Rest of Eurasia
Highlights
- Positive trend in lending activity in the European branches.
- Deposit performance strongly affected by the low interest-rate environment.
- Slight increase in earnings, supported by a positive performance in Europe and decline in operating expenses.
- Stable asset quality indicators.
Macro and industry trends
The Eurozone economy continued to post solid growth in the first half of 2017. In accordance with information from Eurostat, the GDP in the region has grown at a relatively stable quarterly rate of around 0.6% since the end of last year. This growth is supported both by the strength of domestic factors and the sustainability of increased global demand. However, uncertainty remains high. Some stimuli that are supporting the recovery could no longer be in place in the coming quarters, making it difficult to imagine a significant future acceleration in an economy that has already been growing above its potential since 2015. Overall, BBVA Research expects growth of over 2% in 2017, due to the solidity of domestic demand and a slight positive contribution from the foreign sector. Fiscal policy will remain expansive in the area as a whole. The ECB remains cautious with respect to future inflation and the possible impact of the recent appreciation in the euro. It is therefore maintaining its commitment to an accommodative monetary policy, which should be reflected in what will be a gradual withdrawal of the unconventional monetary policy measures.
Activity and result
This business area basically includes the Group's retail and wholesale business in Europe (excluding Spain) and Asia.
The area's loan book (performing loans under management) was up 3.0% at the close of September 2017, compared to the figure at the end of 2016, explained by growth in the branches in Europe (up 8.4%). Asia, which accounts for under 20% of the total loan portfolio in the area, declined by 17.6%.
With respect to the main credit risk indicators, since March 2017 the NPL ratio has remained steady, closing September at 2.6%, the same figure as June 2017, while in December 2016 stood at 2.7%. The NPL coverage ratio has risen to 85% (82% as of 30-Jun-2017 and 84% as of 31-Dec-2016).
Customer deposits under management are still strongly influenced by the environment of negative interest rates. With data as of 30-Sep-2017 they have fallen by 29.1% since December 2016 (down 14.9% in Europe and down 84.7% in Asia).
Regarding earnings, gross income remains at similar levels compared to the same period last year, but the figures differ according to the geographic area: Rest of Europe showed growth of 18.4%, while, Asia, posted a decline of 56.5%, mainly due to the payment of the CNCB dividend in 2016. Operating expenses continue to moderate (down 9.1% yearon- year), due mainly to control of personnel and other administrative expenses (amortization also declined by 3.7%). Finally, there were no relevant changes over the quarter in impairment losses on financial assets. As a result, this geographic area posted a cumulative net attributable profit through September of €101m up 1.2% when compared to the same period in 2016.
Financial statements and relevant business indicators (Million euros. Percentage)
| Income statement | Jan.-Sep. 17 | ∆% | Jan.-Sep. 16 |
|---|---|---|---|
| Net interest income | 144 | 17.1 | 123 |
| Net fees and commissions | 125 | (6.6) | 134 |
| Net trading income | 98 | 41.9 | 69 |
| Other income/expenses | 1 | (98.0) | 42 |
| Gross income | 368 | 0.1 | 368 |
| Operating expenses | (227) | (9.1) | (250) |
| Personnel expenses | (116) | (11.6) | (131) |
| Other administrative expenses | (103) | (6.6) | (110) |
| Depreciation | (9) | (3.7) | (9) |
| Operating income | 141 | 19.7 | 118 |
| Impairment on financial assets (net) | 10 | 39.7 | 7 |
| Provisions (net) and other gains (losses) | (8) | n.s. | 12 |
| Profit/(loss) before tax | 142 | 4.0 | 137 |
| Income tax | (41) | 11.9 | (36) |
| Profit/(loss) for the year | 101 | 1.2 | 100 |
| Non-controlling interests | 0 | - | 0 |
| Net attributable profit | 101 | 1.2 | 100 |
| Balance sheets | 30-09-17 | ∆% | 31-12-16 |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 1,096 | (18.1) | 1,337 |
| Financial assets | 961 | (46.2) | 1,787 |
| Loans and receivables | 15,838 | 1.7 | 15,574 |
| of which loans and advances to customers | 15,657 | 12.2 | 15,325 |
| Inter-area positions | - | - | - |
| Tangible assets | 36 | (4.6) | 38 |
| Other assets | 310 | (16.2) | 369 |
| Total assets/liabilities and equity | 18,241 | (4.5) | 19,106 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 45 | (33.4) | 67 |
| Deposits from central banks and credit institutions | 2,331 | (12.7) | 2,670 |
| Deposits from customers | 6,676 | (29.0) | 9,396 |
| Debt certificates | 231 | (26.6) | 315 |
| Inter-area positions | 6,539 | 35,6 | 4,822 |
| Other liabilities | 1,481 | 156.9 | 577 |
| Economic capital allocated | 938 | (25.5) | 1,259 |
| Relevant business indicators | 30-09-17 | ∆% | 31-12-16 |
|---|---|---|---|
| Loans and advances to customers (gross) (1) | 16,172 | 2.1 | 15,835 |
| Non-performing loans and guarantees given | 624 | (1.4) | 633 |
| Customer deposits under management (1) | 6,612 | (29.1) | 9,322 |
| Off-balance sheet funds (2) | 367 | 0.1 | 366 |
| Risk-weighted assets | 13,525 | (13.5) | 15,637 |
| Efficiency ratio (%) | 61.8 | 69.6 | |
| NPL ratio (%) | 2.6 | 2.7 | |
| NPL coverage ratio (%) | 85 | 84 | |
| Cost of risk (%) | (0.09) | (0.22) |
- (1 No incluye las cesiones temporales de activos.
- (2) Includes mutual funds, pension funds and other off-balance sheet funds.