Carlos Torres Vila: “Little things add up to a major revolution”

“We are talking about the little things we are working on. Some of them are not that little, but they add up to a major revolution.” Carlos Torres Vila explained that BBVA has introduced a remote management model in Mexico, a model that was hugely successful in Spain and is currently in the early stages in Turkey. The bank has also added mobile appointments in Spain and Turkey as well as features like BBVA Valora, which has enjoyed great success in Spain and has more than half a million users (half of which are not customers), leading to more mortgage applications.

He also emphasized the group’s effort to boost digital sales, which are rising quarter after quarter across all countries. In 2015, the percentage of units sold on digital channels out of total sales was 10%, reaching an average of 25% up to September. In terms of the number of digital customers, at the end of the third quarter the bank had more than 17 million digital customers, an increase of 20% year-on-year, and 11 million customers who regularly use mobile banking, an increase of 41%.

Carlos Torres Vila stressed that customers are increasingly engaging with the bank using their mobile devices. That’s why BBVA’s goal is to improve functions that will allow this. “Digital sales are one of the indicators that we are becoming software companies,” he added, to the extent that the bank allows customers to communicate using remote devices.

Capital and efficiency

He also called attention to the bank’s remarkable progress in two of the strategic priorities the bank set a year and a half ago: optimize capital allocation and unrivaled efficiency. The CEO also commented on the bank’s solid results for this period: “It was a very good quarter, with solid growth, diversified by geographic area and a good outlook for growth,” the emphasized.

In terms of capital, Carlos Torres Vila reported that BBVA has reached its goal of a CET1 fully-loaded capital ratio of 11% ahead of time – a target that was set for 2017.

The higher Tier 1 capital ratio also puts the bank in a better position than its competitors due to the greater density of RWAs. He explained, however, that despite the comfortable situation, he remains cautious regarding its future evolution and will not modify next year’s target.

In this regard, BBVA’s CEO pointed to the capital generation of 29 basis points this quarter (from 10.71% to 11%), growth that took place even after absorbing the impact of 15 basis points in capital from Turkey’s lower rating.

In terms of capital, Carlos Torres Vila reported that BBVA has reached its goal of a CET1 fully-loaded capital ratio of 11% ahead of time – a target that was set for 2017.

The higher Tier 1 capital ratio also puts the bank in a better position than its competitors due to the greater density of RWAs. He explained, however, that despite the comfortable situation, he remains cautious regarding its future evolution and will not modify next year’s target.

In this regard, BBVA’s CEO pointed to the capital generation of 29 basis points this quarter (from 10.71% to 11%), growth that took place even after absorbing the impact of 15 basis points in capital from Turkey’s lower rating.

Profitable growth

The CEO also underscored that the bank’s goal is to have profitable growth, while optimizing capital allocation. He clarified that if the bank is forced to consume part of the capital, it will do so, but by generating new sources of capital increases.

He also indicated that depending on the evolution of the capital ratio, the bank will decide when to move toward a cash dividend with a payout between 35% and 40%.

In terms of Telefónica’s decision to lower its dividend, the CEO applauded the measure, even though it will cost the bank €95 million in 2017. “We agree with the decision they have made,” he said.

The CEO also reported good progress in loan loss provisions – at stable, low levels – and lower provisions that contribute to the group’s significant increase in net profit. He stressed that “geographic diversification with significant growth in emerging markets” represents a major advantage for BBVA.

Work philosophy

Turning to Spain, Carlos Torres Vila noted that capital and efficient cost controls have been and will remain strategic priorities. In terms of costs, he recalled that the bank has closed 436 offices in Catalonia and will close 100 more in the rest of Spain. Approximately 2,000 jobs will be cut in Spanish Banking area, of which 1,556 are part of the efficiency plan created to integrate CX.

The CEO stressed that there are no workforce adjustment plans. The job cuts that are not related to the integration of CX correspond to the dynamic management of the network and will take place through early retirement.

As a result of the transformation underway in the bank and in order to continue improving efficiency and optimizing resources, Carlos Torres Vila clarified that the workforce is being reorganized and in many cases, people will move to different positions.

He also emphasized that there are no adjustment plans for the future, as the bank’s needs will be assessed every year. No provisions are currently planned for future job cuts. “It’s a philosophy. Technology lets us be more efficient and that is an obligation in environments with lower profitability,” he added.

 The teams’ strengths

At the results presentation, the CEO pointed to improvement across all business areas, especially in Mexico – an “example of success” in the group, he indicated.

Carlos Torres Vila explained that BBVA Bancomer remains a leading bank in return on equity, that Turkey continues to have positive jaws (the evolutions of costs and income) and South America has a good outlook, despite the slowdown in the region.

The CEO also made reference to the situation in countries like Venezuela and Turkey. In the former, he praised the team’s good management and the strength of the bank, and was confident that the situation would return to normal soon.

The CEO also made it clear that the situation in Turkey is completely different from Venezuela and noted that the Turkish bank’s margins are showing good progress, and that the profitability of the investment has not declined.

Regarding the U.S., Carlos Torres Vila said that it is a “worthwhile” country that will be “the place to be” in the future due to the high digitization rate.  “Our strategy could be successful there,” he added.

Consolidation in the sector

In terms of the consolidation process in the sector, BBVA’s CEO indicated that the mergers make sense to cut costs, but in his opinion, the most important thing is to recover the public assistance provided to intervened institutions. In this regard, he recalled that BBVA has contributed to this process by integrating Unnim and CX, which has allowed the bank to reach a 23% market share in Catalonia. This will represent approximately €200 million in annual synergies.

Political certainty to attract investors

Regarding the political situation in Spain, BBVA’s CEO expressed his satisfaction with the possibility that there will be a government in the coming days, avoiding a third round of elections.

In his opinion, political certainty and stability are the most important elements to recover the levels of investment and continue creating the reforms that Spain needs. He also recalled the good news that unemployment has fallen below 20% (according to data released today from the Labor Force Survey), but said that the government that is eventually formed should continue adopting measures to continue lowering unemployment.