Quarterly evolution of results
The BBVA Group’s results in the third quarter of 2021 stood at €1,400m, with a favorable performance compared to the previous quarter (+94.9% at constant exchange rate), highlighting the following trends:
- Increase in recurring revenues in Turkey, Mexico and South America.
- Decrease in NTI (-23.6% at constant exchange rate), due to lower results of the Global Markets unit and also affected by seasonality in certain geographical areas.
- Favorable evolution of the other operating income and expenses line, due to the contribution made to the SRF by Spain in the second quarter of 2021. In addition, the comparison is affected by the lower dividend income recorded at the Corporate Center, as the previous quarters included, among others, the dividend of Telefónica and those from the Group’s investments in Funds & Investment Vehicles in tech companies.
- Increase in operating expenses in Mexico and South America, in an environment of inflation and recovery of activity.
CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)
| 2021 | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| 3Q | 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |
| Net interest income | 3,753 | 3,504 | 3,451 | 3,477 | 3,553 | 3,537 | 4,024 |
| Net fees and commissions | 1,203 | 1,182 | 1,133 | 1,042 | 1,023 | 934 | 1,124 |
| Net trading income | 387 | 503 | 581 | 175 | 357 | 470 | 544 |
| Other operating income and expenses | (13) | (85) | (11) | (147) | 46 | (80) | 86 |
| Gross income | 5,330 | 5,104 | 5,155 | 4,547 | 4,980 | 4,862 | 5,778 |
| Operating expenses | (2,378) | (2,294) | (2,304) | (2,264) | (2,163) | (2,182) | (2,477) |
| Personnel expenses | (1,276) | (1,187) | (1,184) | (1,186) | (1,124) | (1,113) | (1,272) |
| Other administrative expenses | (788) | (800) | (812) | (766) | (725) | (754) | (860) |
| Depreciation | (314) | (307) | (309) | (312) | (315) | (316) | (345) |
| Operating income | 2,953 | 2,810 | 2,850 | 2,282 | 2,817 | 2,679 | 3,300 |
| Impairment on financial assets not measured at fair value through profit or loss | (622) | (656) | (923) | (901) | (706) | (1,408) | (2,164) |
| Provisions or reversal of provisions | (50) | (23) | (151) | (139) | (88) | (219) | (300) |
| Other gains (losses) | 19 | (7) | (17) | (82) | (127) | (103) | (29) |
| Profit/(loss) before tax | 2,299 | 2,124 | 1,759 | 1,160 | 1,895 | 950 | 807 |
| Income tax | (640) | (591) | (489) | (337) | (515) | (273) | (204) |
| Profit/(loss) for the period | 1,659 | 1,533 | 1,270 | 823 | 1,380 | 678 | 603 |
| Non-controlling interests | (259) | (239) | (237) | (110) | (312) | (162) | (172) |
| Net attributable profit excluding non-recurring impacts | 1,400 | 1,294 | 1,033 | 713 | 1,068 | 516 | 431 |
| Profit/(loss) after tax from discontinued operations (1) | - | 103 | 177 | 302 | 73 | 120 | (2,224) | Corporate operations (2) | - | - | - | 304 | - | - | - |
| Net cost related to the restructuring process | - | (696) | - | - | - | - | - |
| Net attributable profit/(loss) | 1,400 | 701 | 1,210 | 1,320 | 1,141 | 636 | (1,792) |
| Earning per share excluding non-recurring impacts (3) | 0.20 | 0.18 | 0.14 | 0.09 | 0.15 | 0.06 | 0.05 |
| Earning per share (euros) (3) | 0.20 | 0.09 | 0.17 | 0.18 | 0.16 | 0.08 | (0.29) |
- General note: the results generated by BBVA USA and the rest of Group's companies in the United States sold to PNC on June 1, 2021, are presented in a single line as "Profit/ (loss) after tax from discontinued operations".
- (1) Profit/(loss) after tax from discontinued operations includes the goodwill impairment in the United States registered in the first quarter of 2020 for an amount of €2,084m.
- (2) Net capital gain from the sale to Allianz of the half plus one share of the company created to jointly develop the non-life insurance business in Spain, excluding the health insurance line.
- (3) Adjusted by additional Tier 1 instrument remuneration.
Year-on-year evolution of results
The BBVA Group generated a net attributable profit, excluding non-recurring impacts, of €3,727m between January and September 2021, representing a year-on-year increase of +84.9%. Including these impacts —namely €+280m from the results of discontinued operations and €-696m from the net costs related to the restructuring process— the Group's net attributable profit amounts to €3,311m, which compares very positively with the €-15m in the same period of the previous year, which was severely affected by the effects of the COVID-19 pandemic. With regard to the recording of these restructuring costs, it should be noted that, solely for management purposes and for the purpose of the comments provided in this report, these are included in the income statement line "Net cost related to the restructuring process". The financial information is presented to the Group's Senior Management using this approach. This report includes a reconciliation between the management approach and the BBVA Group's Condensed Interim Consolidated Financial Statements.
