Results
BBVA generated a net attributable profit of €5,324m in 2018, which represents a year-on-year increase of 51.3% (+78.2% at constant exchange rates) that includes the results from corporate operations originated by the capital gains (net of taxes) from the sale of BBVA Chile. Moreover, at constant exchange rates, it is worth mentioning the good performance of recurring revenue, lower loan-loss impairments (affected by the negative impact of the recognition in the fourth quarter of 2017 of impairment losses, amounting €1,123m from BBVA stake in Telefónica, S.A.) and provisions, which offsets the lower contribution from net trading income (NTI) compared to the same period the previous year.
Consolidated income statement: quarterly evolution (Millions of Euros)
| IFRS 9 | IAS 39 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | |||||||
| 4Q | 3Q | 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |
| Net interest income | 4,692 | 4,256 | 4,355 | 4,288 | 4,557 | 4,399 | 4,481 | 4,322 |
| Net fees and commissions | 1,226 | 1,161 | 1,256 | 1,236 | 1,215 | 1,249 | 1,233 | 1,223 |
| Net trading income | 316 | 200 | 297 | 410 | 552 | 347 | 378 | 691 |
| Dividend income | 62 | 11 | 72 | 12 | 86 | 35 | 169 | 43 |
| Share of profit or loss of entities accounted for using the equity method | (19) | (3) | 6 | 8 | 5 | 6 | (2) | (5) |
| Other operating income and expenses | (126) | (102) | (10) | 142 | (54) | 154 | 77 | 108 |
| Gross income | 6,151 | 5,522 | 5,977 | 6,096 | 6,362 | 6,189 | 6,336 | 6,383 |
| Operating expenses | (2,981) | (2,779) | (2,963) | (2,979) | (3,114) | (3,075) | (3,175) | (3,137) |
| Personnel expenses | (1,557) | (1,438) | (1,560) | (1,566) | (1,640) | (1,607) | (1,677) | (1,647) |
| Other administrative expenses | (1,119) | (1,044) | (1,105) | (1,106) | (1,143) | (1,123) | (1,139) | (1,136) |
| Depreciation | (305) | (297) | (299) | (307) | (331) | (344) | (359) | (354) |
| Operating income | 3,170 | 2,743 | 3,014 | 3,117 | 3,248 | 3,115 | 3,161 | 3,246 |
| Impairment on financial assets not measured at fair value through profit or loss | (1,353) | (1,018) | (788) | (823) | (1,885) | (976) | (997) | (945) |
| Provisions or reversal of provisions | (66) | (121) | (86) | (99) | (180) | (201) | (193) | (170) |
| Other gains (losses) | (183) | (36) | 67 | 41 | (267) | 44 | (3) | (66) |
| Profit/(loss) before tax | 1,568 | 1,569 | 2,207 | 2,237 | 916 | 1,982 | 1,969 | 2,065 |
| Income tax | (421) | (428) | (602) | (611) | (499) | (550) | (546) | (573) |
| Profit/(loss) after tax from ongoing operations | 1,147 | 1,141 | 1,604 | 1,626 | 417 | 1,431 | 1,422 | 1,492 |
| Results from corporate operations (1) | - | 633 | - | - | - | - | - | - |
| Profit/(loss) for the year | 1,147 | 1,141 | 1,604 | 1,626 | 417 | 1,431 | 1,422 | 1,492 |
| Non-controlling interests | (145) | (100) | (295) | (286) | (347) | (288) | (315) | (293) |
| Net attributable profit | 1.001 | 1.674 | 1,309 | 1,340 | 70 | 1,143 | 1,107 | 1,199 |
| Net attributable profit excluding results from corporate operations | 1,001 | 1,040 | 1,309 | 1,340 | 70 | 1,143 | 1,107 | 1,199 |
| Earning per share (euros) (1) | 0.14 | 0.24 | 0.18 | 0.19 | (0.00) | 0.16 | 0.16 | 0.17 |
- General note: the data for the quarters of 2018 are presented as proforma which are considered as Alternative Performance Measures (APM), the accumulated effect being fully collected to reflect the impact derived from the accounting for hyperinflation in Argentina between 1-1-2018 and 30-9-2018 in the third quarter of 2018, without having been reexpressed the data shown in the previous table for the first and second quarter of 2018.
- (1) Includes net capital gains from the sale of BBVA Chile.
- (2) Adjusted by additional Tier 1 instrument remuneration.
