In the fourth quarter of 2013 recurrence in revenue, stability in the asset quality indicators, improved liquidity and sound solvency ratios have again been the most relevant aspects of the BBVA Group’s results. In addition, there has been the impact of the completed corporate operations: the sale of BBVA Panama and the Provida pension fund administrator (AFP Provida), as well as the signing of the new agreement with CITIC Limited, which includes the sale of the 5.1% stake in China Citic Bank (CNCB).
1. The most significant aspects of earnings in the quarter are summed up below:
- Good performance of recurring income (net interest income plus income from fees and commissions), which has risen 5.0% over the previous quarter. Particularly notable is the upturn in net interest income over the period, which has risen again after two quarters of decline (influenced by the unfavorable impact of the so-called “floor clauses”). Income from fees and commissions has also been positive.
- There has been a slowdown in the year-on-year growth of operating expenses, thanks to the cost control policy applied in Spain and the United States, which has offset the effect of the expansion projects underway in emerging countries.
- Loan-loss provisions were more contained, after the rise registered in the third quarter of 2013 due to the classification of refinanced loans.
- Capital gains of €653m net of tax were generated from the final closing of the sales of BBVA Panama to the Aval Group and the Chilean AFP Provida to subsidiaries of Metlife, Inc.
- The signing of an agreement with the CITIC Group, which includes the sale of the 5.1% stake in CNCB. As a result of this agreement, the remaining 9.9% stake held by the Group has been classified as available-for-sale. This has had a negative effect (aprox. –€2,600m before tax) as all the stake held by BBVA in CNCB at the time of reclassification has been marked to market.
- Another quarter with a negative impact from exchange rates.
- As a result, the net attributable profit for the period October-December 2013 was a negative €849m, and for the whole year it was €2,228m (up 32.9% year-on-year). Excluding the effects of the corporate operations carried out over the year, real-estate activity in Spain and the classification of refinanced loans carried-out in the third quarter of 2013, the net attributable profit amounts to €3,195m, a decline of 28.9% over the last 12 months.
2. In business activity, the same trends mentioned in recent quarters have been maintained. Lending continues to fall in Spain, in contrast with the growth seen in the rest of geographical areas. However, customer funds have performed very well in all areas, supported strongly by the performance of transactional accounts. This has been achieved against the background of the negative effect of exchange rates.
3. The Group’s liquidity, and the commercial gap, once more improved, above all in the euro balance sheet, where the gap fell by €11 billion over the last 3 months (€33 billion in the full year). The good performance of on-balance-sheet deposits has supported this positive trend.
4. The Group’s solvency ratios continue to evolve very favorably, with core capital at the end of the year at 11.6%, according to Basel II regulations. It should be noted that the reduction of BBVA’s stake in CNCB will bring an important improvement of the Group’s core capital, calculated according to Basel III requirements.
5. Risks have evolved over the quarter in line with expectations, with a slight upward move in the NPA ratio in Spain, due not so much to the level of non-performing loans (which fell over the quarter), but rather to the fall in the volume of the loan book. In the rest of the areas, the improvement of Mexico and the US stands out; Eurasia shows a slight deterioration (lower leverage and negative effect of exchange rates) and South America shows stability.
6. Lastly, as regards shareholder remuneration, a new policy for dividend distribution was announced in the quarter. It will pay shareholders in cash, in line with earnings and the Group’s growth profile. This shift toward a 100% cash remuneration will be accompanied by a complement to the cash dividend in the form of the “dividend-option” system during the transition period.