The BBVA share

Global economic growth maintained a robust growth of approximately 3.6% in 2018, although slowed more than expected during the second half of 2018, due to both the poorer performance seen by retailers and the industrial sector along with a strong increase in financial tensions, especially in the developed economies, as a result of higher uncertainty. Poorer economic figures in Europe and China was accompanied by downwards trends in Asian countries and a cyclical deterioration in the United States. In this context, both the Federal Reserve (Fed) and the ECB have been more cautious and patient in the path towards monetary policy normalization and their decisions going forward will depend on the performance of the economy. The main short-term risk continues to be protectionism, not only because of the direct impact of the commercial channel, but also because its indirect effect on confidence and on financial volatility. Additionally, there are concerns about the intensity of the adjustment on economic activity during the following quarters, both in the United States and in China.

Most stock-market indices showed a downward trend during 2018. In Europe, the Stoxx 50 and the Euro Stoxx 50 fell by 13.1% and 14.3%, respectively. On the other hand, in Spain, the Ibex 35 lost 15.0% over the same period. Finally, in the United States the S&P 500 index fell 6.2% in the last twelve months, mainly due to the decline in the last quarter (down 14.0%).

In particular, the banking sector indices were notably more negative during 2018 than these general indices. The European Stoxx Banks index, which includes British banks, lost 28.0%, and the Eurozone bank index, the Euro Stoxx Banks, was down 33.3%, while in the United States the S&P Regional Banks index declined 20.5% in comparison at the close of 2017.

The BBVA share closed 2018 at €4.64, a fall of 34.8% for this year.

BBVA share evolution

Compared with European indices (Base indice 100=31-12-2017)

Regarding shareholder remuneration, on October 10, BBVA paid in cash a gross amount of €0.10 per share on account of the 2018 fiscal year. This payment is consistent with the shareholder remuneration policy announced by Relevant Event of February 1, 2017, that envisages, subject to the pertinent approvals by the corresponding corporate bodies, the payment of two dividends in cash, foreseeably on October and April of each year. It is expected to be proposed for the consideration of the competent governing bodies a cash payment in a gross amount of euro 0.16 per share to be paid in April 2019 as final dividend for 2018.

Shareholder remuneration

(Euros-gross/share)

0.09

Oct. 17

0.15

Apr. 18

0.10

Oct. 18

Cash

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Group information

Results

  • Generalized growth in the more recurring revenue items for almost all business areas.
  • Containment trend in operating expenses, whose performance is affected by exchange rates trends.
  • Lower amount of of impairment on financial assets not measured at fair value through profit or loss (hereinafter, "impairment on financial assets") affected by the negative impact of the recognition in the fourth quarter of 2017 of impairment losses, amounting €1,123m from BBVA’s stake in Telefónica, S.A.
  • The financial statements of the Group for 2018 include, on one hand, the negative impact derived from the accounting for hyperinflation in Argentina (-€266m) in the net attributable profit, and on the other hand, the positive impact on equity of €129m.
  • The result of corporate operations amounted to €633m and includes the capital gains (net of taxes) arising from the sale of BBVA's equity stake in BBVA Chile.
  • The net attributable profit was €5,324m, 51.3% higher than in 2017.
  • Net attributable profit excluding results from corporate operations stood at €4,691m, up 33.3% higher than the result reached in 2017.

Net attributable profit (Millions of Euros)

Net attributable profit breakdown(1) (Percentage. 2018)

(1) Excludes the Corporate Center.

(2) Includes the areas Banking activity in Spain and Non Core Real Estate.

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Balance sheet and business activity

  • Lower volume of loans and advances to customers (gross); however, by business areas, in the United States, Mexico, South America (excluding BBVA Chile) and Rest of Eurasia volumes increased.
  • Non-performing loans continue to reduce in 2018.
  • Within off-balance-sheet funds, mutual funds continue to perform positively.

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Solvency

  • The capital position is above regulatory requirements.
  • 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, under the adverse scenario, BBVA is the second bank among its European peers with lower negative impact in CET1 fully-loaded capital ratio and 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 this scenario.

Capital and leverage ratios (Percentage as of 31-12-2018)



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Risk management

  • Solid indicators of the main credit-risk metrics: as of 31-December-2018, the NPL ratio closed at 3.9%, the NPL coverage ratio at 73% and the cumulative cost of risk at 1.01%.

NPL and NPL coverage ratios (Percentage)

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Transformation

  • The Group's digital and mobile customer base and digital sales continue to increase in all the geographic areas where BBVA operates with a positive impact in efficiency.

