BBVA USA reports third quarter results

Net income for the first nine months of 2019 totaled $484 million compared to earnings of $568 million for the first nine months of 2018. Return on average assets and return on average tangible equity¹ for the first nine months of 2019 were 0.69 percent and 7.36 percent, respectively.

Rodríguez Soler: Strong fee income growth and good expense management enabled us to achieve record quarterly operating income and post a solid increase in earnings.

“Strong fee income growth and good expense management enabled us to achieve record quarterly operating income and post a solid increase in earnings,” said Javier Rodríguez Soler, president and CEO of BBVA USA. “As we continue to navigate the challenging interest rate environment, generating fee income growth while maintaining a focus on expense discipline will be key components to offsetting the pressure on our net interest margin. Operating during this environment also places further emphasis on our digital transformation strategy. Digitization allows us to enhance and expand our product offerings, utilize technology to improve efficiency both for us and our customers and, most importantly, deliver an amazing customer experience.”

Total revenue (excluding securities gains) for the quarter was $941 million, an increase of $25 million or 3 percent from third quarter 2018 levels and down $3 million or 1 percent (annualized) compared to the second quarter of 2019. Net interest income totaled $641 million, down $17 million or 3 percent from $658 million recorded in the third quarter of 2018 and down $19 million on a linked quarter basis. The percent net interest margin in the third quarter of 2019 was 3.07 percent, a decline of 20 basis points from the third quarter of 2018 and 17 basis points on a linked quarter basis.

Noninterest income (excluding securities gains) for the quarter totaled $300 million, up $42 million or 16 percent from the third quarter of 2018 and up $16 million compared to the second quarter of 2019. Growth was fueled by increases in investment banking and advisory fees (+103 percent), mortgage banking (+22 percent), card and merchant processing fees (+14 percent), money transfer income (+11 percent), and service charges on deposit accounts (+8 percent). On a linked quarter basis, each of these fee-based businesses experienced positive growth led by investment banking and advisory fees, mortgage banking and increased activity related to corporate and correspondence investment sales. Gains on the sales of investment securities totaled $21 million during the third quarter of 2019.

Expense containment continued during the quarter with noninterest expenses decreasing 1 percent compared to a year ago and flat linked quarter. On a year-to-date basis, total noninterest expense has increased a modest 2 percent. Revenue growth coupled with expense control resulted in record operating income¹ totaling $363 million, a 17 percent increase compared to the third quarter a year ago and a 21 percent (annualized) increase compared to the second quarter of 2019. During the first nine months of 2019, operating income1 totaled $1.1 billion, up 11 percent compared to the same period a year ago. The efficiency ratio1 at 62.76 improved 233 basis points compared to a year ago and on a year-to-date basis has improved 128 basis points.

Total loans for the third quarter of 2019 were $63.5 billion, down 2 percent from $64.5 billion at the end of the third quarter of 2018 and up slightly on a linked quarter basis. During the second quarter of 2019, approximately $1.2 billion commercial loans held for sale were sold. Adjusting for the sale of these loans, the year-over-year increase in total loans was less than 1 percent.

Total deposits at the end of the third quarter of 2019 were $73.6 billion, a 5 percent increase from the $70.4 billion at the end of the third quarter of 2018. Growth in interest bearing transaction accounts (savings, money market and interest bearing checking accounts) outpaced overall growth at 11 percent compared to a year ago. While noninterest bearing deposits were relatively unchanged from a year ago, on a linked quarter basis noninterest bearing deposits increased 7 percent (annualized). The loan to deposit ratio ended the quarter at 86.25 percent and the Liquidity Coverage Ratio (LCR) at 144 percent was unchanged from second quarter 2019 levels.

Nonperforming loans as a percentage of total loans ended the quarter at 1.14 percent compared to 1.26 percent at the end of the second quarter of 2019 and 1.04 percent at the end of the third quarter of 2018. The decrease in nonperforming loans during the quarter included the charge-off of a single commercial credit in the healthcare industry, which accounted for a significant portion of the decline. Net charge-offs as a percentage of average total loans were 110 basis points in the quarter compared to 90 basis points in the second quarter of 2019 and 49 basis points in the third quarter of 2018. The previously mentioned healthcare credit coupled with continued charge-offs in the consumer-direct portfolio, as expected, accounted for the increase.

Provision expense in the quarter was $141 million compared to $155 million in the second quarter of 2019 and $95 million in the third quarter a year ago. The allowance for loan losses as a percentage of total loans ended the quarter at 1.49 percent compared to 1.54 percent at the end of the second quarter of 2019 and 1.36 percent at the end of the third quarter of 2018. The coverage ratio of nonperforming loans was 131 percent at the end of the quarter compared to 123 percent at the end of the second quarter of 2019 and 130 percent at the end of the third quarter a year ago.

Total shareholder’s equity at the end of the third quarter of 2019 totaled $14.1 billion, a 6 percent increase from the $13.3 billion at the end of the third quarter of 2018. The CET1 ratio stood at 12.90 percent² at the end of the third quarter of 2019, up 33 basis points from the end of the second quarter of 2019 and 83 basis points from the end of the third quarter of 2018. All of BBVA’s regulatory capital ratios² continue to significantly exceed the requirements under “well capitalized” guidelines.

During the third quarter, BBVA Net Cash USA Mobile was named a winner in the 2019 Bank Customer Experience Awards, taking first place in the Best Mobile/Online Experience (financial institutions) category. The Best in Bank Customer Experience Awards recognize the most unique, innovative, and pioneering financial institutions and technology providers whose branches and technologies are having the most impact on customers. The app also gives users access to the first-of-their-kind BBVA Real Time Positive Pay and Real Time ARP services – functionality that is not available through any other treasury management platform or mobile application on the market.

BBVA USA was recognized by Kiplinger as its runner-up in the Best Banks for High-Net-Worth Families category for 2019. The Washington, D.C.-based publisher of business forecasts and personal finance advice cited BBVA's expansive wealth services, including its attractive relationship program and well-regarded private bank, and specifically noted its Premier Personal Banking program. While the program is designed for high-net-worth families, BBVA USA offers a lower qualifying balance that opens the Premier Personal Banking program as an option for many more customers.

¹Return on average tangible equity, operating income and efficiency ratio are Non-GAAP financial measures we believe aid in understanding certain areas of our performance. The calculation of these measures is included on the page titled Non-GAAP Reconciliation.

²Regulatory capital ratios at September 30, 2019, are estimated.