Consolidated income statement (Millions of Euros)
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| 2018 | ∆% | ∆% at constant exchange rates | 2017 | |
| Net interest income | 17,591 | (0.9) | 10.8 | 17,758 |
| Net fees and commissions | 4,879 | (0.8) | 8.9 | 4,921 |
| Net trading income | 1,223 | (37.8) | (33.9) | 1,968 |
| Dividend income | 157 | (52.9) | (52.0) | 334 |
| Share of profit or loss of entities accounted for using the equity method | (7) | n.s. | n.s. | 4 |
| Other operating income and expenses | (96) | n.s. | n.s. | 285 |
| Gross income | 23,747 | (6.0) | 4.3 | 25,270 |
| Operating expenses | (11,702) | (6.4) | 2.5 | (12,500) |
| Personnel expenses | (6,120) | (6.9) | 2.0 | (6,571) |
| Other administrative expenses | (4,374) | (3.7) | 6.1 | (4,541) |
| Depreciation | (1,208) | (12.9) | (6.5) | (1,387) |
| Operating income | 12,045 | (5.7) | 6.2 | 12,770 |
| Impairment on financial assets not measured at fair value through profit or loss | (3,981) | (17.1) | (12.0) | (4,803) |
| Provisions or reversal of provisions | (373) | (49.9) | (47.1) | (745) |
| Other gains (losses) | (110) | (62.1) | (63.0) | (292) |
| Profit/(loss) before tax | 7,580 | 9.4 | 30.4 | 6,931 |
| Income tax | (2,062) | (4.9) | 9.2 | (2,169) |
| Profit/(loss) after tax from ongoing operations | 5,518 | 15.9 | 40.6 | 4,762 |
| Results from corporate operations (1) | 633 | - | - | - |
| Profit/(loss) for the year | 6,151 | 29.2 | 56.7 | 4,762 |
| Non-controlling interests | (827) | (33.5) | (11.7) | (1,243) |
| Net attributable profit | 5,324 | 51.3 | 78.2 | 3,519 |
| Net attributable profit excluding results from corporate operations | 4,691 | 33.3 | 57.0 | 3,519 |
| Earning per share (euros) (2) | 0.76 | - | - | 0.48 |
- (1) Includes net capital gains from the sale of BBVA Chile.
- (2) Adjusted by additional Tier 1 instrument remuneration.
Unless expressly indicated otherwise, to better understand the changes in the main headings of the Group's income statement, the year-on-year percentage changes provided below refer to constant exchange rates.
Gross income
Gross income accumulated in the period grew by 4.3% year-on-year, supported by the positive performance of the more recurring items.
Gross income (Millions of Euros)
(1) At constant exchange rates: +4.3%.
Net interest income grew by 10.8% year-on-year, leveraged mainly by higher contribution from inflation-linked bonds in Turkey. The other business areas, with the exception of Spain and Rest of Eurasia, also registered positive year-on-year changes, with Mexico, South America and the United States standing out, in this order, for its contribution. In the fourth quarter, net interest income grew by 5.2% in comparison with the previous quarter.
Net interest income/ATAs (Percentage)
On the other hand, cumulative net fees and commissions (up 8.9% year-on-year) also registered a favorable evolution highly driven by their diversification. The quarterly figure performed well (up 1.1% in the fourth quarter).
As a result, the more recurring revenues items (net interest income plus net fees and commissions) increased by 10.4% year-on-year (up 4.3% over the third quarter).
Net interest income plus net fees and commissions (Millions of Euros)
(1) At constant exchange rates: +10.4%.
NTI in 2018 moderated in comparison with the previous year, when it was exceptionally high, largely due to the registration of the capital gains of €228m before taxes, from market sales of the stake in China Citic Bank (CNCB): €204m in the first quarter, from the sale of 1.7% stake, and €24m in the third quarter from the sale of the remaining 0.34%. There have also been lower sales of ALCO portfolios in Spain in the first nine months of 2018 compared to the same period of the previous year. By business areas, NTI had a good performance in South America and Turkey.
Other operating income and expenses closed at -€96m in 2018 compared to €285m in 2017, mainly due to negative impact of the hyperinflation in Argentina which meant -€323m in this line of the income statement. The change is also explained by the higher contribution, amounting to €44m, to the Single Resolution Fund (SRF) and Deposit Guarantee Fund (DGF) in Spain. The net contribution of the insurance business grew by 8.7% in cumulative terms (+15.4% in the fourth quarter).
