BBVA Earnings: six key takeaways to understand the 2020 third quarter accounts
The BBVA Group’s results have been improving throughout 2020. The bank earned €1.14 billion in the third quarter (-6.8 percent in current euros, +4.1 percent at constant rates). This result is 79.5 percent higher than this year’s second quarter results in current euros (+83.4 percent at constant rates). In addition, the strength of recurring revenues and cost containment efforts helped to boost operating income compared to the third quarter of 2019. “Net attributable profit grew significantly in the third quarter compared to previous quarters. This positive performance was the result of our resilient recurrent income, coupled with our focus on cost control and a better evolution of impairments, thanks to the significant provisioning effort in the first half of the year,” said BBVA CEO Onur Genç.
The variations described below are at constant rates in order to allow for a better comparison of each item’s evolution.
In the first nine months of the year, net attributable profit was €2.07 billion - 36.6 percent less than the same period one year ago, excluding the goodwill impairment in the U.S. in the first quarter (-2.08 billion euros). Including this impact, the BBVA Group posted €15 million in losses during the period.
Resilient gross income. Recovering activity during the third quarter boosted the top headings of the income statement. Net interest income rose 5.5 percent yoy in the third quarter to €4.11 billion. In the first nine months of the year, this item reached €12.76 billion - 4.7 percent more than the same period of 2019. Gross income climbed five percent in the quarter to €5.66 billion thanks to a good performance of NTI. Between January and September, gross income rose to €17.71 billion (+7.4 percent yoy).
Cost control. The cost containment trend continued in the third quarter. Operating expenses fell 3.8 percent yoy. Between January and September, costs declined 2.4 percent, reaching €8.08 billion. This entails significant cost containment measures, as average inflation in the countries where the bank has a presence was +4.4 percent over the past 12 months (including some countries with very high levels like Argentina). The efficiency ratio stood at 45.6 percent at the end of the third quarter, which represents a decline of 438 basis points compared to 2019.
Strong operating income. Improving activity over the last three months and declining operating expenses boosted operating income 13.5 percent yoy to €3.09 billion. In the first nine months of the year, operating income reached €9.63 billion (+17.3 percent yoy).
Improvement in risk indicators. Thanks to front-loaded provisions in the first quarter and the lower provisions in the following quarters, the cost of risk has seen significant improvement, dropping from 1.51 percent in the second quarter to 0.97 percent in the third, in line with expectations. The accumulated cost of risk since January fell from 2.04 percent in the first quarter to 1.69 percent at the end of September.
Capital generation. The fully-loaded CET1 capital ratio ended the third quarter at 11.52 percent, which represents 30 basis points of capital generation compared to the figures from the end of June. The BBVA Group has set the goal of maintaining a buffer of 225 to 275 basis points above its fully-loaded CET1 ratio requirement (currently 8.59 percent). The current level already surpasses this goal.
Progress in the digital transformation. The bank has four million more mobile customers than it did in December 2019 - a total of 32.8 million. This represents 14 percent more than in December 2019 and 57 percent of the bank’s total customer base. Digital customers (which includes mobile customers) have grown 12 percent since December 2019, reaching 35.6 million (62 percent of the total customer base). Furthermore, more and more customers are using BBVA’s mobile apps for their transactions: interactions have multiplied by five compared to one year ago.