BBVA Profit Jumps As Chile Unit Sale Offsets Argentina Woes

by Ike Obudulu Posted on October 30th, 2018

Spanish lender BBVA Group posted a net attributable profit of €4.32 billion (in line with analysts’ forecasts) during the first nine months of 2018, up 25.3 percent from the same period a year earlier (+43 percent at constant exchange rates). A surge in recurring revenues, cost containment efforts, lower impairment losses and capital gains of €633 million from the sale of BBVA Chile have all contributed to this result.

Transformation: Digital and mobile customers as well as digital sales continued to grow across all geographies, with a positive impact on efficiency. Digital customers now account for 49% of the total, very close to the year-end target of having half of the customers banking through digital channels

• Income: Operating income improved (+5.8 percent at constant exchange rates), driven by a positive trend in recurring revenues and containment in operating expenses. BBVA’s ROE between January and September was 12.2 percent, with ROTE standing at 14.8 percent
• Risks: The NPL ratio was 4.1 percent in September (4.4 percent in June). Coverage ratio reached 73 percent
• Capital: Despite a complex environment, the fully-loaded CET1 ratio stood at 11.34 percent. During the first nine months of the year, the tangible book value per share plus dividends grew 7.2 percent to €5.95

“In spite of a challenging situation in Turkey and Argentina, the results we are presenting today reveal the strength of our business model and geographic diversification. These results are underpinned by the progress achieved in the bank’s transformation, a comfortable capital position and solid risk indicators,” BBVA CEO Carlos Torres Vila said.

Net interest income for the first nine months of the year stood at €12.9 billion (-2.3 percent yoy, +10.2 percent at constant exchange rates), while commissions and fees reached €3.65 billion (-1.4 percent yoy, +9.4 percent at constant exchange rates). Both line items – recurring revenues – reached €16.55 billion (-2.1 percent yoy, +10.1 percent at constant exchange rates), which drove the gross income to €17.6 billion (-6.9 percent yoy, +4.3 percent at constant exchange rates).

Operating expenses between between January and September dropped 7.1 percent on the back of cost-discipline efforts. Excluding currency effects, operating expenses rose 2.7 percent. The efficiency ratio stood at 49.6 percent, 52 basis points lower than in 2017 at constant exchange rates. Operating income was €8.88 billion (-6.8 percent with currency impact, +5.8 percent at constant exchange rates), driven by recurring revenues and containment in operating expenses.

The Group’s net attributable profit for the year through September was €4.32 billion, up 25.3 percent compared to the same period of 2017 (+43 percent at constant exchange rates).

BBVA earned €1.67 billion in Q3-18 (+46.4 percent yoy, +70.5 percent at constant exchange rates). The quarterly figure includes capital gains on the sale of BBVA Chile and a negative impact (€-190 million) as a result of Argentina’s hyperinflation accounting adjustment.

Regarding profitability, BBVA’s ROE between January and September reached 12.2 percent compared to 9.6 percent for the same period of 2017, while the Group’s ROTE stood at 14.8 percent versus 11.9 percent a year earlier. The bank remains focused on creating value for its shareholders. Despite the environment, during the first nine months of the year, the tangible book value per share plus dividends grew 7.2 percent to €5.95.

As for risk indicators, the NPL ratio in September reached 4.1 percent (versus 4.4 percent in Q2-18), its lowest level since June 2012. Coverage ratio rose to 73 percent and the cost of risk was 0.90 percent.

In terms of capital adequacy, BBVA’s capital position remained solid. The fully-loaded CET1 ratio stood during the quarter at 11.34 percent, surpassing the 11-percent target. The sale of the Group’s stake in BBVA Chile generated a positive impact on this ratio of 50 basis points. The leverage ratio as of September 30 was 6.6 percent fully-loaded, the highest among its European peer group.

In balance sheet and activity line items, the comparison was affected by the change in the scope of consolidation following the sale of BBVA Chile, which took place on July 6. Loans and advances to customers totaled €370.5 billion, (down 0.9 percent ytd), with customer deposits reaching €365.69 billion, up 0.5 percent.

The BBVA Group’s transformation process continued, with an increase in its digital and mobile customer base, as well as in digital sales. This performance had a positive impact on efficiency. The number of digital customers increased to 26 million, up 23 percent in one year. The Group’s mobile customer base reached 21.7 million, 37 percent more than in September 2017. Digital customers now account for 49% of the total, very close to the year-end target of having half of our customers banking through digital channels. Also, unit sales through digital channels during the first nine months of the year accounted for 39.5 percent of the total, compared to just 15.3 percent from two years ago.

The BBVA Group’s transformation process continued, with an increase in its digital and mobile customer base, as well as in digital sales. This performance had a positive impact on efficiency. The number of digital customers increased to 26 million, up 23 percent in one year. The Group’s mobile customer base reached 21.7 million, 37 percent more than in September 2017. Digital customers now account for 49% of the total, very close to the year-end target of having half of our customers banking through digital channels. Also, unit sales through digital channels during the first nine months of the year accounted for 39.5 percent of the total, compared to just 15.3 percent from two years ago.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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