The United States
Highlights
- Good performance in consumer and commercial segments activity.
- Net interest income increase, main lever of results and of customer spreads.
- Operating expenses growth below the inflation rate, efficiency improvement.
- Net attributable profit affected by impairment on financial assets associated to the macroeconomic environment, to specific customers and to write-offs in consumer.
Business activity (1)
(Year-on-year change at constant exchange rate. Data as of 31-03-19)
(1) Excluding repos.
Net interest income/ATAs
(Percentage. Constant exchange rate)
Operating income
(Millions of Euros at constant exchange rate)
(1) At current exchange rate: +25.3%.
Net attributable profit
(Millions of Euros at constant exchange rate)
(1) At current exchange rate: -34.8%.
Financial statements and relevant business indicators
(Millions of euros and percentage)
| Income statement | 1Q19 | ∆% | ∆% (1) | 1Q18 |
|---|---|---|---|---|
| Net interest income | 615 | 17.4 | 8.4 | 524 |
| Net fees and commissions | 151 | 2.1 | (5.7) | 148 |
| Net trading income | 41 | 67.3 | 54.0 | 24 |
| Other operating income and expenses | (3) | n.s. | n.s. | 3 |
| Gross income | 804 | 15.1 | 6.3 | 699 |
| Operating expenses | (473) | 8.8 | 0.5 | (434) |
| Personnel expenses | (278) | 10.4 | 1.9 | (252) |
| Other administrative expenses | (140) | (0.6) | (8.2) | (141) |
| Depreciation | (55) | 31.1 | 21.2 | (42) |
| Operating income | 331 | 25.3 | 15.7 | 264 |
| Impaiment on financial assets not measured at fair value through profit or loss | (162) | n.s. | n.s. | (20) |
| Provisions or reversal of provisions and other results | (10) | n.s. | n.s. | 8 |
| Profit/(loss) before tax | 160 | (36.6) | (41.4) | 252 |
| Income tax | (32) | (42.6) | (47.0) | (56) |
| Profit/(loss) for the year | 127 | (34.8) | (39.8) | 196 |
| Non-controlling interests | - | - | - | - |
| Net attributable profit | 127 | (34.8) | (39.8) | 196 |
| Balance sheets | 31-03-19 | ∆% | ∆%(1) | 31-12-18 |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 6,550 | 35.5 | 32.9 | 4,835 |
| Financial assets designated at fair value | 9,330 | (11.0) | (12.7) | 10,481 |
| of which loans and advances | 236 | 51.1 | 48.2 | 156 |
| Financial assets at amortized cost | 65,629 | 3.3 | 1.3 | 63,539 |
| of which loans and advances to customers | 61,403 | 1.0 | (0.9) | 60,808 |
| Inter-area positions | - | - | - | - |
| Tangible assets | 952 | 42.5 | 39.8 | 668 |
| Other assets | 2,700 | 6.5 | 4.5 | 2,534 |
| Total assets/liabilities and equity | 85,160 | 3.8 | 1.8 | 82,057 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 305 | 30.0 | 27.6 | 234 |
| Deposits from central banks and credit institutions | 4,710 | 39.8 | 37.1 | 3,370 |
| Deposits from customers | 65,165 | 2.0 | 0.1 | 63,891 |
| Debt certificates | 3,364 | (6.5) | (8.3) | 3,599 |
| Inter-area positions | 1,737 | (9.9) | (11.6) | 1,926 |
| Other liabilities | 6,198 | 9.6 | 7.6 | 5,654 |
| Economic capital allocated | 3,682 | 8.8 | 6.8 | 3,383 |
| Relevant business indicators | 31-03-19 | ∆% | ∆% (1) | 31-12-18 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) | 61,405 | 1.0 | (0.9) | 60,784 |
| Non-performing loans | 904 | 12.7 | 10.6 | 802 |
| Customer deposits under management (2) | 65,163 | 2.0 | 0.1 | 63,888 |
| Off-balance sheet funds (3) | - | - | - | - |
| Risk-weighted assets | 64,969 | 1.2 | (0.7) | 64,175 |
| Efficiency ratio (%) | 58.8 | 62.2 | ||
| NPL ratio (%) | 1.4 | 1.3 | ||
| NPL coverage ratio (%) | 85 | 85 | ||
| Cost of risk (%) | 1.06 | 0.39 |
- (1) Figures at constant exchange rate.
- (2) Excluding repos.
- (3) Includes mutual funds, pension funds and other off-balance-sheet funds.
Activity
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate. These rates, together with changes at current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
The most relevant evolution to the area’s activity in the first quarter of 2019 was:
- Lending activity (performing loans under management) increased by 6.6% year-on-year, even though the activity showed a slight decrease of 0.9% compared to the last quarter of 2018.
- The commercial portfolio showed a positive evolution year-on-year (up 6.8% and up 0.3% in the quarter), while the higher interest rates continued to affect mortgages (up 3.3% year-on-year, down 0.5% in the quarter). Regarding retail portfolios, credit cards and indirect consumer loan portfolios, which are increasingly being granted through digital channels and have higher margins, increased by 22.2% (year-on-year) and remained flat in the quarter.
- Regarding the risk indicators, the NPL ratio increased slightly in the quarter, and stood at 1.4% from 1.3% registered at the end of December 2018, due to the deterioration related to commercial clients. The NPL coverage ratio closed at 85%.
- Even though the competition for deposits remains intense, customer deposits under management remained at the same level of December 2018 (up 1.5% year-on-year), mainly due to the increase in demand deposits (up 1.0% in the quarter, up 0.3% year-on-year) which offsets the slight decrease in time deposits (down 2.5% in the quarter, up 5.3% year-on-year).
Results
The United States generated a cumulative net attributable profit of €127m through March 2019, 39.8% lower than the one registered twelve months earlier, due mainly to higher impairments on financial assets registered in the quarter.
The most relevant aspects of the evolution of the results is summarized below:
- Net interest income continued to perform positively, with an increase of 8.4% year-on-year, in an environment in which no interest rate hikes are foreseen.
- Net fees and commissions declined by 5.7% year-on-year, mainly due to those related to investment banking and a lower contribution from markets.
- Higher contribution from NTI due to the good performance associated with higher ALCO portfolio sales in the first quarter of 2019.
- Operating expenses grew slightly by 0.5% year-on-year, mainly due to a good performance by savings in personnel expenses. This increase is lower than that shown by the gross income (6.3%), as a result, the efficiency ratio improved.
- Impairment losses on financial assets increased in the last twelve months, due to the macro scenario adjustment, to provisions for some specific customers in the commercial portfolio and some write-offs in consumer. In addition, the first quarter of 2018 was positively impacted by the release of provisions related to the Hurricanes the previous year. As a result, the cumulative cost of risk through March 31, 2019 increased to 1.06%.