining the mandatory authorizations, BBVA, acquired all the shares of LNB, a bank holding company located in Texas (United States) which operates in the banking business through two independent banks: Laredo National Bank and South Texas National Bank. The price paid was U.S.$ 859.6 million (approximately € 666,110 thousand) and the goodwill recognized amounted to € 473,941 thousand at December 31, 2005.

On October 31, 2005, the Guarantee Fund for Colombian Financial Institutions (“FOGAFIN”), sold by public auction 98.78% of the share capital of Banco Granahorrar, S.A. (a Colombian financial institution) (“Banco Granahorrar”) to the BBVA Group’s subsidiary in Colombia, BBVA Colombia, S.A. The offer made by BBVA Colombia, S.A. for the acquisition of Banco Granahorrar totaled U.S.$ 423.66 million. This transaction was consummated in December 2005 after the required authorizations had been obtained from the supervisory and control bodies. The price paid was 981,572.2 million Colombian pesos, approximately € 364,163 thousand, and the goodwill recognized amounted to € 266,862 thousand at December 31, 2005.

2004

Grupo Financiero BBVA Bancomer, S.A. de C.V (“Bancomer”). On January 30, 2004, our Board of Directors adopted a resolution to launch a tender offer for the approximatedapproximately 40.6% of the shares of Bancomer, our Mexican affiliate, which were not already owned by BBVA. The tender offer was launched on February 19, 2004 and expired on March 19, 2004. As a result of the successful completion of the tender offer and subsequent purchases amounting to 0.56%during 2004 of Bancomer’s capital stock, at MarchDecember 31, 2004, we owned 99.44%99.70% of Bancomer’s outstanding shares. On February 5, 2004, to strengthen our capital ratios and finance a portion of the cost of the Bancomer tender offer, we sold 195,000,000 of our newly-issued ordinary shares to institutional investors in Spain and outside of Spain at the offer price of €10.25 per share.

On March 18, 2004, the Board of Directors of BBVA Banco Francés, S.A. (“Banco Francés”). On March 18, 2004, the Board of Directors of Banco Francés,, our Argentine affiliate, resolved to implement a plan intended to improve Banco Frances’sFrancés’s adjusted stockholders’ equity and enable Banco FrancesFrancés to comply with new minimum capital requirements established by the Argentine Central Bank. TheUnder this plan, provides for:we:

The two transactions involving Banco FrancesFrancés described above willdid not affect BBVA’s consolidated operating results because (i) in the case of the loan capitalization, BBVA had previously fully provisioned the loan, and (ii) in the case of the purchase of Banco FrancesFrancés (Cayman) Limited, this entity was already fully consolidated by BBVA.

2003

During 2003, BBVAOn October 8, 2004, we acquired 0.176%all the shares of the capital stock of Gas Natural S.D.G, S.A. (“Gas Natural”) for €12.7 million, raising its interest in Gas Natural to 3.241%.

During 2003, BBVA purchased 4.76% of the capital stock of Bancomer forValley Bank, a total of €304 million, raising its interest to 59.43% as of December 31, 2003.

2002

On May 14, 2002, Banco Francés sold its interest in BBVA Uruguay (60.88%) to BBVA for $55 million, after obtaining authorization from the Central Bank of Uruguay. As a result of this transaction, BBVA’s ownership interest in BBVA Uruguay increased from 80.66% to 100%.

On May 15, 2002, Terra Networks, S.A. (“Terra Networks”) and BBVA entered into a preliminary agreement for the integration of Uno-e Bank, S.A. and the individual consumer financing business of Finanzia Banco de Crédito, S.A. (“Finanzia”), BBVA’s wholly-owned subsidiary, whereby Terra Networks’ holding in Uno-e Bank would decrease to 33%. This integration transaction and the percentage of ownership held by Terra Networks were subject to the formalization of final contracts, which were

executed on January 10, 2003, and approved at extraordinary shareholders’ meetings of Finanzia and Uno-e Bank held on April 23, 2003. In connection with the integration transaction, Terra Networks was granted a put option over its sharesbank licensed in the resulting combined entity giving it the right to require BBVA to purchase such shares. For more information relating to this transaction, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Agreement with Terra Networks” and “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Uno-e Bank Agreement”.

On June 8, 2004, the European Commission approved plans by BBVA and Banca Nazionale del Lavore (“BNL”) to form a consumer-finance 50-50 joint venture in Italy. The new company will provide consumer credit products, such as credit cards, personal loans and salary advances.

