South America
Highlights
- Growth in lending activity and customer funds in the quarter
- Outstanding boost in recurring income
- Improvement in the efficiency ratio despite the growth in expenses in an inflationary environment
- Good performance of risk indicators
Business activity (1)
(VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO 31-12-21)
(1) Excluding repos.
Net interest income / VERAGE TOTAL ASSETS
(PERCENTAGE AT CONSTANT EXCHANGE RATES)
Operating income
(Millions of euros at constant exchange rates)
(1) At current exchange rates:+26,1%
Net attributable profit (LOSS)
(Millions of euros at constant exchange rates)
(1) At current exchange rates: +58.0%
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | 1Q22 | ∆% | ∆% (1) | 1Q21 (2) |
|---|---|---|---|---|
| Net interest income | 809 | 22.7 | 27.0 | 660 |
| Net fees and commissions | 178 | 48.3 | 50.0 | 120 |
| Net trading income | 93 | 25.3 | 28.2 | 74 |
| Other operating income and expenses | (199) | 42.2 | 45.5 | (140) |
| Gross income | 881 | 23.4 | 27.4 | 714 |
| Operating expenses | (413) | 20.5 | 24.0 | (343) |
| Personnel expenses | (201) | 21.0 | 24.7 | (166) |
| Other administrative expenses | (177) | 24.7 | 28.8 | (142) |
| Depreciation | (35) | 0.7 | 1.1 | (34) |
| Operating income | 469 | 26.1 | 30.6 | 372 |
| Impaiment on financial assets not measured at fair value through profit or loss | (141) | (11.5) | (10.6) | (159) |
| Provisions or reversal of provisions and other results | (16) | 2.0 | 3.4 | (16) |
| Profit (loss) before tax | 311 | 58.5 | 67.9 | 197 |
| Income tax | (88) | 52.3 | 61.1 | (57) |
| Profit (loss) for the period | 224 | 61.1 | 70.7 | 139 |
| Non-controlling interests | (66) | 68.9 | 77.1 | (39) |
| Net attributable profit (loss) | 158 | 58.0 | 68.2 | 100 |
- (1) At constant exchange rates.
- (2) Restated balances. For more information, please refer to the “Business Areas” section.
| Balance sheets | 31-03-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 8,269 | (3.3) | (8.5) | 8,549 |
| Financial assets designated at fair value | 9,977 | 39.1 | 31.4 | 7,175 |
| Of which: Loans and advances | 216 | 37.8 | 27.1 | 157 |
| Financial assets at amortized cost | 40,535 | 7.4 | 0.3 | 37,747 |
| Of which: Loans and advances to customers | 37,975 | 9.7 | 1.9 | 34,608 |
| Tangible assets | 993 | 11.0 | 7.4 | 895 |
| Other assets | 1,862 | 5.9 | 0.4 | 1,758 |
| Total assets/liabilities and equity | 61,637 | 9.8 | 3.0 | 56,124 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 2,584 | 37.2 | 26.4 | 1,884 |
| Deposits from central banks and credit institutions | 6,514 | 18.4 | 8.6 | 5,501 |
| Deposits from customers | 38,875 | 7.0 | 0.4 | 36,340 |
| Debt certificates | 3.384 | 5.3 | (2.6) | 3,215 |
| Other liabilities | 4,686 | 11.4 | 9.4 | 4,207 |
| Regulatory capital allocated | 5,595 | 12.4 | 5.3 | 4,977 |
| Relevant business indicators | 31-03-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) | 37,932 | 9.7 | 1.9 | 34,583 |
| Non-performing loans | 1,904 | 5.0 | (3.1) | 1,813 |
| Customer deposits under management (3) | 38,893 | 7.0 | 0.3 | 36,364 |
| Off-balance sheet funds (4) | 16,978 | 4.7 | 1.7 | 16,223 |
| Risk-weighted assets | 46,330 | 6.9 | 0.2 | 43,334 |
| Efficiency ratio (%) | 46.8 | 48.2 | ||
| NPL ratio (%) | 4.3 | 4.5 | ||
| NPL coverage ratio (%) | 99 | 99 | ||
| Cost of risk (%) | 1.17 | 1.65 |
- (1) At constant exchange rates.
- (2) Excluding repos.
- (3) Excluding repos and including specific marketable debt securities.
- (4) Includes mutual funds, customer portfolios in Colombia and Peru and pension funds.
