Rest of Eurasia
Highlights
- Positive trend in lending in Europe.
- Trend in deposits strongly influenced by the negative interest-rate environment.
- Earnings down due to lower revenues, despite the good performance of expenses and loan-loss provisions.
- Good performance of asset quality indicators.
Macro and industry trends
The Eurozone economy continued to post solid growth in 2017. In accordance with information from Eurostat, GDP in the region grew at a relatively stable rate of around 0.6% in the first three quarters of the year. The most recent indicators suggest that this growth was maintained in the final part of the year. The improving labor market and increased confidence, alongside favorable financing conditions, underpinned momentum in consumption and investment. The latter factors were also boosted by increased global demand and the impact of growth in exports, which were not greatly affected by the appreciation of the euro over the year. As a result, the economy could have grown by around 2.4% overall in 2017. Despite the solid growth of domestic demand, inflation continued to moderate, below the ECB target, and the core component was relatively stable at around 1.1%. In this context, the ECB remains cautious and will continue to apply an accommodative monetary policy, steadily reducing asset purchases starting in January 2018 but extending the program at least until September.
Activity and result
This business area basically includes the Group's retail and wholesale business in Europe (excluding Spain) and Asia.
The loan book (performing loans under management) in the area fell year-on-year by 2.7% at the close of 2017. In the rest of Europe there was growth of 1.6%, which did not offset the reduction in Asia of 19.1%.
Regarding the main credit credit risk indicators, the NPL ratio closed at 2.4% in December (2.6% in September 2017, and 2.7% in December 2016) and the NPL coverage ratio closed at 74% (85% as of 30-Sep-2017 and 84% as of 31-Dec-2016).
Customer deposits under management were still strongly influenced by the environment of negative interest rates. With data as of December 2017 they fell by 28.6% year-on-year (down 15.6% in Europe and down 79.3% in Asia).
Regarding earnings, gross income declined 4.8% year-on-year, with the figures differing from geographic area: Rest of Europe showed growth of 12.1%, while Asia posted a decline of 62.3%, mainly due to the payment of the CNCB dividend in 2016. Operating expenses continue to moderate (down 9.9% year-on-year), mainly due to control of all cost items (personnel, other administrative expenses and depreciation). Finally, there was also a decline in impairment losses on financial assets, as a result of which this geography contributed a cumulative net attributable profit in 2017 of €125m, 17.4% less than in 2016.
Financial statements and relevant business indicators (Million euros. Percentage)
Income statement | 2017 | ∆% | 2016 |
---|---|---|---|
Net interest income | 180 | 8.7 | 166 |
Net fees and commissions | 164 | (15.2) | 194 |
Net trading income | 123 | 40.4 | 87 |
Other income/expenses | 1 | (97.3) | 45 |
Gross income | 468 | (4.8) | 491 |
Operating expenses | (308) | (9.9) | (342) |
Personnel expenses | (156) | (13.5) | (181) |
Other administrative expenses | (141) | (5.5) | (149) |
Depreciation | (11) | (10.4) | (12) |
Operating income | 160 | 7.0 | 149 |
Impairment on financial assets (net) | 23 | (24.3) | 30 |
Provisions (net) and other gains (losses) | (6) | n.s. | 23 |
Profit/(loss) before tax | 177 | (12.9) | 203 |
Income tax | (52) | 0.3 | (52) |
Profit/(loss) for the year | 125 | (17.4) | 151 |
Non-controlling interests | - | - | - |
Net attributable profit | 125 | (17.4) | 151 |
Balance sheets | 31-12-17 | ∆% | 31-12-16 |
---|---|---|---|
Cash, cash balances at central banks and other demand deposits | 877 | (34.4) | 1,337 |
Financial assets | 990 | (44.6) | 1,787 |
Loans and receivables | 15,009 | (3.6) | 15,574 |
of which loans and advances to customers | 14,864 | (3.0) | 15,325 |
Inter-area positions | - | - | - |
Tangible assets | 36 | (6.3) | 38 |
Other assets | 352 | (4.6) | 369 |
Total assets/liabilities and equity | 17,265 | (9.6) | 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 | 2,364 | (11.5) | 2,670 |
Deposits from customers | 6,700 | (28.7) | 9,396 |
Debt certificates | 354 | 12.4 | 315 |
Inter-area positions | 5,643 | 17.0 | 4,822 |
Other liabilities | 1,246 | 116.0 | 577 |
Economic capital allocated | 913 | (27.5) | 1,259 |
Relevant business indicators | 31-12-17 | ∆% | 31-12-16 |
---|---|---|---|
Loans and advances to customers (gross) (1) | 15,261 | (3.6) | 15,835 |
Non-performing loans and contingent liabilities | 556 | (12.1) | 633 |
Customer deposits under management (1) | 6,660 | (28.6) | 9,322 |
Off-balance sheet funds (2) | 376 | 2.7 | 366 |
Risk-weighted assets | 12,916 | (17.4) | 15,637 |
Efficiency ratio (%) | 65.9 | 69.6 | |
NPL ratio (%) | 2.4 | 2.7 | |
NPL coverage ratio (%) | 74 | 84 | |
Cost of risk (%) | (0.16) | (0.22) |
- (1 Figures at constant exchange rate.
- (2) Excluding repos.
- (3) Includes mutual funds, pension funds and other off-balance-sheet funds.