South America
Highlights
- Growth in lending activity in the first half of the year, with greater dynamism between April and June.
- Reduction in higher-cost customer funds.
- Year-on-year increase in recurring income and NTI, and higher adjustment for inflation in Argentina.
- Year-on-year comparison influenced at the net attributable profit level as a result of the increase in the impairment on financial assets line in 2020 due to the outbreak of the pandemic.
Business activity (1)
(Year-to-date change, at constant exchange
rates)
(1) Excluding repos.
It excludes the balances of BBVA Paraguay
as of 31-12-2020.
Net interest income/ATAs
(Percentage. Constant exchange rates)
General note: Excluding BBVA Paraguay.
Operating income
(Millions of euros at constant exchange rates)
(1) At current exchange rates:-12.7%
At constant exchange rates, excluding BBVA Paraguay: +4.8%
Net attributable profit
(Millions of euros at constant exchange rates)
(1) At current exchange rates: +3.9%
At constant exchange rates, excluding BBVA Paraguay: +35.6%
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | Jan.-Sep. 21 | ∆% | ∆% (1) | ∆% (2) | Jan.-Sep. 20 |
|---|---|---|---|---|---|
| Net interest income | 2,061 | (0.4) | 13.8 | 16.5 | 2,069 |
| Net fees and commissions | 426 | 15.9 | 34.9 | 38.0 | 368 |
| Net trading income | 250 | (7.2) | 7.3 | 10.4 | 270 |
| Other operating income and expenses | (443) | 66.5 | 76.3 | 78.9 | (266) |
| Gross income | 2,294 | (6.0) | 8.8 | 11.5 | 2,441 |
| Operating expenses | (1,074) | 2.9 | 17.6 | 20.2 | (1,044) |
| Personnel expenses | (519) | 0.7 | 15.8 | 18.7 | (515) |
| Other administrative expenses | (449) | 9.4 | 24.9 | 27.2 | (410) |
| Depreciation | (107) | (10.1) | 0.4 | 2.7 | (119) |
| Operating income | 1,220 | (12.7) | 2.1 | 4.8 | 1,397 |
| Impaiment on financial assets not measured at fair value through profit or loss | (508) | (24.8) | (16.2) | (14.9) | (675) |
| Provisions or reversal of provisions and other results | (47) | (36.9) | (27.2) | (26.7) | (75) |
| Profit/(loss) before tax | 665 | 2.8 | 27.1 | 32.4 | 647 |
| Income tax | (207) | 7.2 | 31.3 | 33.1 | (193) |
| Profit/(loss) for the period | 458 | 0.9 | 25.3 | 32.0 | 454 |
| Non-controlling interests | (119) | (6.8) | 22.8 | 22.8 | (128) |
| Net attributable profit/(loss) | 339 | 3.9 | 26.2 | 35.6 | 326 |
| Balance sheets | 30-09-21 | ∆% | ∆% (1) | ∆% (2) | 31-12-20 |
|---|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 7,853 | 10.2 | 15.9 | 24.3 | 7,127 |
| Financial assets designated at fair value | 7,357 | 0.4 | 6.4 | 6.5 | 7,329 |
| Of which loans and advances | 172 | 59.3 | 67.9 | 67.9 | 108 |
| Financial assets at amortized cost | 36,365 | (5.7) | (0.1) | 3.2 | 38,549 |
| Of which loans and advances to customers | 32,422 | (3.6) | 2.2 | 5.7 | 33,615 |
| Tangible assets | 814 | 0.7 | 5.0 | 6.1 | 808 |
| Other assets | 1,751 | 7.8 | 14.2 | 16.3 | 1,624 |
