The share
Recent global growth has generally been higher than expected by analysts, despite the moderating trend in recent quarters.
Economic activity has benefited from the faster than expected decline in energy prices, following the sharp increase observed after the outbreak of the war in Ukraine, as well as from the process of normalization of global supply chains and the dynamism of labor markets, which have contributed to the relative strength of private consumption and the service sector.
Lower energy prices and improvements in the production process bottlenecks have contributed to a reduction in headline inflation, which, in annual terms, reached 3.0% in the United States and 5.5% in the Eurozone in June. However, despite the recent slowdown in headline inflation, measures of core inflation continue to show no significant improvement.
Against this backdrop of still elevated inflationary pressures, central banks have continued to tighten monetary conditions. Although uncertainty is high, policy rates are likely to stay at restrictive levels, around 5.50% in the United States and 4.50% in the Eurozone, for a relatively long period of time. In addition, the reduction of central banks balance sheets in both regions, as well as the recent turmoil in the banking sector, are expected to contribute to the process of tightening of monetary conditions.
BBVA Research expects global growth to be 2.9% in 2023 (10 basis points higher than the previous forecast), after reaching 3.2% in 2022 and 6.1% in 2021. Recent activity data and the dissipation of supply shocks favor an upward revision of GDP forecasts for 2023 to 1.1% in the United States and 0.8% in the Eurozone (respectively 30 and 20 basis points higher than previously forecasted), while in China growth this year is most likely to be 5.7%, 50 basis points above the previous forecast mainly due to the positive impact of the easing of anti-COVID-19 policies at the beginning of 2023 and despite recent signs of moderation. Also, despite the upward revisions, the outlook for a slowdown in global growth remains, in a context where financial volatility is expected to remain relatively high and interest rates and inflation are expected to remain at higher than expected levels for a longer period.
Uncertainty remains high and a number of factors could determine the materialization of more negative scenarios than the one forecasted by BBVA Research. In particular, persistently high inflation and interest rates could generate a deep and widespread recession, as well as new episodes of financial volatility.
The main indexes have shown a slightly positive performance during the second quarter of 2023. In Europe, the Stoxx Europe 600 index rose by 0.9% compared to the end of March, and in Spain the Ibex 35 increased by 3.9% in the same period, showing a better relative performance. In the United States, the S&P 500 index increased more strongly, by 8.3%.
With regard to the banking sector indexes, the performance in the second quarter of 2023 was better than the general indexes in Europe. The Stoxx Europe 600 Banks index, which includes the banks in the United Kingdom, and the Euro Stoxx Banks, an index of Eurozone banks, increased 6.6% and 5.3% respectively, while in the United States, the S&P Regional Banks sector index fell by -7.0% in the period.
The BBVA share price increased by 7.0% during the quarter, outperforming its sector index, closing the month of June 2023 at €7.03.
BBVA share evolution
Compared with European indexes (Base indice 100=31-12-22)
BBVA
Eurostoxx-50
Eurostoxx Banks
The BBVA share and share performance ratios
| 30/06/2023 | 31/03/2023 | |
|---|---|---|
| Number of shareholders | 778,810 | 786,031 |
| Number of shares issued (millions) | 5,965 | 6,030 |
| Closing price (euros) | 7.03 | 6.57 |
| Book value per share (euros) (1) | 8.23 | 8.02 |
| Tangible book value per share (euros) (1) | 7.84 | 7.65 |
| Market capitalization (millions of euros) | 41,949 | 39,624 |
| Yield (dividend/price; %) (1)(2) | 6.1 | 5.3 |
(1) For more information, see Alternative Performance Measures at the end of the quarterly report.
(2) Calculated by dividing shareholder remuneration over the last twelve months by the closing price of the period.
Regarding shareholder remuneration, as approved by the General Shareholders' Meeting on March 17, 2023, in its first item on the agenda, on April 5, 2023, a cash payment of €0.31 gross per each outstanding BBVA share entitled to receive such amount was made against the 2022 results, as an additional shareholder remuneration for the financial year 2022. Thus, the total amount of cash distributions for 2022, taking into account the €0.12 gross per share that was distributed in October 2022, amounted to €0.43 gross per share.
Total shareholder remuneration includes, in addition to the cash payments mentioned above, the remuneration resulting from the execution of the share buyback programs that the Group could execute. Regarding BBVA's share buyback program announced past February 1, 2023 for an amount of €422m, on April 21, 2023, BBVA announced the completion of this share buyback program, having acquired 64,643,559 own shares between March 20 and April 20, 2023, representing approximately 1.07% of BBVA's share capital as of said date.