In two transactions in June and November 2002, BBVA purchased from the Mexican government its 3% and 2.5% interests in Bancomerstate of California, for approximately €240U.S.$16.7 million, and €175 million, respectively. As a result of these transactions,which was BBVA’s ownership interest in Bancomer increased to 54.67% as of December 31, 2002.

2001

In January 2001, BBVA acquired 200 million shares of Bancomer from the Bank of Montreal, representing approximately 2.2% of Bancomer’s capital stock, for approximately $125 million. On April 4, 2001, BBVA reached an agreement with Bank of Montreal to purchase in two tranches 812 million shares of Bancomer for a total of $558 million. The first tranche, consisting of 500 million shares, was acquired in April 2001, and the second tranche, consisting of 312 million shares, in May 2001, raising BBVA’s holding in Bancomer to 48%. Additional purchases of shares of Bancomer amounting to $140 million were made in October and November 2001, increasing BBVA’s stake in Bancomer to 49% as of December 31, 2001.

BBVA acquiredcommercial banking acquisition in the first and last quarters of 2001 a 4.87% interest in BNL for approximately €398 million, increasing its holding in BNL to 14.8% as of December 31, 2001. BBVA increased its holding to 14.9% as of January 31, 2002.United States.

Capital Divestitures

Our principal divestitures are financial, in subsidiaries and in affiliates. The main capital divestitures from 20012004 to the date of this Annual Report were the following:

2006

On June 14, 2006, BBVA sold its 5.04% capital share in Repsol YPF, S.A (“Repsol”). The selling procedure was executed through the closing and settlement of hedging equity swaps previously contracted. This sale gave rise to a gain of €523 million.

On May 19, 2006, BBVA sold its stake in the share capital of Banca Nazionale del Lavoro (“BNL”) to BNP Paribas, for a price of €1,299 million following its adhesion on May 12, 2006, as shareholder of BNL, to the public tender offer launched by BNP Paribas to acquire 100% of BNL’s capital. The sale gave rise to a gain of €568.3 million.

On April 5, 2006, BBVA sold its stake of 51% in the share capital of Banc Internacional d´Andorra, S.A. (“Andorra”) to the rest of the shareholders of said entity, the Andorran founding partners of the bank, for a price of €395.15 million.

2005

There were no significant capital divestures during 2005.

2004

On June 18, 2004 BBVA sold its 5.01% interest in Acerinox, S.A. for €146.6 million, giving rise to a capital gain of €35 million.

In January 2004, BBVA sold 2.2% of the capital stock of Gas Natural.Natural S.D.G., S.A. At the time the transaction closed, BBVA had not completed preparation of its 2003 Consolidated Financial Statements and therefore, in accordance with Spanish GAAP, reflected the amortization of €70 million of consolidation goodwill which resulted from the transaction in such financial statements rather than in its 2004 Consolidated Financial Statements.

2003

On January 13, 2003, BBVA announced its intention to sell its Brazilian affiliate, Banco Bilbao Vizcaya Argentaria Brasil, S.A. (“BBV Brasil”) to Banco Bradesco, S.A. (“Bradesco”). On June 9, 2003, upon completion of due diligence, receipt of authorizations from regulatory authorities and approval by the corresponding corporate bodies, BBVA transferred 100% of BBV Brasil to Bradesco, in consideration for which Bradesco paid 35,481,460,311 of its newly-issued ordinary shares and 34,948,501,563 of its newly-issued preferred shares, totaling 4.44% of Bradesco’s share capital, as well as 1,864 million Brazilian Reais in cash, for a total consideration of approximately 2,626 million Brazilian Reais (approximately $900 million). We were required, under Spanish GAAP, to take an extraordinary charge in 2002 relating to exchange rate differences relating to our investment in BBV Brasil accumulated up to December 31, 2002. Under the transaction agreements with Bradesco, in addition to the cash consideration and equity participation described above, we have been granted the right to nominate one member of Bradesco’s board of directors so long as we maintain, subject to exceptions relating to capital increases where shareholders are not offered preemptive rights, at least a 4.0% interest in Bradesco’s share capital. We have agreed for a period of two years from the closing date or so long as we have a right to nominate one member of Bradesco’s board of directors, whichever is longer, that we will not control and/or manage a financial institution in Brazil. See Note 32.2.D.13 to the Consolidated Financial Statements.

In March 2003, BBVA2004, the Group sold its 25% interest in Metrovacesa Residencial, S.A., resulting in a capital gain of €2.1 million.

On June 5, 2003, BBVA agreed to sell its24.4% holding in Crédit Lyonnais,Banco Atlántico, S.A., to Crédit Agricole, S.A. in exchange for €482 million in cash, representing 67% of consideration, and 16.3 million shares of Crédit Agricole, S.A., representing at the remaining 33% of consideration. BBVA immediately sold the Crédit Agricole shares to institutional investors at a price of €16.64 per share, for a total consideration of €271 million. As a result of this transaction, BBVA liquidated its participation in Crédit Lyonnais and recorded a capital gain of €342 million.

