Business areas

Regarding the business areas it is worth mentioning:

• Spain: BBVA in Spain generated a net attributable profit of €745m during the first half of 2021, well above the €108m achieved in the same period of the previous year, mainly due to the provisions for impairment on financial assets made between January and June 2020 due to the outbreak of COVID-19, the greater contribution of fees and commissions line and NTI, as well as lower operating expenses in 2021.
• Mexico: BBVA in Mexico achieved a net attributable profit of €1,127m in the first half of 2021, i.e. an increase of 75.0% compared to the same period of the previous year, at constant exchange rate. This evolution is supported by a 5.8% growth (at constant exchange rates) in recurring income (net interest income and, net fees and commissions), as well as lower provisions for impairment on financial assets compared to the first half of 2020, which was greatly affected by the COVID-19 pandemic.
• Turkey: The net attributable profit generated by Turkey in the first half of 2021 stood at €384m, 92.1% (at constant exchange rates) above the figure achieved in the same period of the previous year, which registered a strong increase in the impairment on financial assets derived from the outbreak of the COVID-19 pandemic in March 2020. Thus, the lower provisions for impairment on financial assets, together with the growth of net fees and commissions line and NTI, would explain the growth of the results of Turkey in the first half of 2021.
• South America: South America generated a cumulative net attributable profit of €218 m between January and June 2021, which, at constant exchange rates and excluding BBVA Paraguay in 2020, represents a year-on-year variation of +110.1%, mainly due to the better evolution of recurring income and NTI between January and June 2021 (+17.8%) and lower provisions for impairment on financial assets than those registered in the first half of 2020, as a result of the outbreak of the pandemic in March 2020.
• Other Businesses: At the end of the first half of 2021, the net attributable profit for the area stood at €145m (+36.7% year- on-year, at constant exchange rates). It is worth mentioning that this area mainly incorporates the wholesale business developed in Europe (excluding Spain) and in the United States, as well as the banking business developed through the 5 BBVA branches in Asia.

Corporate Center: The net attributable loss of the Corporate Center including the aforementioned non-recurring impacts, at the close of the first half 2021 was €708m, well below (-71.2%) the net attributable loss for the same period of the previous year, €2.454 m. This result includes several non-recurring impacts: 1) the net attributable profit amounting to €280m generated by the Group's businesses in the United States included in the sale agreement and 2) the net cost related to the restructuring process amounting to €696 m. Excluding these non-recurring impacts, the net attributable loss stood at €292m (compared to €-350m in the first half of 2020).

Lastly and to allow a broader understanding of the Group's activity and results, supplementary information is provided in the following for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. The wholesale business area generated a net attributable profit of €638m in the first half of 2021, which represents a 55.5% increase in year-on-year terms, thanks to the growth in the recurring income and the NTI and lower provisions for impairment on financial assets, which increased significantly in the first half of 2020 due to the COVID-19 pandemic.

Strategy developments

BBVA's strategy has been reinforced as a result of the acceleration of some of the trends caused by the COVID-19 pandemic, such as digitization or the commitment to more sustainable and inclusive development. The anticipation of these trends in the Group strategy has allowed BBVA to promote progress in the execution of its six strategic priorities.

In the first half of 2021, BBVA has continued to help its clients improve their financial health thanks to innovative solutions. The Group has made progress in developing an extensive catalog of experiences and digital tools that allow it to provide its clients with personal ized, proactive and actionable advice for day-to-day control, debt management, savings or financial planning.

Advice that is appreciated by BBVA clients, which is reflected in a better Net Promoter Score among users of the financial health functionalities in Spain in the last quarter, which is 10 percentage points higher than that of other customers. Likewise, these financial advisory functionalities have been a key element for the contracting of products. Thus, in Spain, they have contributed 40% of all investment fund contracts, 28.6% of mortgage contracts or 12.7% of car loans in the first half of the year.

Likewise, the Group has reaffirmed its commitment to sustainability, to help its clients in the transition towards a sustainable future. Between 2018 and June 2021, BBVA has originated a total of €67,116m in sustainable financing. Among them, the issuance of the Central American Bank for Economic Integration (CABEI) stands out, for a total amount of 5,000 million Mexican pesos. It is the first COVID social bond and the largest social issue in the Mexican market, in which BBVA acted as a placement agent.

Sustainable financing by BBVA has grown 53% above forecast, well above the initial target. For this reason, in July 2021, BBVA announced that it doubles its objective of channeling sustainable financing to €200,000m.

But beyond financing, BBVA wants to provide a comprehensive support service to its retail and wholesale customers, including also advisory so that they can take advantage of investment opportunities in sustainability and the technologies of the future, and be more efficient and competitive. To this end, the Group has continued to promote the development of sustainable solutions. In April, BBVA achieved its goal of offering a sustainable alternative to its products in Spain, both for retail and wholesale.

Regarding the management of the impact of the activity and the integration of sustainability risk in the Bank's processes, during the first half of 2021 BBVA announced two very relevant milestones:

• It will reduce its exposure to coal-related activities to zero, ceasing to finance companies in these activities before 2030 in developed countries and before 2040 in the rest of the countries where BBVA Group operates.
• It has adopted the commitment to be neutral in net greenhouse gas emissions by 2050, taking into account the emissions of its clients in addition to direct emissions, and has joined the Net Zero Banking Alliance promoted by the United Nations as a founding member. This is a very relevant milestone that implies alignment with the most ambitious scenario of the Paris Agreement, that is, limiting the increase in temperatures to 1.5ºC compared to levels prior to the industrial revolution. With this, BBVA anticipates in 20 years the base scenario of the Paris Agreement of 2ºC.

