BBVA USA reports fourth quarter 2020 results

For the full-year of 2020, the company reported a net loss of $1.9 billion. Included in the first quarter of 2020 was a non-cash, goodwill impairment charge of $2.2 billion that reflected the drastic change in macroeconomic conditions and forecasts brought about by the COVID-19 pandemic and subsequent decline in interest rates and oil prices. Excluding the impact of this non-cash charge and a $470 million goodwill impairment charge in the fourth quarter of 2019, adjusted net income(1) for the full-year of 2020 was $323 million compared to adjusted net income(1) of $623 million for the full-year of 2019.

“While we continue to navigate the challenges amid the pandemic, our results for the fourth quarter are a testament to the strength and resiliency of the team we have at BBVA USA and their focus on serving our customers and the communities where we live and work,” said Javier Rodríguez Soler, president and CEO of BBVA USA.

“Momentum continued in the quarter highlighted by strong revenue growth and well-contained expenses which allowed us to deliver record operating income. At the same time, we continue to maintain strong liquidity and capital positions. We enter the new year focused on continuing to meet the challenges ahead, and subject to regulatory approval and closing, successfully integrating our operations with PNC and the opportunities that this combination will bring to our customers, our communities and to our employees.”

Rodríguez Soler: We enter the new year focused on continuing to meet the challenges ahead, and subject to regulatory approval and closing, successfully integrating our operations with PNC and the opportunities that this combination will bring to our customers, our communities and to our employees.

Total revenue for the fourth quarter of 2020 was $969 million, up 18 percent (annualized) from third quarter 2020 levels and up 8 percent from fourth quarter 2019 levels. Net interest income in the quarter totaled $667 million, up 16 percent (annualized) from the $642 million recorded in the third quarter of 2020, and up 7 percent from the $623 million recorded in the fourth quarter of 2019. The percent net interest margin for the fourth quarter of 2020 was 2.78 percent compared to 2.68 percent in the third quarter of 2020 and 2.96 percent in the fourth quarter of 2019.

Noninterest income for the fourth quarter of 2020 totaled $301 million, up 24 percent (annualized) from the $285 million reported in the third quarter of 2020, and up 11 percent from the $273 million reported in the fourth quarter of 2019. The increase in noninterest income on a linked quarter basis was driven by an increase in corporate and correspondent investment sales (+$13 million), mortgage banking (+$6 million), service charges on deposit accounts (+$5 million) and money transfer income (+$2 million). Following two consecutive strong quarters, investment banking and advisory fees slowed on a linked quarter basis (-$14 million) but showed solid growth (+$11 million) compared to fourth quarter 2019 levels. For the full-year of 2020, noninterest income (excluding securities gains) totaled $1.2 billion, up 6 percent compared to full-year 2019 results.

No gains or losses were recorded on the sale of investment securities in the fourth quarter of 2020, in the third quarter of 2020 and in the fourth quarter of 2019. For the full-year of 2020, investment securities gains totaled $23 million compared to $30 million for the full-year of 2019.

Total noninterest expense for the fourth quarter of 2020 was $578 million, down 12 percent (annualized) from the $596 million reported in the third quarter of 2020 and down 6 percent compared to adjusted noninterest expense (excluding goodwill impairment) for the fourth quarter of 2019. On a linked quarter basis, the decline in noninterest expense was due to a decrease in other noninterest expense (-$27 million) offset, in part, by increases in salaries, benefits and commissions (+$4 million) and professional services (+$3 million). The decrease in other noninterest expense was primarily driven by a decline in provision for unfunded commitments.

The increase in revenue coupled with the decline in noninterest expense resulted in positive operating leverage both on a linked quarter basis and compared to the year ago quarter. Operating income(1) for the fourth quarter of 2020 was a record $391 million compared to $331 million in the third quarter of 2020 and $279 million in the fourth quarter of 2019. The efficiency ratio(1) for the fourth quarter of 2020 was 58.98 percent compared to 63.55 percent for the third quarter of 2020 and 67.92 percent for the fourth quarter of 2019.