In July 2003, BBVA sold 3% of the capital stock of Gamesa, giving rise to a capital gain of €29.9 million.

In the last quarter of 2003, BBVA sold 2.465% of the capital stock of Repsol-YPF, giving rise to a loss of €73.3 million.

In 2003, a series of purchases and sales of shares of Telefónica de España, S.A., resulting in a 0.57% net reduction of our holding, gave rise to a capital gain of €220 million.

In 2003, a series of purchases and sales of shares of Iberdrola, S.A., resulting in a 1.02% net reduction of our holding, gave rise to a capital gain of €45.3 million.

In December 2003, BBVA sold its entire 9.9% interest in the Moroccan bank Wafabank, S.A. to Omnium Nord Africain, S.A. The total sale price was 529,505,625 dirhams (approximately €48 million) and gave rise to a capital gain of €3.5 million.

In December 2003,established by Banco Sabadell, S.A. launched ain its tender offer for all the shares of Banco Atlántico, S.A. at a price of €71.79 per share. The transaction was completed in March, 2004 and BBVA sold its entire 24.37% interest in Banco Atlántico, whichThis sale gave rise to a capital gain of approximately €218 million.

2002

€217.7 million for the BBVA Group.

In March 2004, the first quarter of 2002, BBVAGroup sold 3.82% of its 50% holding in Metrovacesa,Hilo Direct Seguros y Reaseguros, S.A, which represented all of the Group’s interests. This sale gave rise to a gain of €26 million for the BBVA Group.

In June 2004, the Group sold its 5.0% holding in Acerinox, S.A., which represented all of the Group’s interests. This sale gave rise to a gain of €34.6 million for the BBVA Group.

On September 6, 2004, the Group sold its 17.2% holding in Vidrala, S.A., giving rise to a capital gain of €14€19.3 million. In June 2002, BAMI,

On October 12, 2004, the Group sold the El Salvador welfare business composed of BBVA Crecer AFP and BBVA Seguros, S.A. Inmobiliaria– Seguros de Construcciones y Terrenos agreed to purchase BBVA’s 23.9% interestPersonas – in the capital stockwhich BBVA had ownership interests of Metrovacesa, S.A.62% and 51%, respectively, for €545.4$42.8 million (€36.55 per share).34.76 million), giving rise to a gain of €12.3 million.

In December 2004, the Group sold its 3% holding in Gamesa, S.A., which represented all of the Group’s interests. This transaction closedsale gave rise to a gain of €53.1 million for the BBVA Group.

In the second quarter of 2004, the Group exercised a sale option it had on July 17, 2002. Asits 33.3% holding in Grubarges Inversión Hotelera, S.L., and recognized a resultgain of this sale,€26.3 million on such sale.

During the first six months of 2004, the Group sold its 0.6% holding in Repsol. These sales gave rise to a loss of €6.5 million for the BBVA Group.

During 2004, the Group purchased and sold shares of Telefónica, S.A. without any material variation in its aggregate holding in such company as of December 31, 2002, BBVA had a 0.58% interest in Metrovacesa, S.A. The transaction2003. These sales gave rise to a capital gain of approximately €361€141.7 million.

Public Takeover Offers

2001On June 20, 2005, we launched an exchange offer for the approximately 85.3% of the shares of BNL which we did not already own. Under the terms of the exchange offer, BBVA offered one of its ordinary shares for every five ordinary shares of BNL. We withdrew our offer following a third party’s announcement that it had entered into certain agreements pursuant to which it controlled a 47% stake in BNL.

On March 3, 2006, BBVA purchased 0.43% of BBVA Chile’s share capital for 2,318 million Chilean pesos (€3.7 million), increasing BBVA’s share capital in BBVA Chile to 67.05%. See “—Capital Expenditures”.

In March 2001, BBVA sold its interest in Profuturo GNP, S.A. de C.V. Administradora de Fondos de Pensiones for $190 million.

B. Business Overview

BBVA is a highly diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. We also have a portfolio of industrial holdingsinvestments in some of Spain’s leading companies.

Business Areas

Reorganization in 2003

In 2003, we reorganized our business areas with a view to optimizing the earnings and value-creation of each line of business and to more closely alignDuring 2006, our organizational structure withwas divided into the manner in which management has been settingfollowing business strategy and monitoring our operating results. The principal features of the reorganization were the following: (i) our areas: