South America
Highlights
- Activity growth impacted by support measures from the different governments.
- Year-on-year net interest income growth.
- Year-on-year decrease in NTI due to the sale of the Prisma stake in 2019.
- Net attributable profit affected by the increase in the impairment on financial assets line.
Business activity (1)
(Year-on-year change at constant exchange rates. Data as of 30-09-20)
(1) Excluding repos.
Net interest income/ATAs
(Percentage. Constant exchange rates)
Operating income
(Millions of euros at constant exchange rates)
(1) At current exchange rate: -19.4%.
Net attributable profit
(Millions of euros at constant exchange rates)
(1) At current exchange rate: -42.7%.
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | Jan.-Sep. 20 | ∆% | ∆% (1) | Jan.-Sep. 19 |
|---|---|---|---|---|
| Net interest income | 2,069 | (12.9) | 1.8 | 2,376 |
| Net fees and commissions | 368 | (13.3) | (1.6) | 424 |
| Net trading income | 270 | (35.3) | (22.6) | 417 |
| Other operating income and expenses | (266) | (20.1) | (16.1) | (333) |
| Gross income | 2,441 | (15.4) | 0.1 | 2,884 |
| Operating expenses | (1,044) | (9.3) | 4.8 | (1,151) |
| Personnel expenses | (515) | (11.8) | 2.8 | (584) |
| Other administrative expenses | (410) | (7.6) | 6.9 | (444) |
| Depreciation | (119) | (3.6) | 6.8 | (123) |
| Operating income | 1,397 | (19.4) | (3.2) | 1,733 |
| Impaiment on financial assets not measured at fair value through profit or loss | (675) | 19.9 | 40.7 | (563) |
| Provisions or reversal of provisions and other results | (75) | 122.3 | 213.0 | (34) |
| Profit/(loss) before tax | 647 | (43.1) | (31.1) | 1,137 |
| Income tax | (193) | (39.8) | (26.1) | (321) |
| Profit/(loss) for the year | 454 | (44.3) | (33.0) | 816 |
| Non-controlling interests | (128) | (48.2) | (39.5) | (247) |
| Net attributable profit | 326 | (42.7) | (30.1) | 569 |
| Balance sheets | 30-09-20 | ∆% | ∆% (1) | 31-12-19 |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 6,825 | (20.6) | (5.1) | 8,601 |
| Financial assets designated at fair value | 8,154 | 33.2 | 59.9 | 6,120 |
| Of which loans and advances | 360 | 216.4 | 290.3 | 114 |
| Financial assets at amortized cost | 38,223 | 0.9 | 18.9 | 37,869 |
| Of which loans and advances to customers | 33,678 | (5.7) | 11.4 | 35,701 |
| Tangible assets | 810 | (16.4) | (6.6) | 968 |
| Other assets | 1,521 | 5.7 | 22.8 | 1,438 |
| Total assets/liabilities and equity | 55,533 | 1.0 | 19.3 | 54,996 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 1,618 | (13.0) | 6.8 | 1,860 |
| Deposits from central banks and credit institutions | 5,877 | 60.8 | 84.5 | 3,656 |
| Deposits from customers | 36,024 | (0.2) | 18.7 | 36,104 |
| Debt certificates | 2,812 | (12.7) | (0.3) | 3,220 |
| Other liabilities | 7,012 | (8.5) | 6.4 | 7,664 |
| Economic capital allocated | 2,190 | (12.1) | 5.6 | 2,492 |
| Relevant business indicators | 30-09-20 | ∆% | ∆% (1) | 31-12-19 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) | 33,775 | (5.1) | 12.0 | 35,598 |
| Non-performing loans | 1,746 | (5.8) | 11.3 | 1,853 |
| Customer deposits under management (3) | 36,036 | (0.2) | 18.7 | 36,123 |
| Off-balance sheet funds (4) | 13,861 | 7.7 | 16.8 | 12,864 |
| Risk-weighted assets | 40,087 | (11.7) | 4.3 | 45,413 |
| Efficiency ratio (%) | 42.8 | 40.9 | ||
| NPL ratio (%) | 4.3 | 4.4 | ||
| NPL coverage ratio (%) | 110 | 100 | ||
| Cost of risk (%) | 2.49 | 1.88 |
- (1) Figures at constant exchange rates.
- (2) Excluding repos.
- (3) Excluding repos and including specific marketable debt securities.
- (4) Includes mutual funds, pension funds and other off-balance sheet funds.
South America. Data per country (Millions of euros)
| Operating income | Net attributable profit/(loss) | |||||||
|---|---|---|---|---|---|---|---|---|
| Country | Jan.-Sep. 20 | ∆% | ∆% (1) | Jan.-Sep. 19 | Jan.-Sep. 20 | ∆% | ∆% (1) | Jan.-Sep. 19 |
| Argentina | 255 | (39.6) | n.s. | 421 | 84 | (28.2) | n.s. | 117 |
| Colombia | 447 | (7.5) | 5.9 | 483 | 103 | (48.1) | (40.6) | 198 |
| Peru | 545 | (12.8) | (9.2) | 624 | 76 | (50.1) | (48.1) | 153 |
| Other countries (2) | 151 | (26.1) | (14.3) | 205 | 63 | (37.4) | (26.7) | 100 |
| Total | 1,397 | (19.4) | (3.2) | 1,733 | 326 | (42.7) | (30.1) | 569 |
- (1) Figures at constant exchange rates.
- (2) Bolivia, Chile (Forum), Paraguay, Uruguay and Venezuela. Additionally, it includes eliminations and other charges.
South America. Relevant business indicators per country (Millions of euros)
| Argentina | Colombia | Peru | ||||
|---|---|---|---|---|---|---|
| 30-09-20 | 31-12-19 | 30-09-20 | 31-12-19 | 30-09-20 | 31-12-19 | |
| Performing loans and advances to customers under management (1) (2) | 2,895 | 2,212 | 10,907 | 10,419 | 15,940 | 13,272 |
| Non-performing loans and guarantees given (1) | 58 | 79 | 610 | 601 | 899 | 712 |
| Customer deposits under management (1) (3) | 4,477 | 3,296 | 11,347 | 10,292 | 15,660 | 12,929 |
| Off-balance sheet funds (1)(4) | 1,125 | 487 | 1,506 | 1,126 | 2,044 | 1,608 |
| Risk-weighted assets | 5,987 | 6,093 | 12,080 | 14,172 | 16,439 | 19,293 |
| Efficiency ratio (%) | 54.9 | 46.9 | 34.9 | 36.2 | 37.7 | 35.8 |
| NPL ratio (%) | 2.0 | 3.4 | 5.1 | 5.3 | 4.3 | 4.1 |
| NPL coverage ratio (%) | 212 | 161 | 118 | 98 | 102 | 96 |
| Cost of risk (%) | 2.59 | 4.22 | 2.98 | 1.67 | 2.25 | 1.45 |
- (1) Figures at constant exchange rates.
- (2) Excluding repos.
- (3) Excluding repos and including specific marketable debt securities.
- (4) Includes mutual funds and other off-balance sheet funds.
Activity and results
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rates. These rates, together with the changes at current exchange rates, can be found in the attached tables of the financial statements and relevant business indicators.
The most relevant aspects related to the area's activity during the first nine months of 2020 were:
- Lending activity (performing loans under management) was 12.0% higher as of September 30, 2020, than at the end of the previous year. The performance of the wholesale portfolio stands out, due to the greater drawdowns of credit facilities by companies in response to the situation generated by the COVID-19 health crisis. The balance of the retail portfolio was higher than at the end of 2019 (up 3.4%) following the upturn in the quarter (up 2.4%), mainly due to the evolution of credit cards and consumer loans (up 2.4% combined). In terms of asset quality, the non-performing loan ratio stood at 4.3% while the NPL coverage ratio stood at 110%.
- On the funding side, the performance has been boosted by the measures taken by the different central banks to ensure liquidity in the respective financial systems in the region. As a result, customer deposits under management increased by 18.7% during the first nine months of the year, mainly due to the performance of demand deposits. Off-balance sheet funds grew by 16.8% in the same period.
Regarding results, South America generated a cumulative net attributable profit of €326m between January and September 2020, representing a year-on-year decline of 30.1% (down 42.7% at current exchange rates), mainly due to the increase in the impairment on financial assets in the first half of the year caused by the COVID-19 crisis. The cumulative impact of inflation on Argentina’s net attributable profit in the first nine months of 2020 stood at a loss of €82m, compared to a cumulative loss of €72m at the end of September 2019.