Operating income
Operating expenses in 2018 registered an increase of 2.5%, year-on-year, well below the inflation rate recorded in the main countries where BBVA is present (down 6.4% at current exchange rates). Cost discipline has been maintained in all the Group's areas through various efficiency plans. By business area the biggest year-on-year reductions were in Banking activity in Spain and Non Core Real Estate. In the United States, Mexico and Turkey the growth of operating expenses was lower than the growth of gross income.
Operating expenses (Millions of Euros)
(1) At constant exchange rates: +2.5%.
Breakdown of operating expenses and efficiency calculation (Millions of Euros)
| 2018 | ∆% | 2017 | |
|---|---|---|---|
| Personnel expenses | 6,120 | (6.9) | 6,571 |
| Wages and salaries | 4,786 | (7.3) | 5,163 |
| Employee welfare expenses | 869 | (4.6) | 911 |
| Training expenses and other | 465 | (6.4) | 497 |
| Other administrative expenses | 4,374 | (3.7) | 4,541 |
| Property, fixtures and materials | 982 | (5.0) | 1.033 |
| IT | 1,133 | 11.2 | 1,018 |
| Communications | 235 | (12.7) | 269 |
| Advertising and publicity | 336 | (4.5) | 352 |
| Corporate expenses | 109 | (0.8) | 110 |
| Other expenses | 1,162 | (10.7) | 1,301 |
| Levies and taxes | 417 | (8.6) | 456 |
| Administration costs | 10,494 | (5.6) | 11,112 |
| Depreciation | 1,208 | (12.9) | 1,387 |
| Operating expenses | 11,702 | (6.4) | 12,500 |
| Gross income | 23,747 | (6.0) | 25,270 |
| Efficiency ratio (operating expenses/gross income; %) | 49.3 | - | 49.5 |
Number of employees
Number of branches
Number of ATMs
As a consequence of this evolution of operating expenses, the efficiency ratio stood at 49.3% and the operating income posted a year-on-year growth of 6.2% (+9.4% in the last quarter of 2018).
Efficiency ratio (Percentage)
Operating Income (Millions of Euros)
(1) At constant exchange rates: +6.2%.
Provisions and other
Impairment on financial assets in 2018 decreased by 12.0% in comparison with the figure for 2017, affected by the negative impact of the recognition in 2017 of impairment losses, amounting €1,123m from BBVA stake in Telefónica, S.A. as a result of the evolution of the price of the latter and in compliance with the requirements of the accounting standard IAS 39 which was in force at that point in time. By business area, they continued to fall in Spain, due to lower loan-loss provisioning requirements for large customers. In contrast, they increased, especially in Turkey, due to the deterioration of the macroeconomic scenario and some wholesale-customers and to a lesser extent in South America. On the other hand, Mexico stood in line with 2017.
Impairment on financial assests (net) (Millions of Euros)
(1) At constant exchange rates: -12.0%.
The heading provisions or reversal of provisions (hereinafter, provisions) was 47.1% lower than the figure of 2017, as a result of lower restructuring costs in 2018. The line other gains (losses) showed a negative balance, due mainly to certain operations with an unfavorable effect from the Non Core Real Estate area, recorded in the last quarter.
The heading results from corporate operations amounted to €633m and registered the capital gains (net of taxes) originated by the sale of BBVA’S equity stake in BBVA Chile.
Results
As a result of the above, the Group's net attributable profit accumulated in 2018 reached an amount of €5,324m and continued to show a very positive year-on-year evolution (up 78.2% at constant exchange rates, up 51.3% at current exchange rates). The net attributable profit, excluding results from corporate operations, stood at €4,691m, or 33.3% higher than the amount recorded for the previous year, when operations of this kind were not carried out (up 57.0% at constant exchange rates).
By business area, Banking activity in Spain generated a profit of €1,522m, Non Core Real Estate a loss of €78m, the United States contributed a profit of €735m, Mexico registered €2,384m, Turkey contributed a profit of €569m, South America €591m and the Rest of Eurasia €93m.
Net attributable profit (Millions of Euros)
(1) At constant exchange rates: +78.2%.
Earning per share (1) (Euros)
(1) Adjusted by additional Tier 1 instrument remuneration.
ROE and ROTE (1) (Percentage)
(1) The ROE and ROTE ratios include, in the denominator, the Group’s average shareholders’ funds and take into account the item called “Accumulated other comprehensive income”, which forms part of the equity. Excluding this item, the ROE would stand at 6.9% in 2016, 6.7% in 2017 and 10.1% in 2018; and the ROTE on 8.6%, 8.0% and 12.0%, respectively.
ROA and RORWA (Percentage)
