Results
The BBVA Group generated a net attributable loss of €1,157m in the first half of 2020. The good performance of operating income was offset on the one hand by a further impairment on financial assets, mainly due to the deterioration of the macroeconomic scenario resulting from COVID-19 and higher provisions, and, on the other hand by the goodwill impairment in the United States in the first quarter of 2020 of €2,084m, also resulting from the pandemic. The comparison with the same period of the previous year is impacted by these two factors. Excluding the goodwill impairment in the United States, the Group´s net attributable profit stood at €928m which corresponds to a decrease of 62.0% compared to the first half of 2019. In the second quarter of the year, the net attributable profit, excluding the goodwill impairment in the United States, stood at €636m, 118.0% higher than the figure achieved in the first quarter.
CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)
| 2020 | 2019 | |||||
|---|---|---|---|---|---|---|
| 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |
| Net interest income | 4,097 | 4,556 | 4,709 | 4,473 | 4,544 | 4,398 |
| Net fees and commissions | 1,043 | 1,258 | 1,290 | 1,273 | 1,256 | 1,214 |
| Net trading income | 512 | 594 | 490 | 351 | 116 | 426 |
| Other operating income and expenses | (91) | 75 | (89) | 22 | (18) | 8 |
| Gross income | 5,561 | 6,484 | 6,400 | 6,120 | 5,897 | 6,046 |
| Operating expenses | (2,594) | (2,918) | (3,082) | (2,946) | (2,952) | (2,922) |
| Personnel expenses | (1,342) | (1,532) | (1,637) | (1,572) | (1,578) | (1,553) |
| Other administrative expenses | (884) | (988) | (1,039) | (971) | (976) | (977) |
| Depreciation | (369) | (397) | (406) | (403) | (398) | (392) |
| Operating income | 2,967 | 3,566 | 3,317 | 3,174 | 2,945 | 3,124 |
| Impairment on financial assets not measured at fair value through profit or loss | (1,571) | (2,575) | (1,169) | (1,172) | (731) | (1,001) |
| Provisions or reversal of provisions | (228) | (312) | (243) | (113) | (117) | (144) |
| Other gains (losses) | (101) | (2,113) | (1,444) | (4) | (3) | (22) |
| Profit/(loss) before tax | 1,066 | (1,435) | 460 | 1,886 | 2,095 | 1,957 |
| Income tax | (269) | (186) | (430) | (488) | (595) | (541) |
| Profit/(loss) for the year | 798 | (1,621) | 31 | 1,398 | 1,500 | 1,416 |
| Non-controlling interests | (162) | (172) | (186) | (173) | (241) | (234) |
| Net attributable profit | 636 | (1,792) | (155) | 1,225 | 1,260 | 1,182 |
| Earning per share (euros) (1) | 0.08 | (0.29) | (0.04) | 0.17 | 0.17 | 0.16 |
| Of which: | ||||||
| Goodwill impairment in the United States | (2,084) | (1,318) | ||||
| Net attributable profit excluding the goodwill impairment in the United States | 636 | 292 | 1,163 | 1,225 | 1,260 | 1,182 |
| Earning per share excluding the goodwill impairment in the United States (euros) (1) | 0.08 | 0.03 | 0.16 | 0.17 | 0.17 | 0.16 |
- General note: as a result of the interpretation issued by the International Financial Reporting Standards Interpretations Committee (IFRIC) regarding the collecting of interests of written-off financial assets for the purpose of IFRS 9, those collections are presented as reduction of the credit allowances and not as a higher interest income, recognition method applied until December 2019. Therefore, and in order to make the information comparable, the quarterly information of the 2019 income statements has been restated.
- (1) Adjusted by additional Tier 1 instrument remuneration.
CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)
| 1H 2020 | ∆% | ∆% at constant exchange rates |
1H 2019 | |
|---|---|---|---|---|
| Net interest income | 8,653 | (3.2) | 4.5 | 8,941 |
| Net fees and commissions | 2,301 | (6.8) | (1.7) | 2,470 |
| Net trading income | 1,107 | 104.1 | 135.1 | 542 |
| Other operating income and expenses | (16) | 61.3 | 33.2 | (10) |
| Gross income | 12,045 | 0.8 | 8.8 | 11,944 |
| Operating expenses | (5,512) | (6.2) | (1.5) | (5,874) |
| Personnel expenses | (2,875) | (8.2) | (3.9) | (3,131) |
| Other administrative expenses | (1,872) | (4.1) | 1.4 | (1,953) |
| Depreciation | (766) | (3.1) | 0.9 | (790) |
| Operating income | 6,533 | 7.6 | 19.2 | 6,069 |
| Impairment on financial assets not measured at fair value through profit or loss | (4,146) | 139.5 | 162.0 | (1,731) |
| Provisions or reversal of provisions | (541) | 107.6 | 116.5 | (261) |
| Other gains (losses) | (2,214) | n.s. | n.s. | (25) |
| Profit/(loss) before tax | (368) | n.s. | n.s. | 4,052 |
| Income tax | (455) | (60.0) | (55.5) | (1,136) |
| Profit/(loss) for the year | (823) | n.s. | n.s. | 2,916 |
| Non-controlling interests | (333) | (29.7) | (17.8) | (475) |
| Net attributable profit | (1,157) | n.s. | n.s. | 2,442 |
| Earning per share (euros) (1) | (0.20) | 0.34 | ||
| Of which: | ||||
| Goodwill impairment in the United States | (2,084) | |||
| Net attributable profit excluding the goodwill impairment in the United States | 928 | (62.0) | (57.8) | 2,442 |
| Earning per share excluding the goodwill impairment in the United States (euros) (1) | 0.11 | 0.34 |
- General note: as a result of the interpretation issued by the International Financial Reporting Standards Interpretations Committee (IFRIC) regarding the collecting of interests of written-off financial assets for the purpose of IFRS 9, those collections are presented as reduction of the credit allowances and not as a higher interest income, recognition method applied until December 2019. Therefore, and in order to make the information comparable, the first six months information of the 2019 income statements has been restated.