The most notable aspects of the cumulative evolution of the income statement to September 2020 are summarized below:
- Net interest income continued to grow at constant exchange rates (up 1.8%). At current exchange rates, the devaluation of the main currencies in the region weakened this positive performance.
- Decrease in the contribution from NTI (down 22.6% at constant exchange rates, down 35.3% at current exchange rates) mainly due to the positive effect of the sale of the stake in Prisma Medios de Pago S.A. on cumulative earnings at the end of September 2019.
- Increase in operating expenses below the inflation rate in the region.
- Higher impairments on financial assets (up 40.7%, up 19.9% at current exchange rates) mainly due to the extraordinary deterioration in the macroeconomic scenario resulting from the impact of COVID-19 and largely recorded in the first half of the year.
The evolution between January and September 2020 for the most representative countries for the business area, Argentina, Colombia and Peru, is summarized below:
Argentina
- Lending activity has grown by 30.9% since December 2019. Retail portfolios showed lower growth than the wholesale portfolios, as a result of lower activity caused by the pandemic. Greater credit card and consumer finance dynamism was also observed in the quarter. There was a fall in the NPL ratio which stood at 2.0% as of September 30, 2020, from 3.4% at the end of December 2019, as a result of the reduction in non-performing loans. NPL coverage ratio increased to 212%.
- On the total customer funds side, customer deposits under management increased by 35.8% between January and September 2020, with growth in both demand deposits and time deposits, the latter was favored by the establishment by the Central Bank of the Republic of Argentina of minimum returns for deposits in pesos.
- Net attributable profit stood at €84m. The greater need for impairment on financial assets resulting from the COVID-19 crisis and the positive effect of the sale of the stake in Prisma Medios de Pago S.A. on the results for the previous year, among other factors, affect the year-on-year comparison.
Colombia
- Lending activity grew by 4.7% in the first nine months of 2020 due to the performance of the wholesale portfolios in the first half of the year (down 5.6% in the quarter) and the recovery in the third quarter of consumer loans and mortgages (up 4.6% and 2.4% between January and September, respectively). In terms of asset quality, the NPL ratio and the NPL coverage ratio improved to 5.1% and 118% respectively at the close of September 2020.
- Customer deposits under management increased by 10.3% in the first nine months of 2020, driven by the growth in demand deposits. Off-balance sheet funds continued their recovery after the withdrawals seen at the end of the first quarter of the year and closed with a positive evolution of 33.7% compared to the end of December 2019. In the quarter, the search for more profitable investment alternatives by customers has led to a shift from demand and time deposits (down 9.9%) to mutual funds (up 42.5%).
- The net attributable profit stood at €103m, a year-on-year decrease of 40.6%. The strength of the operating income, which grew 5.9% between January and September 2020, is due to the greater generation of income through net interest income, although there was a negative impact from the higher loan-loss provisioning due to the COVID-19 crisis.
Peru
- Lending activity was 20.1% higher than the end of the 2019 financial year, mainly driven by the wholesale portfolio, as a result of the distribution of funds from the Plan Reactiva, which offset the decline still seen in credit cards as a result of the lower activity caused by the pandemic. With regard to asset quality, as of September 30, 2020, there was an increase in the NPL ratio to 4.3%, and the NPL coverage ratio, which reached 102%.
- Customer deposits under management increased by 21.1% during the first nine months of 2020, mainly due to the 40.4% growth in demand deposits driven by legislative measures that allowed pension plan participants to withdraw part of their funds as a relief measure to deal with the pandemic. Off-balance sheet funds increased by 27.1%.
- Net interest income fell compared to the previous year, due to the pressure on interest rates caused by the drop in official rates and government-backed loans at preferential rates, which are in addition to the customer relief measures such as interest-free deferral of repayments on credit cards. Net fees and commissions also fell, affected by the reduced activity resulting from the pandemic, the temporary elimination of certain fees and commissions as a measure to support customers and the increased use of digital channels since the beginning of the pandemic. There was an increase in impairment on financial assets as a result of greater loan-loss provisioning in the first half of the year resulting from the COVID-19 crisis. As a result of the above, net attributable profit was 48.1% lower than the figure achieved twelve months earlier, that is, €76m.