Likewise, in its commitment to the community, BBVA works to contribute to a more sustainable and inclusive development. In the first half of 2021, BBVA allocated €38m, from which more than 17 million people benefited, to support the inclusive growth of the societies in which the Group is present, with a focus on reducing inequality and supporting entrepreneurship, providing opportunities through education and promoting local knowledge and culture. Among the initiatives of the first half of 2021, the following stands out:

• The "Educación conectada" project, promoted by BBVA and the Fundación de Ayuda contra la Drogadicción (FAD), whose priority is to alleviate the serious consequences of the COVID-19 crisis by reducing the digital divide.
• The celebration, in May 2021, of the 4th summit of the BBVA Center for Financial Education and Capacities (Edufin Summit), which had approximately 400 attendees from 40 countries.
• The national call for the access to education program "Chavos que inspiran" in Mexico, aimed at students who require financial support to continue their high school studies.

For all this, BBVA is the most sustainable European bank, according to the Dow Jones Sustainability Index, and the second in the world. An acknowledgement shared by Euromoney, which has named BBVA the best bank in corporate social responsibility in Western Europe in 2021, recognizing BBVA's commitment to improve social, economic and environmental conditions in the region.

On the other hand, the Group has continued to grow in customers, especially through digital channels. The acquisition of customers through digital channels has increased by 45% in the last twelve months (comparing the data at the end of June 2021 and the end of June 2020), reaching 37% of new customers in the period. Something that has also been reflected in digital sales which, in cumulative terms and at the end of June, already represented 54% of the Group's total sales in PRV¹.

BBVA's commitment to innovative and globally scalable solutions also allows the Group to advance in operational excellence, such as the BBVA App, which is a leader and means that 62% of the Bank's active customers already use mobile channels and that the Bank's digital transactions have increased by 115% in Spain over the last two years. As a result, BBVA's efficiency ratio stands at 45%, outperforming to the average of its European competitors.

¹ Product Relative Value is a proxy used for the economic representation of the sale of units.

The Group puts the best and most engaged team at the center of its strategic priorities. For this reason, BBVA is one of the 30 companies worldwide awarded with the acknowledgement “Exceptional Workplace 2021” by the American consulting firm Gallup. This award distinguishes organizations committed to developing the human potential of their staff.

Likewise, the Group's commitment to inclusion and diversity and the initiatives developed in this regard has led BBVA to be included for the fourth consecutive year in the Bloomberg Gender-Equality Index, a ranking that includes the 100 global companies with the best practices in gender diversity. BBVA is also a signee of the Charter of Diversity at the European level and the Women's Empowerment Principles of the United Nations.

And for all this, the Group relies on data and technology, on distinctive digital capabilities, which it has been working on for more than a decade and which have allowed it to be leader in the transformation of the financial industry. An example is the progress in the development of an integrated big data platform, in which more than 1,600 data scientists, developers and specialists are involved, or the increasing use of other technologies such as the cloud, blockchain or artificial intelligence.

Other highlights

• On June 1, BBVA made public that, once the mandatory authorizations were obtained, the sale of 100% of the capital stock of BBVA USA Bancshares, Inc, the company that in turn owns all of the capital stock of the bank BBVA USA, was completed in favor of PNC (The PNC Financial Services Group, Inc). The accounting of the results generated by BBVA USA since the announcement of the operation in November 2020, as well as the closing of the sale on June 1, 2021, has generated a result net of taxes of €582m, which is included in the line "Profit/(loss) after tax from discontinued operations" of the consolidated income statement and of the Corporate Center income statement.
• Regarding the collective layoff process in BBVA, S.A. in Spain, announced on April 13, 2021, on June 8 the Group made public that it has reached an agreement with the legal representation of the workers. The agreement takes into account the layoff of 2,935 employees, as well as the closure of 480 branches. The net cost related to this procedure has been recorded in the results of the second quarter of 2021 of the BBVA Group and have amounted to €-696m, of which, before taxes, €-754m correspond to the collective layoff and €-240m to the closing of offices.

  For management information purposes, considered to be a strategic decision, these impacts have been assigned to the Corporate Center. This process will generate estimated savings of approximately €250m per year from 2022 before taxes, of which approximately €220m correspond to personnel expenses. In 2021 the estimated savings will be approximately €65m before taxes.

• BBVA has voluntarily adhered to the Code of Good Practices approved by the Government of Spain on May 11 for clients who have benefited from financing with public endorsement since March 17, 2020. By joining this code, BBVA assumes, among other commitments, extend the expiration date of operations with public endorsement (normally from the Official Credit Institute, hereinafter ICO) that meet the established requirements, to continue supporting both companies and the self-employed.
• Regarding shareholder remuneration, on July 23, 2021, the European Central Bank (hereinafter ECB) made public that it had approved a new recommendation replacing recommendation ECB/2020/62 and to be in force as of September 30, 2021. The ECB indicates in its latter recommendation, that it will assess the capital, dividend distribution and share buyback plans of each entity in the context of its ordinary supervisory process, replacing all the restrictions regarding dividends and share buybacks contained in recommendation ECB/2021/31. Once recommendation ECB/2021/31 has been released, BBVA intends to reintroduce its dividend policy announced on February 1, 2017 by the release of relevant information, that consist in the distribution of an annual payout of between 35% and 40% of the profits obtained in each financial year fully in cash in two different payments (expected for October and April, subject to the applicable authorizations) as from September 30, 2021.