Rest of Eurasia
Highlights
- Positive trend in lending in European branches.
- Evolution of deposits strongly influenced by the environment of negative interest rates.
- Earnings improved due to good performance of expenses and impairments.
- Good performance of NPL ratio and coverage ratio.
Macro and industry trends
Growth in the Eurozone appears to continue to be relatively stable and sound. Economic activity is mainly based on strong global trade and recovery in the investment. However, the recent sectoral confidence figures show a moderation of the optimism, which has been shifting to industrial activity and retail sales. Despite this, the foundations of private consumption remains sound. The labor market continues to improve and supports consumer optimism, in a context of growing, but still low inflation. In this situation, the ECB began a gradual reduction in asset purchases at the start of 2018, although it remains cautious. This has been reinforced by a somewhat stronger euro and the recent materialization of global risks associated with protectionism.
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) fell by 1.5% at the close of the first quarter of 2018. The figures varied by geographic area: There was a decline in the Rest of Europe (down 2.3%) and a slight rise in Asia (up 2.0%).
With respect to the trajectory of the main credit risk indicators, the NPL ratio closed March at 2.1% (2.4% as of December 2017) and the NPL coverage ratio closed at 88% (74% as of 31-Dec-2017).
Customer deposits under management were still strongly influenced by the environment of negative interest rates. Data as of March 2018 showed a quarterly declined of 19.0% (down 20.7% in Europe but up 7.1% in Asia).
Regarding earnings, gross income declined by 7.3% year-on-year. Rest of Europe fell by 7.9% and Asia by 2.8%. Operating expenses continued to fall (down 9.0% year-on-year), due to tight control of personnel and discretionary costs. Lastly, there was an increase in impairment losses on financial assets. As a result, this geographic area contributed a cumulative net attributable profit in the first quarter of 2018 of €47 million, up 19.1% on the same period of 2017.
Financial statements and relevant business indicators (Million euros. Percentage)
| IFRS 9 | IAS 39 | |||||
|---|---|---|---|---|---|---|
| Income statement | 1 Q 18 | ∆% | 1 Q 17 | |||
| Net interest income | 43 | (7.0) | 46 | |||
| Net fees and commissions | 39 | (5.1) | 41 | |||
| Net trading income | 44 | (9.5) | 48 | |||
| Other income/expenses | 1 | (2.0) | 1 | |||
| Gross income | 126 | (7.3) | 135 | |||
| Operating expenses | (72) | (9.0) | (80) | |||
| Personnel expenses | (35) | (17.4) | (43) | |||
| Other administrative expenses | (36) | 5.8 | (34) | |||
| Depreciation | (2) | (52.8) | (3) | |||
| Operating income | 53 | (4.9) | 56 | |||
| Impaiment on financial assets not measured at fair value through profit or loss | 17 | 127.2 | 7 | |||
| Provisions or reversal of provisions and other results | (1) | (86.1) | (5) | |||
| Profit/(loss) before tax | 69 | 18.7 | 58 | |||
| Income tax | (22) | 17.8 | (19) | |||
| Profit/(loss) for the year | 47 | 19.1 | 40 | |||
| Non-controlling interests | 0 | - | 0 | |||
| Net attributable profit | 47 | 19.1 | 40 | |||
| IFRS 9 | IAS 39 | |||||
|---|---|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆% | 31-12-17 | |||
| Cash, cash balances at central banks and other demand deposits | 705 | (19.6) | 877 | |||
| Financial assets designated at fair value | 535 | (46.0) | 991 | |||
| of which Loans and advances | - | - | - | |||
| Financial assets at amortized cost | 15,129 | 0.8 | 15,009 | |||
| of which loans and advances to customers | 13,988 | (5.9) | 14,864 | |||
| Inter-area positions | - | - | - | |||
| Tangible assets | 37 | 2.5 | 36 | |||
| Other assets | 344 | (2.2) | 352 | |||
| Total assets/liabilities and equity | 16,749 | (3.0) | 17,265 | |||
| Financial liabilities held for trading and designated at fair value through profit or loss | 43 | (4.8) | 45 | |||
| Deposits from central banks and credit institutions | 2,899 | 22.6 | 2,364 | |||
| Deposits from customers | 5,425 | (19.0) | 6,700 | |||
| Debt certificates | 221 | (37.7) | 354 | |||
| Inter-area positions | 6,410 | 13.6 | 5,643 | |||
| Other liabilities | 868 | (30.3) | 1,246 | |||
| Economic capital allocated | 884 | (3.2) | 913 | |||
| Relevant business indicators | 31-03-18 | ∆% | 31-12-17 |
|---|---|---|---|
| Performing loans and advances to customers under management (1) | 15,126 | (1.5) | 15,362 |
| Non-performing loans and guarantees given | 462 | (16.9) | 556 |
| Customer deposits under management (2) | 5,425 | (19,0) | 6.700 |
| Off-balance sheet funds (3) | 390 | 3.9 | 376 |
| Risk-weighted assets | 14,907 | (1.6) | 15,150 |
| Efficiency ratio (%) | 57.7 | 65.9 | |
| NPL ratio (%) | 2.1 | 2.4 | |
| NPL coverage ratio (%) | 88 | 74 | |
| Cost of risk (%) | (0.35) | (0.16) |
- (1 Figures at constant exchange rate.
- (2) Excluding repos.