Despite the complex environment and at constant exchange rates, good performance in recurring income (i.e. net interest income and fees), the evolution of net trading income (NTI) and lower provisions for impairment on financial assets were particularly notable.
CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)
| Jan.-Sep. 2021 | ∆% | ∆% at constant exchange rates |
Jan.-Sep. 2020 | |
|---|---|---|---|---|
| Net interest income | 10,708 | (3.7) | 2.5 | 11,115 |
| Net fees and commissions | 3,518 | 14.2 | 19.2 | 3,081 |
| Net trading income | 1,472 | 7.3 | 13.7 | 1,372 |
| Other operating income and expenses | (108) | n.s. | n.s. | 53 |
| Gross income | 15,589 | (0.2) | 5.6 | 15,620 |
| Operating expenses | (6,976) | 2.2 | 6.5 | (6,823) |
| Personnel expenses | (3,647) | 4.0 | 8.7 | (3,509) |
| Other administrative expenses | (2,400) | 2.6 | 6.7 | (2,338) |
| Depreciation | (929) | (4.9) | (1.5) | (976) |
| Operating income | 8,613 | (2.1) | 4.9 | 8,796 |
| Impairment on financial assets not measured at fair value through profit or loss | (2,202) | (48.5) | (46.2) | (4,278) |
| Provisions or reversal of provisions | (224) | (63.0) | (61.6) | (607) |
| Other gains (losses) | (5) | (98.0) | (98.0) | (259) |
| Profit/(loss) before tax | 6,182 | 69.3 | 89.0 | 3,652 |
| Income tax | (1,720) | 73.5 | 91.6 | (991) |
| Profit/(loss) for the period | 4,462 | 67.7 | 88.1 | 2,661 |
| Non-controlling interests | (735) | 13.8 | 46.1 | (646) |
| Net attributable profit/(loss) excluding non-recurring impacts | 3,727 | 84.9 | 99.3 | 2,016 |
| Profit/(loss) after tax from discontinued operations (1) | 280 | n.s. | n.s. | (2,031) |
| Net cost related to the restructuring process | (696) | n.s. | n.s. | _ |
| Net attributable profit/(loss) | 3,311 | n.s. | n.s. | (15) |
| Earning per share excluding non-recurring impacts (2) | 0.52 | 0.26 | ||
| Earning per share (euros) (2) | 0.46 | (0.05) |
- General note: the results generated by BBVA USA and the rest of Group's companies in the United States sold to PNC on June 1, 2021, are presented in a single line as "Profit/ (loss) after tax from discontinued operations".
- (1) Profit/(loss) after tax from discontinued operations includes the goodwill impairment in the United States registered in the first quarter of 2020 for an amount of €2,084m.
- (2) Adjusted by additional Tier 1 instrument remuneration.
Unless expressly indicated otherwise, to better understand the changes under the main headings of the Group's income statement, the year-on-year rates of change provided below refer to constant exchange rates. When comparing two dates or periods in this report, the impact of exchange rate variations against the euro for the currencies of the countries in which BBVA operates is sometimes excluded, assuming that the exchange rates remain constant. In doing so, with regard to income statement amounts, average exchange rates of the most recent period are used for each currency in the geographic areas where the Group operates for both periods.
Net interest income e as of September 30, 2021 was higher than in the same period of the previous year (+2.5%), due to the good performance in South America and Mexico, which offset the poor evolution in Turkey, Spain and Rest of Business.
All areas, with the exception of Rest of Business, showed a positive performance in the net fees and commissions line compared to the accumulated balance between January and September 2020 (+19.2% in the Group), which is partly explained by lower activity and the removal of certain fees as a measure to support customers during the worst moments of the pandemic in 2020, as well as higher fees from payment systems, deposits and asset management in 2021.
NET INTEREST INCOME/ATAS(1)
(PERCENTAGE)
(1) Excluding BBVA USA and the rest of the Group's companies in the United States sold to PNC on June 1, 2021.
NET INTEREST INCOME PLUS NET FEES AND COMMISSIONS
(MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
(1) At constant exchange rates: +0.2%.
NTI showed a year-on-year increase of +13.7%, as of September 30, 2021, mainly due to the good performance of the Global Markets unit in Spain and the revaluations of the Group stakes in Funds & Investment Vehicles in tech companies and the industrial and financial portfolio.
The other operating income and expenses line accumulated a negative result of €-108m as of September 30, 2021, compared to € +53m in the same period last year, due to BBVA's greater annual contribution in Spain to the Single Resolution Fund (hereinafter SRF), the higher negative adjustment for inflation in Argentina and the lower contribution of the insurance business.
GROSS INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
(1) At constant exchange rates: -0.2%.
