BBVA Chair Carlos Torres Vila spoke on Monday on Spain's opportunity to lead investment in the clean technologies required for the decarbonization of the economy. In his view, if the implementation of the EU Net-Zero Industry Act is ambitious in Spain, the country’s leading innovative companies will be able to invest in cleantech and place it in a better position compared to its European peers.
“Spain can boost the deployment of clean technologies using part of the budget growth that will come from the EU in the coming years," he stated in his speech at the 'Wake Up Spain' forum organized by online news outlet El Español in Madrid.
Carlos Torres Vila also underlined BBVA’s positive performance in sustainable business in 2023, with €70 billion channeled last year. “This year we will continue to beat records in sustainable business,” he predicted.
The BBVA Chair also noted BBVA's support for innovation through investment in cleantech, which is in the early stages and needs to move to an economically viable phase in order to scale up in sectors that are difficult to decarbonize. Just in the past two years, the bank has invested €108 million through six climate funds specializing in clean technologies.
“We are witnessing an unprecedented wave of innovation,” he added. The European Commission estimates a required investment of €92 billion in cleantech between 2023 and 2030. Taking into account public investment and current private investment, there is an estimated investment gap of €50 billion according to Cleantech for Europe. “To address this gap, it is essential that governments create the enabling framework to stimulate investment in cleantech," he said. In his view, we need ambitious policies that provide certainty to all players. One of the elements of these policies must be suitable incentives. This has already been done in the United States with the Inflation Reduction Act (IRA) and now it is time to do the same in Europe with the Net-Zero Industry Act,he explained.
Positive outlook for banking in Spain in 2024
Carlos Torres Vila forecast that "2024 will once again be a great year for BBVA.” What are the factors behind this expectation? First, BBVA expects economic growth in the key markets within its footprint, which will help banking business volumes to grow. Secondly, and over and above the context, "our growth levers are structural," he said, and pointed out the strength and leadership position of its franchises and the focus on the trends that are defining the future: digitization, innovation and sustainability.
Therefore, the bank's estimate, as announced to the market, is for strong growth in net attributable profit in 2024. Profitability as measured through ROTE is expected to rise above the 17 percent achieved in 2023, while the cost-to-income ratio will fall below 42 percent. This forecast implies surpassing the 2024 targets that BBVA set at its Investor Day at the end of 2021, not only in financial metrics but also in terms of shareholder value creation, customer growth and sustainable business channeling.
In a context of lower inflation, BBVA Research expects rates to be around 2 percent to 2.5 percent in 2025, which is a good scenario for the Spanish financial system. Thus, in Spain, BBVA’s business outlook is positive for 2024. On the macroeconomic context, he stressed that the Spanish economy is proving to be resilient and will grow by around 2 percent in 2024 -2,1 percent, specifically- more than double the European average.
Among the factors supporting growth are lower inflation, mostly the decline in energy prices; a more expansionary fiscal policy than expected and its impact on labor markets; and the deployment of NGEU funds.
BBVA Research has reduced its forecast for 2025 to 2 percent for a series of reasons. First, reduced strength of the external demand, mostly in the EU, and also the fact that the investment in Spain is below the levels in the rest of Europe. “Investment is crucial for competitiveness because it allows increases in productivity. The lack of productivity growth is a pending matter and it is where we should be focusing on,” he added. Carlos Torres Vila also referred to fiscal rules, since countries with deficits above 3 percent and public debt levels above 90 percent will have to adopt measures to reduce said deficit in the long term. “That is why it is needed to focus on measures to improve efficiency, reduce non-productive expenses and foster investment,” he said.
When asked about the EU funds, he pointed out that “they provide a unique opportunity to encourage investment, which will lead to growth and modernization of the economy.” The pace of execution (of the EU funds) is gaining momentum, he said. “Banks can multiply that investment and we can help to make distribution faster and more efficient,” he underlined. Carlos Torres Vila also added that BBVA works with public authorities to develop products and solutions to channel funds in the most efficient and fastest way possible.
During his speech, Carlos Torres Vila emphasized the key role that banking plays through its main activity in boosting the economy: "Spain needs investment and banks play an essential role in channeling that investment," he stressed.