BBVA requested on July 27, 2023 to the European Central Bank the correspondent supervisory authorization in order to carry out a buyback program of BBVA shares up to €1,000 million. Its execution, if the authorization requested is finally granted, would be subject to the adoption of the correspondent corporate resolutions and to the communication of the specific terms and conditions of the share buyback program before its execution. This share buyback program would be considered to be an extraordinary shareholder distribution and is therefore not included in the scope of the ordinary distribution policy.
On June 30, 2023 the number of BBVA shares outstanding was 5,965 million, once the Group has carried out the partial execution, announced on June 2, 2023, of the partial execution, notified on June 2, 2023, of the share capital reduction resolution adopted by the Ordinary General Shareholders' Meeting. The number of shareholders reached 778,810 and, by type of investor, 59.7% of the capital was held by institutional investors and the remaining 40.3% was in the hands of retail shareholders.
BBVA shares are included on the main stock market indexes. At the closing of March 2023, the weighting of BBVA shares in the Ibex 35, Euro Stoxx 50 and the Stoxx Europe 600 index, were 8.4%, 1.4% and 0.4%, respectively. They are also included on several sector indexes, including Stoxx Europe 600 Banks, which includes the United Kingdom, with a weighting of 5.1% and the Euro Stoxx Banks index for the eurozone with a weighting of 8.8%. Moreover BBVA maintains a significant presence on a number of international sustainability indexes, such as, Dow Jones Sustainability Index (DJSI), FTSE4Good or MSCI ESG Indexes.
Group's information
Results
The BBVA Group generated a net attributable profit of €3,878m in the first half of 2023, which represents an increase of 31.1% compared to the same period of the previous year, driven by the performance of recurring income from the banking business, mainly the net interest income.
These results include the recording for the estimated total annual amount of the temporary tax on credit institutions and financial credit institutions for €225m, included in the other operating income and expenses line of the income statement.
Operating expenses increased by 18.2% at Group level, largely impacted by the inflation rates observed in the countries in which the Group operates. Notwithstanding the above, thanks to the remarkable growth in gross income, higher than the growth in expenses, the efficiency ratio stood at 42.0% as of June 30, 2023, with an improvement of 468 basis points, in constant terms, compared to the ratio recorded 12 months earlier.
The provisions for impairment on financial assets increased (+38.2% in year-on-year terms and at constant exchange rates), with lower requirements in Turkey, which were offset by higher provisioning needs, mainly in Mexico and South America, in a context of growth in activity.
NET ATTRIBUTABLE PROFIT (LOSS)
(MILLIONS OF EUROS)
Read more
Balance sheet and business activity
Loans and advances to customers recorded an increase of 3.5% compared to the end of December 2022, strongly favored by the evolution of retail loans (+5.6% at Group level).
Customer funds increased 2.5% compared to the end of December 2022 thanks both to the growth in deposits from customers which increased by 2.0%, and to the increase in off-balance sheet funds (+3.7%).
LOANS AND ADVANCES TO CUSTOMERS AND TOTAL CUSTOMER FUNDS (VARIATION COMPARED TO 31-12-2022)
Solvency
The Group's CET1 fully-loaded ratio stood at 12.99% as of June 30, 2023, which allows to maintain a large management buffer over the Group's CET1 requirement (8.76% at the date of release of this report)1, and also above the Group's established target management range of 11.5-12.0% of CET1.
CET1 fully-loaded
(1) Includes the update of the countercyclical capital buffer calculated on the basis of exposure at end June 2023.
1 Includes the update of the countercyclical capital buffer calculated on the basis of exposure at end June 2023.
Shareholder remuneration
Regarding shareholder remuneration, as approved by the General Shareholders' Meeting on March 17, 2023, in its first item on the agenda, on April 5, 2023, a cash payment of €0.31 gross per each outstanding BBVA share entitled to receive such amount was made against the 2022 results, as an additional shareholder remuneration for the financial year 2022. Thus, the total amount of cash distributions for 2022, taking into account the €0.12 gross per share that was distributed in October 2022, amounted to €0.43 gross per share.
Total shareholder remuneration includes, in addition to the cash payments mentioned above, the remuneration resulting from the execution of the share buyback programs that the Group could execute. Regarding BBVA's buyback program announced past February 1, 2023 for an amount of €422m, on April 21, 2023, BBVA announced the completion of this share buyback program, having acquired 64,643,559 own shares between March 20 and April 20, 2023, representing approximately 1.07% of BBVA's share capital as of said date.