Operating expenses s increased (+6.5% year-on-year) in all areas except Spain and Rest of Business. This growth is framed within an environment of activity recovery and high inflation, particularly in Mexico and Turkey.
The efficiency ratio stood at 44.7% as of September 30, 2021, in line with the ratio achieved in the same period of the previous year (44.4%), with an improvement of 83 basis points over the ratio at the end of December 2020.
OPERATING EXPENSES (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
(1) At current exchange rates: +2.2%.
EFFICIENCY RATIO (PERCENTAGE)
Impairment on financial assets not measured at fair value through profit or loss (impairment on financial assets) closed September, 2021 with a negative balance of €2,202m, significantly lower than the previous year (-46.2%) and with a decrease in all geographical areas mainly due to the negative impact of provisions for COVID-19 in 2020.
OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
(1) At current exchange rates: -2.1%.
IMPAIRMENT ON FINANCIAL ASSESTS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
(1) At current exchange rates: -48.5%.
The provisions or reversal of provisions line (hereinafter "provisions") closed with a negative balance of €-224m as of September 30, 2021, -61.6% below the figure accumulated in the same period last year, mainly due to provisions to meet potential claims in Spain and to increased provisions for special funds and contingent risk and commitments in Turkey, in both cases registered in 2020.
With regard to other gains (losses) line, it closed September 2021 with a negative balance of €5m, an improvement on the figure reached the previous year (€-259m), mainly due to the impairment of investments in subsidiaries, joint ventures and associates in 2020 registered at the Corporate Center.
As a result of the above, the BBVA Group generated a net attributable profit, excluding non-recurring impacts, of €3,727m between January and September 2021, representing a year-on-year increase of +99.3%. These non-recurring impacts include:
- The results generated by BBVA USA and other companies included in the sale agreement to PNC and classified as discontinued operations, generated €280m in 2021 until the closing of the operation, contrasting very positively with the negative result of €-2,031m accumulated between January and September 2020, which included the impact of the goodwill impairment in the United States. These results are recorded in the "Profit/(loss) after tax from discontinued operations" line of the Corporate Center's income statement.
- The net cost related to the restructuring process of BBVA S.A. in Spain which amounted to €-696m, of which, before tax, €-754m correspond to the collective layoff and €-240m to branches closures.
Taking into account both impacts, the Group's net attributable profit between January and September 2021 amounts to €3,311m, which compares very positively with the €-15m in the same period of the previous year, which was severely affected by the effects of the COVID-19 pandemic.
The cumulative net attributable profits, in millions of euros, at the close of September 2021 for the various business areas that comprise the Group were as follows: €1,223m in Spain, €1,811m in Mexico, €583m in Turkey, €339m in South America and €205m in Rest of Business.
NET ATTRIBUTABLE PROFIT (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
NET ATTRIBUTABLE PROFIT EXCLUDING NON-RECURRING IMPACTS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)
General note: non-recurring impacts include: (I) BBVA USA and the rest of the Group´s companies in the United States sold to PNC on June 1, 2021 in all periods; (II) the net cost related to the restructuring process as of 2Q21; and (III) the net capital gain from the bancassurance operation with Allianz as of 4Q20.
(1) At current exchange rates:+84.9%
TANGIBLE BOOK VALUE PER SHARE AND DIVIDENDS (1) (EUROS)
(1) Replenishing dividends paid in the period.
EARNING PER SHARE (1) AND ADJUSTED EARNING PER SHARE (1)(EUROS)
General note: adjusted earning per share excludes: (I) BBVA USA and the rest of the Group's companies in the United States sold to PNC on June 1, 2021, in all periods; (II) the net cost related to the restructuring process as of 2Q21; and (III) the net capital gain from the bancassurance operation with Allianz as of 4Q20.
(1) Adjusted by additional Tier 1 instrument remuneration.
The Group’s profitability indicators improved, both on a year-to-year basis and compared to the end of December 2020, in line with the favorable performance of the results.
ROE AND ROTE (1) (PERCENTAGE)
(1) Excludes: (I) BBVA USA and the rest of the Group's companies in the United States sold to PNC on June 1, 2021, as of Jan.-Sep. 21, 2020 and Jan.-Sep.20; (II) the net cost related to the restructuring process as of Jan.-Sep.21; and (III) the net capital gain from the sale to Allianz of the half plus one share of the company created to jointly promote non-life insurance business in Spain, excluding the health insurance line as of 2020.
ROA AND RORWA (1) (PERCENTAGE)
(1) Excludes: (I) BBVA USA and the rest of the Group's companies in the United States sold to PNC on June 1, 2021, as of Jan.-Sep.21, 2020 and Jan.-Sep.20; (II) the net cost related to the restructuring process as of 1H21; and (III) the net capital gain from the sale to Allianz of the half plus one share of the company created to jointly promote non-life insurance business in Spain, excluding the health insurance line as of 2020.