South America. Data per country (Millions of euros)
| Operating income | Net attributable profit (loss) | |||||||
|---|---|---|---|---|---|---|---|---|
| Country | 1Q22 | ∆% | ∆% (1) | 1Q21 (2) | 1Q22 | ∆% | ∆% (1) | 1Q21 (2) |
| Argentina | 82 | 161.6 | n.s. | 31 | 18 | n.s | n.s | 4 |
| Colombia | 169 | 18.7 | 21.6 | 143 | 69 | 47.5 | 51.1 | 47 |
| Peru | 187 | 17.2 | 13.3 | 160 | 51 | 89.7 | 83.4 | 27 |
| Other countries (3) | 30 | (21.1) | (22.0) | 38 | 19 | (11.4) | (12.0) | 22 |
| Total | 469 | 26.1 | 30.6 | 372 | 158 | 58.0 | 68.2 | 100 |
- (1) Figures at constant exchange rates.
- (2) Restated balances. For more information, please refer to the “Business Areas” section.
- (3) 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 | ||||
|---|---|---|---|---|---|---|
| 31-03-22 | 31-12-21 | 31-03-22 | 31-12-21 | 31-03-22 | 31-12-21 | |
| Performing loans and advances to customers under management (1) (2) | 3,387 | 3,150 | 14,069 | 13,366 | 16,806 | 17,010 |
| Non-performing loans and guarantees given (1) | 59 | 77 | 725 | 755 | 1,039 | 1,057 |
| Customer deposits under management (1) (3) | 6,466 | 5,749 | 13,454 | 13,886 | 14,961 | 15,253 |
| Off-balance sheet funds (1) (4) | 1,986 | 1,622 | 2,573 | 2,574 | 1,539 | 1,786 |
| Risk-weighted assets | 6,767 | 6,775 | 15,853 | 14,262 | 19,004 | 18,016 |
| Efficiency ratio (%) | 63.9 | 69.0 | 34.3 | 37.0 | 38.8 | 38.2 |
| NPL ratio (%) | 1.7 | 2.3 | 4.6 | 5.0 | 4.9 | 4.9 |
| NPL coverage ratio (%) | 165 | 146 | 107 | 103 | 87 | 89 |
| Cost of risk (%) | 2.04 | 2.20 | 1.62 | 1.85 | 0.73 | 1.59 |
- (1) Figures at constant exchange rates.
- (2) Excluding repos.
- (3) Excluding repos and including specific marketable debt securities.
- (4) Includes mutual funds and customer portfolios (in Colombia and Peru).
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.
Activity and results
The most relevant aspects related to the area's activity during the first quarter of 2022 were:
- Lending activity (performing loans under management) registered a variation of +1.9% in the first three months of the year, with growth in practically all segments excluding loans to public sector.
- With regard to asset quality, the NPL ratio stood at 4.3%, with a decrease of 18 basis points in the quarter, with reductions in Colombia and Argentina as a result of limited NPL entries and a good management of recoveries and write-offs. For its part, the NPL coverage rate remained stable at 99%.
- Customer funds under management remained stable in the first quarter of 2022 (+0.8%) compared to the 2021 closing balances, with growth in off-balance sheet funds (+1.7%) and time deposits (+3.1%), which offset the slight reduction in demand deposits (-0.6%).
South America generated €158m in the first quarter of 2022, representing a year-on-year variation of +68.2%, mainly due to the improved performance of recurring income (+30.6%) and NTI (+28.2%), which more than offset the higher impact of inflation in Argentina and the growth of expenses. At the end of March 2022, the cumulative impact of inflation in Argentina on the net attributable profit of the area was €-62m compared to €-43m accumulated at the end of March 2021.
More detailed information on the most representative countries of the business area is provided below:
Argentina
Macro and industry trends
Greater control of the pandemic during the second half of 2021 has allowed a rapid recovery in economic activity and a growth of 10.3% of GDP in 2021, above BBVA Research estimates which forecasts a moderation to approximately 3.5% in 2022 (unchanged from the previous forecast, three months ago). Inflation remains very high, at around 50% at the end of December 2021, and some acceleration is expected during 2022. Likewise, the new loan agreement with the International Monetary Fund could increase the scope for correcting some of the current macroeconomic distortions and reduce uncertainty about the future evolution of the Argentine economy.
The banking system continues to be influenced by the high inflation scenario. At the end of March 2022, lending grew by 46.0% compared to the same month in 2021, while deposits grew by 49.0%. Meanwhile, the NPL ratio reached 4.3% in January 2022 (50 basis points more than in January 2021).
Activity and results
- Lending activity increased by 7.5% compared to the close of December 2021, a figure that is below inflation, with growth in the retail segment (7.5%), especially consumer loans (13.1%), credit cards (5.0%), and in the business segment (7.7%). The NPL ratio stood at 1.7% as a result of limited NPL entries, a good management of recoveries and the write-off of a relevant client provisioned at 100%. For its part, the NPL coverage ratio increased to 165% due to the reduction in the balance of non-performing assets in the quarter.
- Balance sheet funds grew by 12.5% in the first quarter of 2022 and off-balance sheet funds (mutual funds) grew by 22.4% in the same period.
