Letter to shareholders from the Group executive chairman

Dear shareholders,

In 2019 we achieved excellent financial results on a recurring basis, the best of the last ten years, and we also made major progress in our transformation journey.

Net attributable profit excluding non-recurring impacts reached €4,830 million in 2019, thanks to record-high core revenues and strict cost management. Book value per share rose 11.5 percent and the return on tangible equity (ROTE) was 11.9 percent, which placed us ahead of the financial industry in terms of profitability. The Group’s fully-loaded CET1 capital ratio ended the year at 11.74 percent, 40 basis points higher than in 2018.

All of this in a year marked by a highly complex economic environment, with deceleration in the global economy due to geopolitical conflicts, trade tensions and a low interest-rate environment. This led to global growth of 3.1 percent in 2019, the lowest since 2009.

These results are clear evidence of the success of our transformation and of our commitment to digitization. A commitment that has made us the unquestionable leaders of the financial sector’s digital transformation in recent years.

Proof of this is the fact that since 2015, the number of customers banking with us on digital channels has doubled, and the number of customers doing it through their mobile phones has tripled. Mobile customers now represent more than 50 percent of our customer base. Digital sales in both units and value now represent 59 percent and 45 percent of sales, respectively.

Not only have we seen the number of mobile and digital customers evolve in recent years, our total base of active customers has increased by nearly nine million. And what is even more important, our customers are more loyal and more satisfied, as shown by our leading position in the net promoter score (NPS) in most places where we operate.

All of this is the result of a unique value proposition across all channels, especially digital channels. The consulting firm Forrester Research recognized BBVA Spain’s mobile banking app as the best in the world for the third consecutive year, followed by BBVA’s app in Turkey in the second place.

Furthermore, in 2019, we adopted a single brand and new logo globally. This change underscores our goal of offering a unique value proposition and uniform user experience, characteristic of a global digital company.

Without a doubt, one of the most remarkable aspects of 2019 is the rising awareness and social mobilization with regards to climate change and the sustainability challenges facing humankind. The fight against climate change represents one of the biggest disruptions in history, with very significant economic consequences to which we all (governments, regulators, companies, consumers, society as a whole) need to adapt immediately.

The climate transition will require significant investment in the short term in many industries. At BBVA, we are aware of the important role banks may play in this transition providing financings and advice to our customers. We firmly believe that the future of banking is financing the Future, with a capital F.

For this reason, two years ago, we defined our Pledge 2025 in order to achieve the United Nations Sustainable Development Goals and aligned with the Paris Climate Agreement. We set the goal of mobilizing €100 billion by 2025, and in just two years we have already allocated over €30 billion, which represents a significant progress.

In addition, at BBVA, we have made the commitment to be neutral in direct CO₂ emissions from our activities starting this year, 2020. Also, as we announced at the United Nations Climate Change Conference COP 25 in Madrid, we have set an internal price for CO₂ emissions. This encourages all of BBVA’s areas and businesses to reduce their emissions. We hope that in the near future, a global CO₂ market will be established to also incentivize all economic actors to make the necessary reductions.

But it is important to highlight that for us, sustainability goes beyond climate change. For this reason, at BBVA we support global initiatives, such as the United Nations Global Compact, which help join efforts in the pursuit of sustainable development. For us, it is essential that this sustainable development be inclusive for each and every person in society. With this goal in mind, in 2019, BBVA allocated over €100 million to social initiatives and support for education, culture and science as well as entrepreneurship, benefitting over 11 million people.

In particular, at BBVA, we feel especially proud of the great work of our foundations through numerous initiatives, such as the BBVA Foundation Frontiers of Knowledge Awards, which recognize fundamental contributions to the development of knowledge and research. BBVA Microfinance Foundation’s financing for development is also noteworthy, particularly through microloans to low-income entrepreneurs and programs for environmental sustainability and the economic empowerment of women. An endeavor for which it was recognized by the Organization for Economic Cooperation and Development (OECD), as the second largest philanthropic initiative on a global level, and the largest in Latin America.

Furthermore, paying taxes is a fundamental part of BBVA’s commitment to society. For this reason, BBVA voluntarily publishes its global tax contribution report, an example of good governance and transparency. In 2019, BBVA contributed a total of €9.29 billion in taxes derived from our activities in all of our markets, including both our own taxes and third-party taxes paid by the Group. These taxes make it possible to foster development in these countries by investing in infrastructure or healthcare, but especially by helping to promote equal opportunities through better education.

The year 2019 also served to carry out a strategic reflection process, based on the enormous accomplishments that we have achieved over the past five years, and with the goal of continuing to work to attain our Purpose: to bring the age of opportunity to everyone.

Looking forward we want to help our customers make better financial decisions and to support them in their transition to a more sustainable world. This aspect is crucial for all of us, taking into account the important social and environmental challenges we are facing.