BBVA requested on July 27, 2023 to the European Central Bank the correspondent supervisory authorization in order to carry out a buyback program of BBVA shares up to €1,000 million. Its execution, if the authorization requested is finally granted, would be subject to the adoption of the correspondent corporate resolutions and to the communication of the specific terms and conditions of the share buyback program before its execution. This share buyback program would be considered to be an extraordinary shareholder distribution and is therefore not included in the scope of the ordinary distribution policy.
As of June 30, 2023, BBVA's share capital stood at €2,923,081,772.45 divided into 5,965,473,005 shares, at €0.49 par value each, once the Group has carried out the partial execution, announced on June 2, 2023, of the share capital reduction resolution adopted by the Ordinary General Shareholders' Meeting of BBVA held on March 17, 2023, under item 3 of the agenda, with the redemption, charged to unrestricted reserves, of 64,643,559 own shares of €0.49 par value each acquired derivatively by BBVA in execution of the share buyback program scheme and which were held in treasury shares.
Sustainability
Channeling sustainable business 2
SUSTAINABLE BUSINESS BREAKDOWN (PERCENTAGE. TOTAL AMOUNT CHANNELED 2018-JUNE 2023)
(1) In those cases where it is not feasible or there is not enough information available to allow an exact distribution between the categories of climate change and inclusive growth, internal estimates are made based on the information available.
(2) Non-Project Finance and transactional banking activity.
(3) Bonds in which BBVA acts as bookrunner.
(4) Investment products art. 8 or 9 under Sustainable Finance Disclosure Regulation (SFDR) or similar criteria outside the European Union, managed, intermediated or marketed by BBVA. Includes, in Retail: structured deposits, insurance policies for electric vehicles and self-renting of electric vehicles, mainly; and in CIB and Enterprise: structured deposits, mainly.
BBVA Group has mobilized a total of approximately €169 billion in sustainable business between 2018 and June 2023, of which approximately 77% correspond to the area of promoting the fight against climate change, and the remaining 23% to promote inclusive growth. The channeled amount includes financing, intermediation, investment, off-balance sheet or insurance operations. These operations have contractual maturity or amortization dates, so the mentioned accumulated amount does not represent the amount recognized in the balance sheet.
During the first half of 2023, around €33 billion was mobilized, of which around €19 billion correspond to the second quarter of 2023. This channeling during the second quarter of 2023 represents an increase of about 30% compared to the same quarter of 2022 and a new quarterly record in sustainable business mobilization for the Group.
In this second quarter, the retail business has mobilized around €1.3 billion. The good behavior related to financial and social inclusion stands out, among which are worth mentioning the financing and the access to the financial system for vulnerable segments of the population, which grows by 85% in relation to the same period of the previous year. During this quarter, in the area of financial and social inclusion, €156m have been mobilized, the contribution of Mexico being relevant, which has channeled more than a third of this amount.
Between April and June 2023, the commercial business (enterprises) mobilized around €6.5 billion. The financing destined to promote or improve the energy efficiency of buildings stands out with €1,246m channeled in the quarter, which represents an increase of 114% compared to the same period of the previous year. In this section, the contribution of Spain is fundamental, advancing by 125%.
The corporate business has channeled during this quarter around €10.8 billion. The dynamism of the brokered bond market in which BBVA acts as bookrunner stands out, contributing €3,560m this quarter (25% more than in the same period of the previous year). Of this amount, €2,634m correspond to green bonds, which have experienced an increase of 91% compared to the same quarter of the previous year, offsetting the lower growth of other types. However, there have been signs of a slowdown in the field of sustainable corporate financing since the beginning of 2023, both in the long and short term.
Lastly, this quarter the BBVA Microfinance Foundation (FMBBVA), which is not part of the consolidated Group, has channeled around €400m to support vulnerable entrepreneurs with microcredits, experiencing an increase of 5% compared to the same quarter of the previous year.
Other actions carried out and awards received in sustainability matters
- Issuance of the first blue bond in Colombia
BBVA, together with the International Finance Corporation (IFC), announced this quarter the issuance of the first blue bond in Colombia. This blue bond consists of a first tranche of USD50m, which will be destined to support initiatives related to the protection of the country's water resources and, thus, preserve and protect aquatic biodiversity, conserving the sustainable use, management and protection of marine resources.
- Advances in energy efficient products
During this quarter, BBVA has continued to promote energy efficiency solutions in order to accompany its customers in the transition to a more sustainable future, with the aim of reducing energy costs and carbon dioxide (CO2) emissions into the atmosphere.