Digital and mobile customers (Millons)

Appointments and other matters of interest

  • BBVA’s Board of Directors, in its meeting held on December 20, 2018, approved the succession plans for the Group Executive Chairman and for the Chief Executive Officer and appointed Carlos Torres Vila as Executive Chairman of BBVA, replacing Francisco González Rodríguez and Onur Genç as member of the Board of Directors and as Chief Executive Officer of BBVA. The Board of Directors also approved organisational changes, which involve changes at the senior management level of BBVA Group. On December, 21st, BBVA received the required administrative authorisations to give full effect to the resolutions approved.
  • On December, 26th, BBVA reached an agreement with Voyager Investing UK Limited Partnership, an entity managed by Canada Pension Plan Investment Board (“CPPIB”) for the transfer of a credit portfolio mainly composed by non-performing and defaulted mortgage loans. The closing of the Transaction will be completed as soon as the relevant conditions are fulfilled, which is expected to occur within the second quarter of 2019. In addition, it is expected that the impact in the Group’s attributable profit, which is currently expected to be positive by €150m, net of taxes and other adjustments, and the impact in the Common Equity Tier 1 (fully-loaded), which is expected to be slightly positive.

Impact of the initial implementation of IFRS 9

  • The figures corresponding to the first nine months of 2018 are prepared under International Financial Reporting Standard 9 (IFRS 9), which entered into force on January 1, 2018. This new accounting standard did not require the comparative information from prior periods, so the comparative figures shown for the year 2017 have been prepared in accordance with the IAS 39 (International Accounting Standard 39) regulation in force at that time.
  • The impacts derived from the first application of IFRS 9, as of January 1, 2018, were registered with a charge to reserves of approximately €900m (net of fiscal effect) mainly due to the allocation of provisions based on expected losses, compared to the model of losses incurred under the previous IAS 39.
  • In capital, the impact derived from the first application of IFRS 9 has been a reduction of 31 basis points with respect to the fully-loaded CET1 ratio of December 2017.

Business areas

Banking activity in Spain

Highlights

  • Activity growth in high profitable segments.
  • Good performance of net fees and commissions.
  • Operating expenses decline during all quarters.
  • Solid asset-quality indicators: lower impairments and provisions.

Spain

Gross income. Year-on-year changes.

€5,943 m

Arrow Up Green

-3.8%

Activity (1)

Year-on-year change at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

     

    -0.7%

  • Customers funds
    under management

     

    +2.9%

(1) Excluding repos.


Spain

Results

  • Net interest income

    €3,672 m

    Arrow Down Green

    -1.8% (2)

  • Gross income

    €5,943 m

    Arrow Down Green

    -3.8% (2)

  • Operating income

    €2,680 m

    Arrow Down Green

    -3.9% (2)

  • Net attributable profit

    €1,522 m

    Arrow Down Green

    +10.8% (2)

(2) Year-on-year changes.


Spain

Risks

NPL coverage ratio

50%


57%

NPL ratio

5.5%


4.6%

Cost of risk

0.32%


0.21%




DEC 17

DEC 18


Spain

Non Core Real Estate

Highlights

  • Continued positive trend in the Spanish real-estate market, although with a more moderate growth rate.
  • Minimum levels of the net real-estate exposure.
  • Closing of the sale agreement of the participation in Testa.
  • Significant reduction in net losses in the area.

Spain

Gross income. Year-on-year changes.

€38 m

n.s.

Results

  • Net interest income

    €32 m

    Arrow Down Green

    -55.8%

  • Gross income

    €38 m

    n.s.

  • Operating income

    -€28 m

    Arrow Down Green

    -76.1%

  • Net attributable profit

    -€78 m

    Arrow Down Green

    -84.2%


Spain

Real estate net exposure

Billion euros.


Spain

The United States

Highlights

  • Lending growth supported by business financing and retail segments.
  • Good performance of net interest income and provisions.
  • Improvement in efficiency.
  • Net attributable profit positively affected by the tax reform at the end of 2017.

The United States

Gross income. Year-on-year changes, at constant exchange rate.

€2,989 m

Arrow Up Green

+8.3%

Activity (1)

Year-on-year change, at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

    +7.4%

  • Customers funds
    under management

    +0.3%

(1) Excluding repos.


The United States

Results

Year-on-year changes.

  • Net interest income

    €2,276 m

    Arrow Up Green

    +12.1% (2)

  • Gross income

    €2,989 m

    Arrow Up Green

    +8.3% (2)

  • Operating income

    1,127 m

    Arrow Up Green

    +14.5% (2)

  • Net attributable profit

    €735 m

    Arrow Up Green

    +56.9% (2)

(2) Year-on-year changes, at constant exchange rate.


The United States

Risks

NPL coverage ratio

104%


85%

NPL ratio

1.2%


1.3%

Cost of risk

0.43%


0.39%




DEC 17

DEC 18


The United States

Mexico

Highlights

  • Good performance of the lending activity, with growth in all segments.
  • Expenses continue to grow below the rate of gross income.
  • Double-digit year-on-year growth in net attributable profit.
  • Good asset quality indicators.

