Capital ratio

BBVA has once again excelled in EU-wide bank stress tests thanks to its resilience in the face of potential economic shocks. According to the exercise results, published today, BBVA would reach a fully loaded CET1 capital ratio of 8.80 percent in 2020 under the adverse scenario. The bank would also have the second least negative impact among its peers between the initial ratio in 2017 and the final ratio in 2020 (1.93 percentage points). Among big European banks  assessed, BBVA is one of the few banks with the ability to generate an accumulated profit in the three-year period under analysis (2018, 2019, and 2020), under the adverse scenario.

BBVA’s digital customers are increasing in number, are more satisfied and interact more with the bank. In fact, the bank has reached its digital tipping point, at which more than 50 percent of its customers are using the bank’s digital channels in six countries (Spain, the United States, Turkey, Argentina, Chile and Venezuela). It’s a milestone that foreseeably will be reached this year by more of the countries where BBVA operates. Indeed in Davos last week, BBVA Group Executive Chairman Francisco González predicted the Group’s customer base as a whole will pass the 50 percent tipping point in 2018.

In December, the Basel Committee on Banking Supervision (BCBS) announced the finalization of the review process of the Basel III framework, which will allow banks to better withstand financial crises. The new standards, which will enter into force in January 2022, should help clarify and bring more stability to the global regulatory framework.

Positive market conditions and investor appetite have helped BBVA to get an excellent reception for its sixth issue of CoCos. The Group has issued a $1 billion bond, with the lowest coupon in dollars for an issuer from southern Europe (6.125%), and the longest maturity (perpetual, with a ‘call’ option starting in the tenth year). Registration of a prospectus with the U.S. Securities and Exchange Commission (SEC) has prompted a bigger participation from American, European and Asian investors.

Every quarter, BBVA rolls out new products and functionalities, delivering new amazing experiences for its mobile and online customers to enjoy. By year end, the bank expects that about 92% of its current product portfolio will be available on its digital channels in Spain, as well as to be able to continue making progress in its other franchises. BBVA CEO Carlos Torres Vila explained how this effort is having an “impressive impact”, as evidenced by the exponential rate at which digital sales are growing. Digital sales account for about one fourth of the bank’s total, with more than 3.5 million units sold between July and September.

These are the ratios that show up the financial position of a bank. This is a disclosure of BBVA’s ratios calculated as of September 2017.

• Operating income: Recurring revenues continued their upward trend, growing 4.2% between January and September. This, together with cost containment efforts (expenses dropped 1.7% in the year to September), drove operating income to a record €9.52 billion
• Risks: The NPL ratio continued to improve, reaching 4.5% in September (vs. 4.8% in June), the lowest level in the past five years. Coverage increased to 72%
• Capital: The fully-loaded CET1 ratio rose to 11.2% in September, reflecting a capital generation of 30 basis points in the first nine months of the year
• Transformation: The digital customer base grew 24% y-o-y to 21.1 million in September. Of these, the number of customers banking with their smartphones surged 43% to 15.8 million

BBVA Research has analyzed the potential regulatory scenarios that the financial industry will be facing in the next 5 to 10 years. In its Financial Regulation Outlook report, BBVA Research analysts address some of the questions being asked in Europe over the course and pace that regulators will choose in the medium and long term.

The EBA recently completed its latest monitoring exercise to assess EU Banks’ capital, leverage, and liquidity ratios assuming full implementation of the CRD IV-CRR/Basel III framework.  Overall, the results show that, between June and December of 2016, there was an improvement in both CET1 capital and liquidity ratios.

These are the ratios that show up the financial position of a bank. This is a disclosure of BBVA’s ratios calculated as of June 2017.

BBVA presented today its financial statements for the April-June 2017 period. BBVA CEO Carlos Torres Vila said that “the second quarter results confirm the positive trends recorded earlier this year, both in terms of financial results and of transformation and value creation for shareholders.”

How did the bank do during these three months? And what about during the first half of the year? These are the keys to understanding the results:

BBVA’s has issued perpetual debt eventually convertible into shares at the cheapest price of all operations launched by Spanish issuers for this type of product. The issuing of €500 million of contingent convertible bonds, or 'CoCos' (also known as AT1) took place at a very attractive price, with a coupon of 5.875%.

These are the ratios that show up the financial position of a bank. This is a disclosure of BBVA’s ratios calculated as of March 2017.

Europe has taken a giant leap forward to keep taxpayers from footing bailout bills in the future. Last week, the European Commission unveiled a regulatory package which, among other measures, envisaged the revision of the resolution framework for institutions. The proposal represents a new leap towards the goal of ensuring that banks allocate the right amount of resources to absorb eventual losses, even bail-out themselves, without resorting to public funding. It will also help European banks boost the amount of high-quality capital in their balance sheets.

A bank balance sheet is a key way to draw conclusions regarding a bank’s business and the resources used to be able to finance lending. The volume of business of a bank is included in its balance sheet for both assets (lending) and liabilities (customer deposits or other financial instruments).

The Federal Reserve Board released the results Thursday of the latest round of the Dodd-Frank Act Stress Test, which reported that BBVA Compass projections again exceeded the minimum applicable regulatory requirements for all nine quarters in the severely adverse hypothetical scenario as defined by the Fed.

The stress test, to which 33 of the country's largest financial institutions were subjected, is designed to evaluate whether the firms have sufficient capital to absorb losses in a hypothetical, severely adverse scenario. The scenario depicts economic conditions that are more adverse than expected conditions.

The results released on Thursday were from the first of two Fed stress tests. The results of the Comprehensive Capital Analysis Review, or CCAR, will be released next week.

BBVA Compass posts the results, and the full disclosure for both stress tests, here.

Sovereign Wealth Funds are state-owned investment vehicles that control a portfolio consisting of national and international financial assets. The capital that these institutions manage is essential for the economies as it allows them to mitigate economic shocks; safeguard the wealth of future generations; make key investments for the country’s development; pay pensions; or maximize the profitability of a percentage of the country’s international reserves – generally the surplus over the level deemed optimal - which are usually managed following a capital preservation approach.