Total loans at the end of the fourth quarter of 2020 were $65.8 billion, down 4 percent (annualized) from $66.4 billion at the end of the third quarter of 2020 and up 3 percent from the $64.1 billion at the end of the fourth quarter of 2019. Commercial loans associated with the energy sector were $2.4 billion compared to $2.5 billion at the end of the third quarter of 2020 and $2.9 billion at the fourth quarter of 2019. During the quarter, newly funded loans totaled $4.4 billion bringing the total to more than $20.2 billion for the full year of 2020, a 21 percent increase compared to the full-year of 2019. Included in 2020 results is approximately $3.3 billion of newly funded loans under the Payroll Protection Program.

Total deposits at the end of the fourth quarter of 2020 were $85.9 billion, down 2 percent (annualized) from the third quarter of 2020 and up $10.9 billion or 15 percent compared to the fourth quarter of 2019. Noninterest bearing demand deposits totaled $27.8 billion, up 15 percent (annualized) on a linked quarter basis and up $5.9 billion or 27 percent compared to the fourth quarter of 2019. Interest bearing transaction accounts (checking, savings and money market accounts) totaled $53.4 billion at the end of the fourth quarter of 2020, relatively unchanged on a linked quarter basis and up $12.3 billion or 30 percent compared to the fourth quarter a year ago.

The loan to deposit ratio at the end of the fourth quarter of 2020 was 76.6 percent compared to 76.9 percent at the end of the third quarter of 2020 and 85.4 percent at the end of the fourth quarter of 2019. The LCR ratio was unchanged from third quarter 2020 levels at 144 percent and consistent with the 145 percent reported at the end of fourth quarter of 2019.

During the fourth quarter of 2020, the company recorded provision recapture of credit losses totaling $81 million compared to provision for credit losses of $151 million in the third quarter of 2020 and $120 million in the fourth quarter of 2019. The recapture of provision expense primarily reflected improvements in macroeconomic factors and forecasts. Net charge-offs as a percentage of average total loans were 34 basis points in the quarter compared to 59 basis points in the third quarter of 2020 and 87 basis points in the fourth quarter of 2019. The allowance for loans losses as a percentage of total loans at the end of the 2020 was 2.56 percent compared to 2.73 percent at the end of the third quarter of 2020 and 1.44 percent at the end of the prior year.

Nonperforming loans as a percentage of total loans ended the fourth quarter at 2.21 percent, up from the 2.00 percent at the end of the third quarter of 2020 and 1.06 percent at the end of the fourth quarter of 2019. The increase in nonperforming loans on a linked quarter basis was primarily attributable to an increase in nonaccrual loans associated with commercial real estate – mortgage (+$166 million), residential real estate – mortgage (+$31 million) and real estate – construction (+$13 million), offset in part by a decrease in nonaccrual loans associated with the commercial loan portfolio (-$120 million). Also contributing to the rise in nonperforming loans was an increase in loans 90 days or more past due which totaled $122 million at the end of the fourth quarter of 2020 compared to $94 million at the end of the third quarter of 2020. The coverage ratio of nonperforming loans ended the quarter at 116 percent compared to 136 percent at the end of the third quarter of 2020 and 136 percent at the end of the fourth quarter of 2019.

Total shareholder’s equity at the end of the fourth quarter of 2020 totaled $11.7 billion compared to $11.4 billion at the end of the third quarter of 2020 and $13.4 billion at the end of the fourth quarter of 2019. Total tangible shareholder’s equity(1) totaled $9.3 billion at the end of the fourth quarter of 2020 compared to $9.0 billion at the end of the third quarter of 2020 and $8.8 billion at the end of the fourth quarter of 2019. The CET1(2) ratio ended the quarter at 13.28 percent compared to 12.79 percent at the end of the third quarter of 2020 and 12.49 percent at the end of the fourth quarter of 2019. All of BBVA USA’s regulatory capital ratios(2) continue to exceed the requirements under “well-capitalized” guidelines.

On November 16, 2020, BBVA announced that it had signed a definitive agreement to sell BBVA USA Bancshares, Inc., including its U.S. banking subsidiary, BBVA USA, to PNC Financial Services Group, Inc. Pending regulatory and other customary approvals, the transaction is expected to close in mid-2021.

1 Operating income, adjusted net income, efficiency ratio and tangible shareholder’s equity 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.

2 Regulatory capital ratios at December 31, 2020, are estimated.