| Total assets/liabilities and equity | 54,139 | (2.3) | 3.4 | 6.7 | 55,436 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 1,588 | 19.8 | 26.7 | 26.7 | 1,326 |
| Deposits from central banks and credit institutions | 5,240 | (2.6) | 4.3 | 4.6 | 5,378 |
| Deposits from customers | 35,458 | (3.8) | 1.6 | 5.8 | 36,874 |
| Debt certificates | 3,159 | (3.4) | 3.2 | 4.1 | 3,269 |
| Other liabilities | 4.076 | 6.9 | 12.9 | 14.6 | 3,813 |
| Regulatory capital allocated | 4,617 | (3.3) | 2.6 | 6.2 | 4,776 |
| Relevant business indicators | 30-09-21 | ∆% | ∆% (1) | ∆% (2) | 31-12-20 |
|---|---|---|---|---|---|
| Performing loans and advances to customers under management (3) | 32,542 | (3.5) | 2.3 | 5.8 | 33,719 |
| Non-performing loans | 1,731 | (2.8) | 3.2 | 5.6 | 1,780 |
| Customer deposits under management (4) | 35,453 | (3.9) | 1.6 | 5.7 | 36,886 |
| Off-balance sheet funds (5) | 14,418 | 5.1 | 3.4 | 3.4 | 13,722 |
| Risk-weighted assets | 40,849 | 2.6 | 8.8 | 12.5 | 39,804 |
| Efficiency ratio (%) | 46.8 | 42.6 | |||
| NPL ratio (%) | 4.5 | 4.4 | |||
| NPL coverage ratio (%) | 108 | 110 | |||
| Cost of risk (%) | 1.87 | 2.36 |
- (1) At constant exchange rates.
- (2) At constant exchange rates excluding BBVA Paraguay.
- (3) Excluding repos.
- (4) Excluding repos and including specific marketable debt securities.
- (5) 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. 2021 | ∆% | ∆% (1) | Jan.-Sep. 2020 | Jan.-Sep. 2021 | ∆% | ∆% (1) | Jan.-Sep. 2020 |
| Argentina | 181 | (28.7) | n.s. | 255 | 42 | (49.7) | n.s. | 84 |
| Colombia | 423 | (5.2) | 0.6 | 446 | 159 | 55.4 | 65.0 | 103 |
| Peru | 509 | (6.6) | 10.0 | 545 | 79 | 3.4 | 21.7 | 76 |
| Other countries (2) | 107 | (29.2) | (26.5) | 151 | 58 | (7.6) | (2.2) | 63 |
| Total | 1,220 | (12.7) | 2.1 | 1,397 | 339 | 3.9 | 26.2 | 326 |
- (1) Figures at constant exchange rates.
- (2) Bolivia, Chile (Forum), Paraguay in 2020, Uruguay and Venezuela. Additionally, it includes eliminations and other charges.
South America. Relevant business indicators per country (Millions of euros)
| Argentina | Colombia | Peru | ||||
|---|---|---|---|---|---|---|
| 30-09-21 | 31-12-20 | 30-09-21 | 31-12-20 | 30-09-21 | 31-12-20 | |
| Performing loans and advances to customers under management (1) (2) | 2,969 | 2,540 | 11,790 | 11,082 | 14,617 | 14,047 |
| Non-performing loans and guarantees given (1) | 80 | 47 | 695 | 642 | 878 | 840 |
| Customer deposits under management (1) (3) | 5,515 | 4,176 | 12,170 | 11,506 | 14,239 | 14,738 |
| Off-balance sheet funds (1) (4) | 1,674 | 876 | 1,049 | 1,486 | 1,552 | 1,995 |
| Risk-weighted assets | 6,180 | 5,685 | 13,387 | 13,096 | 17,305 | 15,845 |
| Efficiency ratio (%) | 67.8 | 53.6 | 36.1 | 35.2 | 37.2 | 37.7 |
| NPL ratio (%) | 2.6 | 1.8 | 5.3 | 5.2 | 4.7 | 4.5 |
| NPL coverage ratio (%) | 177 | 241 | 107 | 113 | 101 | 101 |
| Cost of risk (%) | 2.79 | 3.24 | 2.05 | 2.64 | 1.85 | 2.13 |
- (1) Figures at constant exchange rates.