- The cumulative net attributable profit at the end of March 2022 stood at €18m, above the figure achieved at the end of March 2021. Good performance of the net interest income, mainly favored by higher rates and management of surplus liquidity, and favorable evolution of fees, highlighting payment channels. The aforementioned was partially offset by a more negative adjustment for inflation, as well as by higher expenses and provisions, the latter resulting, partially, from the negative impact recorded by the deterioration in the macroeconomic scenario at the beginning of 2022, since the provisioning needs of the loan portfolio were lower.
Colombia
Macro and industry trends
Economic activity has shown greater dynamism than expected in the last months of 2021, which is why the growth in the year could stand at 10.6%, a significant recovery after the 6.8% contraction of GDP in 2020. In addition, the high inflation has helped the Bank of the Republic raise interest rates to 5.0% in April, from 1.75% in August 2021. Likewise, BBVA Research estimates that, despite further expected interest rates increases, inflation will remain relatively high this year (8.0%, on average), and growth will converge to around 4.5% in 2022.
In a context of higher inflation, the growth of total lending in the banking system accelerated to 10.9% year-on-year in January 2022, driven by credit to households, both on the consumer and on the mortgage side (14.5% and 14.7% year-on-year, respectively). Corporate lending growth also accelerated to 7.8% year-on-year in January this year. Likewise, total deposits show a strong rebound, growing by 9.5% year-on-year at the end of January 2022. The system's NPL ratio rebounded slightly in January 2022 to 4.14% (3.93% in December 2021 and 5.18% in January 2021).
Activity and results
- Lending activity started well in the financial year showing a growth of 5.3% compared to the end of 2021, with a more dynamic in the wholesale portfolio (+6.4%) and slightly less in the retail portfolio (+4.6%), where consumer loans "libranzas" and "free investment" stood out, both aimed at customers with payroll or fixed income and credit cards. In terms of asset quality, the NPL ratio stood at 4.6% at the end of the first quarter of 2022, which represents a reduction of 41 basis points in the quarter due to limited entries into default and an adequate management of recoveries and write-offs. For its part, the NPL coverage ratio increased to 107%, mainly due to a favorable performance of the non-performing loans.
- Customer deposits under management decreased by 3.1% compared to 2021 year-end, with growth in demand deposits, which did not compensate for the strategic reduction of time deposits (-12.8%), with higher costs for BBVA Colombia. For its part, off-balance sheet funds (mutual funds and managed portfolios) remained stable (-0.1%) between January and March 2022.
- The net attributable profit in the first quarter of 2022 stood at €69m, or what is the same, 51.1% above that achieved in the same period of the previous year, thanks to the favorable evolution of recurring income and the NTI, as well as lower provisions for impairment on financial assets, which offset the increase in operating expenses.
Peru
Macro and industry trends
The economic recovery process continued in the last months of 2021. Activity indicators have surprised positively compared to what was expected. Thus, BBVA Research estimates that after the 11% drop registered in 2020, the GDP would have increased in 2021 by around 13.3%, despite inflationary pressures and increases in monetary policy interest rates up to 4.5% in April 2022. BBVA Research expects growth to be around 2% in 2022, slightly below its previous forecast, in a context of relatively high inflation (around 6.5%, on average) and with additional rises in interest rates.
Total lending growth in the banking system reached 6.7% year-on-year in January 2022, characterized by a moderation in corporate lending (to +5.7% year-on-year) after the strong boost from the Reactiva Peru credit program, but offset by greater dynamism in consumer credit (+9.1% year-on-year). The housing portfolio maintained its year-on-year growth rate, around +8.3%. For its part, the system's NPL ratio remained stable at around 3.21% in January (22 basis points less than the same month of 2021).
Activity and results
- Lending activity registered a decrease of 1.2% between January and March 2022, mainly due to the deleveraging of loans to companies (-1.9%) in an environment of high competition, which makes it difficult to offset the amortizations of the program Reactiva Peru, although renewals are being carried out at higher rates. The NPL ratio remains stable at 4.9% and the NPL coverage ratio fell by 155 basis points in the quarter to 87%, with entries in non-performing loans and lower provisioning requirements than in the previous quarter.
- Customers funds under management decreased by 3.2% in the first quarter of 2022, mainly due to lower balances in current accounts while deposits increased by 13.6% due to balances deposited by certain wholesale customers.
- During the first quarter of 2022, recurring income grew by 14.9%, thanks to the favorable evolution of the net interest income, which benefited from higher volumes and increasing rates; and commissions, compared to the first quarter of the previous year, affected by the lockdowns in February 2021. The aforementioned, together with the lower provisions for impairment of financial assets (-55.1%), offset the increase in operating expenses (+12.4%). As a result, the net attributable profit stood at €51m at the end of March 2022, 83.4% higher than the figure achieved at the end of the first quarter of 2021.