Mexico

Gross income. Year-on-year changes, at constant exchange rate.

€7,193 m

Arrow Up Green

+7.5%

Activity (1)

Year-on-year change at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

    +8.1%

  • Customers funds
    under management

    +3.6%

(1) Excluding repos.


Mexico

Results

Year-on-year changes.

  • Net interest income

    €5,568 m

    Arrow Up Green

    +8.2% (2)

  • Gross income

    €7,193 m

    Arrow Up Green

    +7.5% (2)

  • Operating income

    €4,825 m

    Arrow Up Green

    +10.0% (2)

  • Net attributable profit

    €2,384 m

    Arrow Up Green

    +16.1% (2)

(2) Year-on-year changes, at constant exchange rate.


Mexico

Risks

NPL coverage ratio

123%


154%

NPL ratio

2.3%


2.1%

Cost of risk

3.24%


3.07%




DEC 17

DEC 18


Mexico

Turkey

Highlights

  • Activity impacted by the evolution of exchange rates.
  • Good performance of recurring revenue items, as a result of the inflation-linked bonds performance.
  • Operating expenses growth below inflation.
  • Risk indicators affected by the update of the macroeconomic scenario and certain negative impacts of the portfolio of wholesale customers.

Turkey

Gross income. Year-on-year changes, at constant exchange rate.

€3,901 m

Arrow Up Green

+31.3%

Activity (1)

Year-on-year change at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

    +6.2%

  • Customers funds under management

    +17.7%

(1) Excluding repos.


Turkey

Results

Year-on-year changes.

  • Net interest income

    €3,135 m

    Arrow Up Green

    +30.3% (2)

  • Gross income

    €3,901 m

    Arrow Up Green

    +31.3% (2)

  • Operating income

    €2,658 m

    Arrow Up Green

    +40.9% (2)

  • Net attributable profit

    €569 m

    Arrow Down Green

    -4.5% (2)

(2) Year-on-year changes, at constant exchange rate.


Turkey

Risks

NPL coverage ratio

85%


81%

NPL ratio

3.9%


5.3%

Cost of risk

0.82%


2.44%




DEC 17

DEC 18


Turkey

South America

Highlights

  • Activity affected by the sale of BBVA Chile.
  • In other countries, the activity evolves at a good pace.
  • Argentina hyperinflation adjustment impacts in every item of the income statement.

South America

Gross income. Year-on-year changes At constant exchange rates.

€3,701 m

Arrow Up Green

+1.9%

Activity (1)

Year-on-year change at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

    -21.2%

  • Customers funds under management

    -10.5%

(1) Excluding repos.


South America

Results

Year-on-year changes.

  • Net interest income

    €3,009 m

    Arrow Up Green

    +12.8% (2)

  • Gross income

    €3,701 m

    Arrow Up Green

    +1.9% (2)

  • Operating income

    €2,011 m

    Arrow Up Green

    -2,5% (2)

  • Net attributable profit

    €591 m

    Arrow Down Green

    -16.5% (2)

(2) Year-on-year changes At constant exchange rates.


South America

Risks

NPL coverage ratio

89%


97%

NPL ratio

3.4%


4.3%

Cost of risk

1.32%


1.44%




DEC 17

DEC 18


South America

Rest of Eurasia

Highlights

  • Positive trend in lending activity.
  • Performance of deposits strongly influenced by the environment of negative interest rates.
  • Despite the control costs, earnings affected by decrease in revenues.
  • Improvement of the NPL and NPL coverage ratios.

Rest of Eurasia

Gross income. Year-on-year changes.

€415 m

Arrow Down Green

-11.4%

Activity (1)

Year-on-year change at constant exchange rate.
Data as of 31-12-2018.

  • Performing loans and advances to customers under management

    +7.7%

  • Customers funds under management

    -25.6%

(1) Excluding repos.


Rest of Eurasia

Results

Year-on-year changes.

  • Net interest income

    €175 m

    Arrow Down Green

    -2.5% (2)

  • Gross income

    €415 m

    Arrow Down Green

    -11.4% (2)

  • Operating income

    €124 m

    Arrow Up Green

    -22.5% (2)

  • Net attributable profit

    €93 m

    Arrow Down Green

    -25.2% (2)

(2) Year-on-year changes At constant exchange rates.


Rest of Eurasia

Risks

NPL coverage ratio

74%


83%

NPL ratio

2.4%


1.7%

Cost of risk

-0.16%


-0.11%




DEC 17

DEC 18


Rest of Eurasia

Contact

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Contact email
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Quartely report 4Q 2018

Additional information

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