- (2) Excluding repos.
- (3) Excluding repos and including specific marketable debt securities.
- (4) Includes mutual funds.
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 information for this business area includes BBVA Paraguay with regard to data on the results, activity, balance sheet and relevant business indicators for 2020, but does not include Paraguay for 2021, as the sale agreement materialized in January of that year. To facilitate an homogeneous comparison, the attached tables include a column at constant exchange rates that does not take BBVA Paraguay into account. All comments for this area also exclude BBVA Paraguay.
Activity and results
The most relevant aspects related to the area's activity during the first nine months of 2021 were:
- Lending activity (performing loans under management) registered an increase of +5.8% compared to December 2020. By portfolio, the wholesale portfolio recorded an increase of +4.8% and the retail portfolio grew +6.8%.
- With regard to asset quality, the NPL ratio stood at 4.5%, a decrease of 13 basis points compared to the end of the first half of 2021, with a generalized decrease in the main countries in the area, due to lower inflows and a higher level of write-offs and recoveries.
- Customer funds under management increased by (+5.0%) compared to December 2020 closing balances. Deposits from customers under management increased by +5.7%, despite efforts in some countries to reduce higher-cost resources in an environment whereby the Group's liquidity situation throughout the region is adequate. Off-balance sheet funds increased +3.4% in the area as a whole between January and September 2021.
The most relevant aspects of the area's activity in the quarter were:
- Lending activity (performing loans under management) was higher than in the previous quarter (+1.0%), mainly thanks to the good performance of consumer loans and credit cards (+3.1% and +6.5%, respectively).
- Total customer funds increased in the quarter, boosted by growth in both demand deposits (+1.6%) and off-balance sheet funds (+1.9%).
With regard to the interannual evolution of South America, the area generated a cumulative net attributable profit of €339m between January and September 2021, representing a year-on-year variation of +35.6%, mainly due to the improved performance of recurring income and NTI in 2021 (+18.8%), despite COVID-19 outbreaks and restrictions on mobility which have been in force during part of 2021 in some countries of the region. This comparison is also affected by the significant provision for impairment on financial assets made in 2020, also caused by COVID-19. The accumulated impact at the end of September 2021 derived from inflation in Argentina on the attributable profit of the area was a loss of €-125m, compared to a cumulative loss of €-82m at the close of September 2020.
In the quarter, South America generated a net attributable profit of €124m, supported mainly by the good performance of recurring revenues (+10.1% compared to the previous quarter), which, together with a lower level of provisions for impairment on financial assets (-8.5%), offset the lower NTI results and the increase in operating expenses in the context of higher activity.
More detailed information on the most representative countries of the business area is provided below:
Argentina
Macro and industry trends
Within the framework of reduction in the number of infections and the acceleration of vaccination in recent months, economic activity continues to gradually recover from the sharp drop in GDP recorded in 2020. Thus, BBVA Research estimates that GDP growth will reach 7.5% in 2021. Inflation remains high and the exchange rate continues to gradually depreciate.
The banking system continues to be influenced by the high inflation scenario. At the end of July 2021, lending grew by 14.2% with regard to December 2020, while deposits grew by 25.6%. In addition, the NPL ratio increased during the second quarter of 2021 to 4.8% (+1 percentage point compared to the first quarter of 2021).
Activity and results
- Lending activity increased 16.9% compared to the close of December 2020, a figure that is below inflation, with growth in the retail segment (+22.6%), focused on credit cards (+20.5%) and corporate (+8.3%). The NPL ratio slightly decreased in the quarter to 2.6% driven by the increase in activity and a better performance of recoveries.
- Balance sheet funds continued to grow (+32.1% between January and September 2021) both from individuals and wholesale, while off-balance sheet funds increased 91.1% compared to December 2020.