- (1) 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 increased by 8.8% year-on-year, supported by the good performance of net interest income and NTI, which managed to offset the lower contribution from net fees and commissions and the other operating income and expenses line.
GROSS INCOME (MILLIONS OF EUROS)
(1) At constant exchange rates: +8.8%.
Net interest income grew by 4.5% year-on-year, supported by the good performance of Turkey and South America, which offset the smaller contribution from Mexico and the United States as a result of the benchmark interest rate cuts by the banking authorities in these countries.
Net fees and commissions were affected by the lower activity resulting from the lockdown imposed in response to the pandemic. The areas that showed year-on-year reductions were South America, Mexico and Turkey, the latter was also affected by changes in the regulation regarding fees and commissions charged, which have been in application since March 2020. In Spain, Rest of Eurasia and the United States, net fees and commissions grew year-on-year (up 7.4%, 19.6% and 2.6%, respectively) despite ceasing to charge some fees and commissions as one of the measures to support customers through the worst moments of the pandemic.
NET INTEREST INCOME/ATAS (PERCENTAGE)
NET INTEREST INCOME PLUS FEES AND COMMISSIONS (MILLIONS OF EUROS)
(1) At constant exchange rates: +3.2%.
NTI recorded a year-on-year increase of 135.1% mainly due to the foreign-exchange rate hedging gains, registered at the Corporate Center, and higher results generated during the first half of the year by all business areas, with the exception of South America, due to the positive effect of the sale of the Prisma Medios de Pago S.A. stake in the first half of 2019.
The other operating income and expenses line closed the first half of the year at -€16m compared to the -€10m accumulated at the end of June 2019, which represents an increase of 33.2% compared to the same period of the previous year. This is mainly due to BBVA's increased annual contribution in Spain to the Single Resolution Fund (SRF) in the second quarter of 2020, which stood at -€165m compared to the -€144m contributed in 2019.
Operating income
Operating expenses fell 1.5% year-on-year as a result of the containment plans implemented by all business areas and also due to the limitations the lockdown placed on some expenses, such as travel. The main drivers are the reduction in expenses in Spain and the Corporate Center.
OPERATING EXPENSES (MILLIONS OF EUROS)
(1) At constant exchange rates: -1.5%.
As a result, the efficiency ratio stood at 45.8% as of June 30, 2020, significantly below the level reached last year (49.2%), and operating income grew 19.2% year-on-year.
EFFICIENCY RATIO (PERCENTAGE)
OPERATING INCOME (MILLIONS OF EUROS)
(1) At constant exchange rates: +19.2%.
Provisions and other
The impairment on financial assets not measured at fair value through profit and loss (impairment on financial assets) closed the half year with a negative balance of €4,146m, 162.0% above that recorded in the same period of the previous year, mainly due to the negative impact of the deterioration in the macroeconomic scenario resulting from COVID-19.
IMPAIRMENT ON FINANCIAL ASSESTS (MILLIONS OF EUROS)
(1) At constant exchange rates: +162.0%.
Provisions or reversal of provisions (hereinafter provisions) closed the first half of the year with a negative balance of €541m, 116.5% higher compared to the same period of the previous year, mainly due to higher provisions in Spain.
The other gains (losses) line mainly reflects the aforementioned goodwill impairment in the United States and closed the first half with a negative balance of €2,214m.
Results
As a result of the above, the Group's net attributable loss during the first half of 2020 amounted to €1,157m, which compares negatively with the profit of €2,442m obtained in the first half of 2019. This comparison is affected by the increase in the impairment on financial assets as well as by the goodwill impairment in the United States, being both a result of the impact of COVID-19.
NET ATTRIBUTABLE PROFIT (MILLIONS OF EUROS)
(1) At constant exchange rates: n.s.
NET ATTRIBUTABLE PROFIT EXCLUDING THE UNITED STATES GOODWILL IMPAIRMENT (MILLIONS OF EUROS)
(1) At constant exchange rates: +57.8%.
By business areas, and in millions of euros, the net attributable profit from the different business areas that make up the Group were: 88 in Spain, 26 in the United States, 654 in Mexico, 266 in Turkey, 159 in South America and 66 in the Rest of Eurasia.
TANGIBLE BOOK VALUE PER SHARE AND DIVIDENDS (1) (EUROS)
(1) Replenishing dividends paid in the period.
EARNING PER SHARE (1) (EUROS)
(1) Adjusted by additional Tier 1 instrument remuneration.
(2) Excluding the goodwill impairment in the United States in 4Q19 and 1Q20.
ROE AND ROTE (1) (PERCENTAGE)
(1) Ratios excluding the goodwill impairment in the United States in 2019 and 2Q20.
ROA AND RORWA (PERCENTAGE)
(1) Ratios excluding the goodwill impairment in the United States in 2019 and 2Q20.