Thus, in Spain, BBVA and the General Council of Property Administrators have agreed on collaborating to improve the energy efficiency of Spain's housing stock. Thanks to this initiative, communities of owners of residential buildings built before 2007, and managed by property administrators registered in the General Council of Property Administrators, will be able to learn about financing solutions through BBVA, including loans with a maturity of up to 10 years.
Likewise, in Colombia, BBVA, in alliance with a brand of household appliances, has announced a new line of financing that promotes savings in energy consumption in Colombian households.
- Investment in Just Climate
During this quarter, BBVA invested USD20m in Just Climate's decarbonization fund (Just Climate CAF I), established by Generation Investment Management. Just Climate CAF I is a fund that invests in developing new large-scale technologies to reduce or eliminate emissions from industries that are difficult to decarbonize, such as cement and steel.
- BBVA renews as a member of the NZBA steering committee.
BBVA has renewed its membership as the only Spanish bank on the steering committee of the Zero Net Emissions Banking Alliance (NZBA). This alliance, of which BBVA is a founding member since 2021, is the forum promoted by the United Nations that defines the reference framework for the decarbonization of the banking sector: a robust, science-based framework that supports the credibility of the voluntary commitments.
- Global Finance Awards
This quarter BBVA has won several awards in different categories related to sustainability in the Global Finance magazine's Sustainable Finance Awards 2023, including "Outstanding Financial Leadership in Sustaining Communities in 2023", which highlights the Group's commitment to contribute to a more inclusive future.
It has also been recognized by Global Finance as:
- - Outstanding bank in green bonds in Western Europe.
- - Outstanding Financial Leadership in Sustaining Communities in Latin America.
- - Leadership in ESG-related Loans in Latin America.
2 Channeling sustainable business is considered to be any mobilization of financial flows, cumulatively, towards activities or clients considered sustainable in accordance with existing regulations, both internal and market standards and best practices. The foregoing is understood without prejudice to the fact that such mobilization, both initially and at a later time, may not be recorded on the balance sheet. To determine the amounts of channeled sustainable business, internal criteria based on both internal and external information are used.
Business areas
Spain
€3,630M*
+19.0%
Mexico
€6,774M*
+24.8% (1)
Turkey
€1,480M*
n.s. (1)
South America
€2,415M*
+60.7%(2)
Rest of business
€565M*
+48.4% (2)
Spain
€3,630 Mill.*
+19.0%
Highlights
- Significant growth in net interest income
- Improvement of the efficiency ratio
- Cost of risk remains at low levels, in line with the previous quarter
Results
(Millions of euros)
Net interest income
2,544
+44.7% (2)
Gross income
3,630
+19.0% (2)
Operating income
2,113
+30.1% (2)
Net attributable profit
1,231
+22.8%(2)
Activity (1)
Variation compared to 31-12-22.
Balances as of 30-06-23.
Performing loans and advances to customers under mangement
-0.3%
Customers funds under management
-0.3%
Risks
NPL coverage ratio
61%
57%
NPL ratio
3.9%
4.0%
Cost of risk
0.28%
0.27%
DEC 22
JUN 23
(1) Excluding repos.
(2) Year-on-year changes.
Mexico
€6,774 Mill.*
+24.8%
Highlights
- Increase in lending activity, with greater dynamism of the retail segment
- Relevant increase in net interest income
- The efficiency ratio continues to improve
- Excellent evolution of the net attributable profit
Results
(Millions of euros)
Net interest income
5,264
+26.6% (2)
Gross income
6,774
+24.8% (2)
Operating income
4,717
+28.3% (2)
Net attributable profit
2,614
+30.1% (2)
Activity (1)
Variation compared to 31-12-22 at constant exchange
rate.
Balances as of 30-06-23.
Performing loans and advances to customers under mangement
+4.6%
Customers funds under management
+2.6%
Risks
NPL coverage ratio
129%
129%
NPL ratio
2.5%
2.5%
Cost of risk
2.49%
2.86%
DEC 22
JUN 23
(1) Excluding repos.
(2) Year-on-year changes at constant exchange rate.
Turkey
1,480 Mill.*
n.s.
Highlights
- The dedollarization of the balance sheet continues
- Improvement of the NPL ratio and the cost of risk in the quarter
- Net attributable profit of the second quarter negatively affected by the strong depreciation of the Turkish lira
Results
(Millions of euros)
Net interest income
980
+29.2% (2)
Gross income
1,480
n.s. (2)
Operating income
888
n.s. (2)
Net attributable profit
525
n.s. (2)
Activity (1)
Variation compared to 31-12-22 at constant exchange
rate.
Balances as of 30-06-23.
