Spain
Highlights
- Growth in activity, partly driven by government support programs.
- Significant improvement in operating income due to an increase in recurring income and a decrease in operating expenses.
- Contained risk indicators.
- Net attributable profit affected by the significant increase in the impairment on financial assets.
Business activity (1)
(Year-on-year change. Data as of 30-06-20)
(1) Excluding repos.
Net interest income/ATAs
(Percentage)
Operating income (Millions of euros)
Net attributable profit (Millions of euros)
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | 1H20 | ∆% | 1H19 |
|---|---|---|---|
| Net interest income | 1,793 | 1.7 | 1,763 |
| Net fees and commissions | 908 | 7.4 | 846 |
| Net trading income | 165 | 79.6 | 92 |
| Other operating income and expenses | 34 | (53.0) | 72 |
| Of which insurance activities (1) | 237 | (8.2) | 258 |
| Gross income | 2,900 | 4.6 | 2,773 |
| Operating expenses | (1,529) | (6.1) | (1,628) |
| Personnel expenses | (866) | (8.1) | (942) |
| Other administrative expenses | (433) | (3.2) | (447) |
| Depreciation | (230) | (3.5) | (239) |
| Operating income | 1,371 | 19.8 | 1,145 |
| Impairment on financial assets not measured at fair value through profit or loss | (883) | n.s. | 70 |
| Provisions or reversal of provisions and other results | (365) | 94.6 | (188) |
| Profit/(loss) before tax | 124 | (88.0) | 1,027 |
| Income tax | (34) | (88.3) | (292) |
| Profit/(loss) for the year | 90 | (87.8) | 735 |
| Non-controlling interests | (2) | 46.1 | (1) |
| Net attributable profit | 88 | (88.1) | 734 |
- (1) Includes premiums received net of estimated technical insurance reserves.
| Balance sheets | 30-06-20 | ∆% | 31-12-19 |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 32,199 | 102.5 | 15,903 |
| Financial assets designated at fair value | 147,143 | 19.8 | 122,844 |
| Of which: Loans and advances | 35,995 | 5.3 | 34,175 |
| Financial assets at amortized cost | 203,500 | 4.2 | 195,260 |
| Of which: Loans and advances to customers | 172,026 | 2.8 | 167,332 |
| Inter-area positions | 26,357 | 21.8 | 21,637 |
| Tangible assets | 3.149 | (4.6) | 3.302 |
| Other assets | 7,126 | 10.7 | 6,436 |
| Total assets/liabilities and equity | 419,475 | 14.8 | 365,380 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 97,430 | 23.8 | 78,684 |
| Deposits from central banks and credit institutions | 60,533 | 47.3 | 41,092 |
| Deposits from customers | 195,676 | 7.3 | 182,370 |
| Debt certificates | 38,981 | 9.7 | 35,520 |
| Inter-area positions | - | - | - |
| Other liabilities | 17,009 | (8.0) | 18,484 |
| Economic capital allocated | 9,847 | 6.7 | 9,229 |
| Relevant business indicators | 30-06-20 | ∆% | 31-12-19 |
|---|---|---|---|
| Performing loans and advances to customers under management (1) | 168,528 | 2.7 | 164,140 |
| Non-performing loans | 8,504 | (1.5) | 8,635 |
| Customer deposits under management (2) | 195,676 | 7.3 | 182,370 |
| Off-balance sheet funds (3) | 60,974 | (7.7) | 66,068 |
| Risk-weighted assets | 109,625 | 4,5 | 104,911 |
| Efficiency ratio (%) | 52.7 | 57.5 | |
| NPL ratio (%) | 4.3 | 4.4 | |
| NPL coverage ratio (%) | 66 | 60 | |
| Cost of risk (%) | 1.00 | 0.08 |
- (1) Excluding repos.
- (2) Includes mutual funds, pension funds and other off-balance sheet funds.
Activity
The most relevant aspects related to the area's activity during the first half of 2020 were:
- The lending activity (performing loans under management) was 2.7% above the end of 2019. The reduction in mortgages and consumer lending (including credit cards) due to the lockdown derived from COVID-19, was largely offset by higher balances in corporate banking (up 9.2%), retail businesses (up 7.6%) and SMEs (up 5.6%), which benefited from the credit lines guaranteed by the Spanish Instituto de Crédito Oficial (ICO).
- In terms of asset quality, the NPL ratio and NPL coverage ratio remained at the same level as in March, 4.3% and 66%, respectively.
- Total customer funds increased by 3.3% compared to the end of 2019, partly due to the trend towards increasing savings during the lockdown, by both companies and retail customers. This has meant an increase in customer deposits under management (up 7.3%) which managed to offset the negative evolution of off-balance sheet funds (down 7.7%) resulting from their unfavorable evolution in the first quarter of the year, partially offset between April and June 2020.
Results
Spain generated a positive net attributable profet of €88m during the first half of 2020, compared to a profit of €734m in the same period of the previous year, due to an increase in the impairment on financial assets, as the operating income increased by 19.8% compared to the same period in 2019.
The highlights of the area's income statement are:
- The net interest income increased from the first half of the previous year (up 1.7%), mainly due to the lower funding costs and the greater contribution from the ALCO portfolios.
- Net fees and commissions performed well (up 7.4% year-on-year), strongly supported by asset management fees and commissions, and those generated by corporate banking transactions.
- Positive development of NTI (up 79.6% year-on-year), mainly due to higher portfolio sales.
- Other operating income and expenses fell by 53.0% compared to the first half of 2019, due to the higher contribution to the Single Resolution Fund (SRF) and the lower earnings of the insurance business resulting from the lower activity during the lockdown.
- The reduction in operating expenses accelerated (down 6.1% year-on-year), mainly as a result of the cost-containment plans but supported by the reduction in some discretionary expenses as a result of the lockdown. Therefore, the efficiency ratio stood at 52.7% compared to 58.7% in the same period in 2019.
- The impairment on financial assets increased by €953m compared to the first half of 2019, mainly due to the negative impact from the deterioration of the macroeconomic scenario caused by COVID-19, which incorporates loan loss allowances for the most affected sectors, in a comparison that is further impacted by portfolio sales made last year. Following the upturn in March due to the increase in the impairment on financial assets, the cumulative cost of risk fell in the quarter to 1.00%.
- Finally, provisions and other results closed at -€365m, or 94.6% above the first half of the previous year, partially due to higher provisions to face potential claims.