Seven keys to understanding the earnings from the first half of 2020
The BBVA Group earned €636 million in the first half of the year - more than double the results from January through March, excluding the impact of the goodwill adjustment in the U.S. This was possible thanks to the bank’s efforts to anticipate impairments related to the COVID-19 crisis in the first quarter of the year. In a highly complex context due to the pandemic, the BBVA Group has demonstrated the strength of its profit before provisions in the second quarter of 2020, with operating income up 17.6 percent year-on-year in constant euros. “We are facing this crisis from a position of strength, thanks to the resilience of our revenues, our diversified business model and our digital capabilities. Likewise, our solid capital generation stood out during the quarter,” said BBVA CEO Onur Genç.
BBVA’s net attributable profit without extraordinary items reached €928 million in the first six months of the year in an unprecedented environment marked by the profound economic crisis caused by the impact of COVID-19. This result is 57.8 percent lower than the amount from the previous year in constant euros (-62 percent in current euros) due to the provisions and other impairments from the pandemic. Including the U.S. goodwill adjustment in the first quarter of 2020, the bank posted a loss of €1.16 billion between January and June.
Typical revenue from the banking business. BBVA’s net interest income saw robust growth in the first half of the year, reaching €8.65 billion, up 4.5 percent year-on-year at constant exchange rates (-3.2 percent at current exchange rates). Net fees and commissions were impacted by lower levels of retail banking, especially in cards, due to lockdown measures from the pandemic. They reached a total of €2.3 billion in the first six months of the year (-1.7 percent at constant exchange rates, -6.8 percent at current exchange rates). The positive evolution of net trading income (NTI) stands out, rising 419.7 percent at constant exchange rates in the second quarter (+341.5 percent at current exchange rates) thanks mainly to gains from exchange rate hedging and higher results in nearly all business units.
Gross income and efficiency. Operating expenses dropped significantly in the second quarter to €2.59 billion (-4.9 percent at constant exchange rates, -12.1 percent at current exchange rates). In the first six months of the year they declined 1.5 percent at constant exchange rates (-6.2 percent at current exchange rates). This cost containment and strong performance from recurring revenue drove operating income to €6.53 billion between January and June, an increase of 19.2 percent at constant exchange rates (+7.6 percent at current exchange rates). In this context, the efficiency ratio declined 389 basis points from December 2019 to 45.8 percent and operating jaw remain positive.
Risk indicators. BBVA saw a substantial improvement in the cost-of-risk, which stood at 1.51 percent between April and June, compared to 2.57 percent in the first quarter. NPL and NPL coverage ratios remained stable at 3.7 percent and 85 percent, respectively.
Solvency. The BBVA Group’s fully-loaded CET1 capital ratio was 11.22 percent as of June 30, 2020, compared to 10.84 percent at the end of March. This increase of 38 basis points - in one of the best quarters in history - was mainly due to a greater contribution of the quarterly results, as well as an improvement in the evolution of financial markets. BBVA is in the upper part of the target range - maintaining a buffer of 225 to 275 basis points over its fully-loaded CET1 capital ratios requirement (currently 8.59 percent).
Sustainable finance. In the first half of the year, BBVA became the first private financial institution in Europe to issue a COVID-19 social bond and the first financial institution in the world to issue a green contingent convertible (CoCo) bond.
Response to COVID-19. In order to help customers and clients overcome the crisis from the pandemic, the bank approved four million loan moratoriums - nine percent of its total loan portfolio - in the first half of the year. Furthermore, the bank granted a total of €20 billion in new credit lines backed by public guarantee schemes.
Advances in transformation. BBVA’s digitization continued to accelerate in the second quarter due to the lockdown measures in many places. Digital customers currently account for 60 percent of the total customer base, with mobile customers representing 56 percent. Digital sales, measured in units, represented 66 percent of the total in the second quarter.