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Online Extra: Q&A with BBVA's Ybarra and Gonzalez

Bank analysts often dub Banco Bilbao Vizcaya Argentaria (BBVA) one of Europe's best-managed banks. With more than a decade of dealmaking under its belt, from Spanish mergers to Latin American acquisitions, BBVA now ranks No. 2 by assets in both Spain and Latin America. And though its personality is less flamboyant than rival Banco Santander Central Hispano (BSCH), BBVA's superior profits and cost-efficiency are the envy of rival BSCH's management. Competitors also praise BBVA's team-driven corporate culture and liken its steady unstoppable march into new markets to that of "the Roman army."

BBVA Co-Chairmen Emilio Ybarra and Francisco Gonzalez spoke recently with BusinessWeek Rome Bureau Chief Gail Edmondson and European Finance Correspondent David Fairlamb at the bank's towering Madrid office. Edited excerpts from their conversation follow:

Q: When will cross-border mergers in Europe begin?

Gonzalez: The situation in Europe is still pending. Why? There are many nationalist barriers remaining. Sooner or later, something must be done to bring them down.

Q: When the time comes and cross-border consolidation begins in Europe, will you look for an acquisition or a merger partner?

Gonzalez: All the possibilities are open.

Ybarra: Everyone is talking to everybody.

Q: Are you interested in expanding in any markets beyond Latin America and Europe?

Ybarra: We are thinking of doing something in North America. You take our base in Mexico [with the Bancomer acquisition last year], and given the number of Mexicans and Spanish-speakers in the U.S., it's an interesting market.

Q: You've invested heavily in Latin America. Isn't there a risk of volatile markets destabilizing your performance?

Ybarra: We are accustomed to volatile markets. We [in Spain] have gone through the same economic transition. We've been through the crisis in Argentina and Mexico without major impact. Of course there is more risk in Latin America than Europe, but there are more opportunities to grow our business.

Gonzalez: In terms of risks, we are quite comfortable. We control risk through the assets, people, and technological tools we use.

Q: Despite your years of experience investing in Latin America, Spanish banks still do relatively little lending there. Are you disappointed in the pace of development of these markets?

Ybarra: What we've done in Latin America is prepared a good technological platform for the whole region. We have reduced the number of people working for us by 8,000, and we can still do a lot more to improve the systems. We expect clients will be demanding more services.

Q: Are you likely to make an acquisition soon in Brazil?

Ybarra: We are prepared to study opportunities. We don't need to do something tomorrow. If there are no good opportunities and the prices are too high, we are not interested.

Q: What's the key to making a bank merger succeed?

Ybarra: The second big one is much easier. We have good experience, which is what you need to make it work. Many people throughout our organization have this experience. It's very important to create one brand. It's also good to do it quickly. You have to have the energy to decide. Otherwise, you lose a lot of time.

Gonzalez: Technology is also important. It helps make a merger much more feasible and creates tremendous opportunity to cut costs.

Q: Are you disappointed in your investments in e-banking?

Gonzalez: Our experience with Uno-E [BBVA's e-bank] has proven successful in terms of market share. Of course, it's losing money, but it's a fantastic experience. It's important to gain this experience on the ground. Technology means big changes in the customer-relationship-management tools and the digitalization of the bank. Over time, we will increasingly enter the life of the customer through technology. Technology will transform the bank entirely. We see huge possibilities.

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