Performing loans and advances to customers under mangement
+35.8%
Customers funds under management
+52.1%
Risks
NPL coverage ratio
90%
97%
NPL ratio
5.1%
4.2%
Cost of risk
0.94%
0.23%
DEC 22
JUN 23
(1) Excluding repos.
(2) Year-on-year changes at constant exchange rate.
South America
€2,415 Mill.*
+60.7%
Highlights
- Growth in lending activity
- Excellent evolution of the net interest income
- Higher adjustment for hyperinflation in Argentina
- Improvement of the efficiency ratio
Results
(Millions of euros)
Net interest income
2,503
+74.8% (2)
Gross income
2,415
+60.7% (2)
Operating income
1,332
+75.6% (2)
Net attributable profit
367
+22.6% (2)
Activity (1)
Variation compared to 31-12-22 at constant exchange
rates.
Balances as of 30-06-23.
Performing loans and advances to customers under mangement
+4.8%
Customers funds under management
-14.2%
Risks
NPL coverage ratio
101%
95%
NPL ratio
4.1%
4.3%
Cost of risk
1.69%
2.34%
DEC 22
JUN 23
(1) Excluding repos.
(2) Year-on-year changes at constant exchange
rates.
Rest of business
€565 Mill.*
+48.4%
Highlights
- Growth in resources the quarter
- Dynamism in recurring income and NTI
- NPL ratio and cost of risk remain at low levels
- Efficiency improvement continues
Results
(Millions of euros)
Net interest income
260
+69.3% (2)
Gross income
565
+48.4% (2)
Operating income
288
+94.1% (2)
Net attributable profit
212
+68.3% (2)
Activity (1)
Variation compared to 31-12-22 at constant exchange
rates.
Balances as of 30-06-23.
Performing loans and advances to customers under mangement
-2.9%
Customers funds under management
+6.6%
Risks
NPL coverage ratio
131%
96%
NPL ratio
0.4%
0.5%
Cost of risk
0.04%
0.13%
DEC 22
JUN 23
(1) Excluding repos.
(2) Year-on-year changes at constant exchange
rates.
* Gross income
(1) At constant exchange rate.
(2) At constant exchange rates.
As for the business areas evolution, excluding the effect of currency fluctuation in those areas where it has an impact, in each of them it is worth mentioning:
- Spain generated a net attributable profit of €1,231m in the first half of 2023, 53.6% higher than in the same period of the previous year, thanks to the dynamism of the net interest income, which boosted gross income growth.
- In Mexico, BBVA achieved a net attributable profit of €2,614m by the end of the first half of 2023, representing an increase of 30.1% compared to the same period in 2022, mainly as a result of the notable growth in net interest income, thanks to the strong boots of the activity and the improvement in the customer spread.
- Turkey generated a net attributable profit of €525m during the first half of 2023, which compares very positively with the result reached in the first half of 2022, both periods reflecting the impact of the application of hyperinflation accounting. The accumulated result at the end of June 2023 reflects the positive impact of the revaluation for tax purposes of the real estate and other depreciable assets of Garanti BBVA AS which has generated a credit in corporate income tax expense, due to the higher tax base of the assets, amounting to approximately €205m.
- South America generated a cumulative net attributable profit of €367m at the end of the first half of the year 2023, which represents a year-on-year increase of +22.6%, thanks to the good performance of recurring income (+65.7%) and the area's NTI, which offset the increase in expenses, in a highly inflationary environment throughout the region, and the higher provisioning requirements for impairment on financial assets.
- Rest of Business achieved a net attributable profit of €212m accumulated at the end of the first half of 2023, 68.3% higher than in the same period of the previous year, thanks to a favorable performance of recurring income, especially the net interest income, and NTI, which offset the increase in expenses in a context of higher inflation and normalization of loan-loss provisions.
The Corporate Center recorded in the first half of the year 2023 a net attributable profit of €-1,072m, compared with €-230m recorded in the same period of the previous year, mainly due to a negative contribution in the NTI line from exchange rate hedges as a result of better than expected currency performance, in particular the Mexican peso.
Lastly, and for a broader understanding of the Group's activity and results, supplementary information is provided below for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. CIB generated a net attributable profit of €1,233m in the first half of 2023. These results, which do not include the application of hyperinflation accounting, represent an increase of 47.9% on a year-on-year basis and reflects the contribution of the diversification of products and geographical areas, as well as the progress of the Group's wholesale businesses in its strategy, leveraged on globality and sustainability, with the purpose of being relevant to its clients.
NET ATTRIBUTABLE PROFIT BREAKDOWN (1)
(PERCENTAGE. 1H23)
(1) Excludes the Corporate Center.
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