- In the third quarter of 2021, Argentina recorded a good performance in recurring revenues, offset by higher operating expenses. The cumulative attributable profit at the end of September 2021 stood at €42m, as a consequence of the good performance of the recurring revenues from commission fees and a higher contribution from NTI from foreign currency derivatives transactions, offset by higher expenses and higher provisions compared to 2020.
Colombia
Macro and industry trends
The improvement of the epidemiological situation has supported the economic recovery process. Recent indicators show that GDP could grow 9.2% this year according to BBVA Research. In line with global trends, inflation has risen more than expected and reached 4.4% at the end of August. In this context, the Central Bank has started the interest rate hike cycle earlier than expected.
Total lending in the banking system is recovering (+3.4% at the end of July 2021, in a year-to-date comparison) after some months of weak growth, driven by credit to households, both the consumer portfolio (+3.3%) and companies (+4.2%), which offset the fall in mortgages (-1.1%). Furthermore, total deposits slowed down after growing by 2.8% at the end of July 2021, in a year-to-date comparison. The system's NPL ratio at the end of July 2021 remained stable at 4.61%.
Activity and results
- Lending activity grew by 6.4% compared to 2020 year-end thanks to the performance of wholesale portfolios (+9.1%) and retail portfolios (+4.9%). In terms of asset quality, there was a slight quarterly reduction in the NPL ratio to 5.3% as a result of contained NPL entries, higher recoveries (mainly in wholesale portfolios) and higher activity at the close of September 2021.
- Deposits from customers under management increased by 5.8%, compared to 2020 year-end, with a significant reduction in the cost of such deposits. Off-balance sheet funds closed with a negative variation of 29.4% in the nine-month period due to the volatility of investments made by institutional customers.
- In the third quarter of 2021, BBVA Colombia recorded a slight reduction in gross margin since the good evolution of the net interest income was offset by lower commission fees and NTI, along with an increase in personnel expenses in a context of higher activity. The attributable profit for the first nine months of 2021 stood at €159m, well above (+65.0% year-on-year) the €103m reached between January and September 2020, thanks to the performance of net interest income and commissions, as well as lower provisions for impairment on financial assets compared to the same period of the previous year, when they increased notably due to the outbreak of the pandemic.
Peru
Macro and industry trends
The economic recovery continues, reinforcing BBVA Research's outlook that GDP growth could be around 12.2% in 2021. Rising inflation has led the Central Bank to raise interest rates earlier than expected.
The banking system continues to be influenced by the effects of supportive policies in the context of the COVID-19 pandemic, although expanding at a more moderate rate during June 2021, with growth in loans and deposits of 4.2% and 0.8%, respectively in a year-to-date comparison. In addition, the NPL of the system is still contained at 3.11%.
Activity and results
- Lending activity closed September with a favorable growth of 4.1% compared to 2020 year-end, mainly due to the performance of mortgages, consumer finance (+6.2% and +16.6%, respectively) and growth in corporate lending (+3.8% compared to 2020 year-end), which captured liquidity in order to weather political uncertainty caused by the electoral process. The NPL ratio improved in the third quarter of 2021 to 4.7% due to write-offs. The NPL coverage ratio remained stable at 101%.
- Deposits from customers under management fell 3.4% in the first nine months of 2021, with a decrease in time deposits to reduce its cost. Off-balance sheet funds also declined compared to the close of December 2020 (-22.2%).
- In the third quarter, BBVA Peru has shown a good evolution of recurring income, but a reduction in NTI driven by the negative impact in derivatives positions as a consequence of the increase in rates carried out by the Central Bank. In the year-on-year evolution of the income statement, recurring income grew by 9.5%, thanks to the favorable evolution of the interest margin and commissions (which grew by 5.0% and 26.9%, respectively). Year-on-year reduction in provisions for impairment on financial assets (-6.1%), as a result of higher provision charges in 2020 following the pandemic outbreak. As a result, net attributable profit stood at €79m, 21.7% higher than the figure posted between January and September 2020.