Five keys to understanding BBVA results in 5 minutes
BBVA today reported financial results for the first nine months of 2016. According to BBVA CEO Carlos Torres Vila, “it has been a good quarter, with solid growth in recurring revenues, cost control, and stability in risk indicators. Furthermore, we have already achieved the capital goal we had set for 2017.”
These are the 5 keys to understanding BBVA’s results:
1. BBVA earned 64,3%* more between January and September 2016, compared to the same period a year earlier. What drove this growth in net attributable profit? Basically, three factors: resilience of the Group’s recurring revenues (in other words, typically bank-related income: net interest income and fees and commissions), lower impairment losses on financial assets and real-estate provisions, and cost-containment efforts. On top of the resilience of recurring revenues, the Group benefited from positive NTI (Net Trading Income), which helped gross income (recurring operating revenues plus increases on NTI plus other headings such as dividends and other products and operating charges) reach €18.43 billion, 5.1% more y-o-y.
2. BBVA achieved its 2017 capital goal ahead of schedule. Thus, its fully-loaded CET1 ratio stood at 11% as of September 30.
3. BBVA’s risk indicators are still reflecting the solid trends from previous months. Specifically, the NPL ratio remained stable and stood at 5.1%, standing at levels similar to those posted in December 2012.
4. BBVA has 17.2 million digital customers. As of the end of September, the base of customers choosing digital channels to engage with the bank increased 20% with respect to the same period of 2015. Of these, 11 million are mobile customers (+41%). Also within its transformation process, BBVA continued to move forward on its objective of driving digital sales across all franchises. For example, in the U.S. digital sales already accounted for 19.5% of the total sales between January and September 2016, compared to the 9.3% in 2015. In Turkey, 25.2% of all sales are digital, the highest among all the geographies in which the Group operates.
5. BBVA’s activity in emerging markets remains solid. A breakdown by business area reveals that Mexico continued to post double-digit growth rates in lending and customer funds. The area’s earnings between January and September 2016 came to €1.44 billion, and again grew at double digit rates (+11.4% y-o-y). In South America, net attributable profit grew 2.2% y-o-y, reaching €576 million from January through September. Turkey’s earnings in homogeneous terms (i.e. including the stake as if it had been incorporated by the full integration method since January 1, 2015) reflected the notable strength of recurring revenues. Net attributable profit in the first half of the year jumped 45.7% y-o-y to €464 million.
Regarding developed markets, the Group once again confirmed its ability to generate income in environments of historically low interest rates. The nine-month result for BBVA Spain -combining banking and real estate activities - came to €621 million (+8.8%). The United States saw a solid net interest income performance and a recovery of growth in fees and commissions. The area’s results between January and September 2016 came to €298 million, down 24.3% in y-o-y terms.
* All figures mentioned include two impacts: the change in scope of consolidation due to the incorporation of Catalunya Banc on April 24th, 2015, and the acquisition of an additional 14.89% stake in Turkey’s Garanti, which has been incorporated into the Group’s financial statements using the full integration method.
**Mexico, South America, Turkey and USA at constant exchange rates.