South America
Highlights
- Growth in lending activity and customer funds
- Significant momentum in recurring income
- Stability in the efficiency ratio despite the growth in expenses in an inflationary environment
- Outstanding growth in net attributable profit in the quarter
Business activity (1)
(VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO
31-12-21)
(1) Excluding repos.
Net interest income / AVERAGE TOTAL ASSETS
(PERCENTAGE AT CONSTANT EXCHANGE RATES)
Operating income
(Millions of euros at constant exchange rates)
(1) At current exchange rates:+33.7%.
Net attributable profit (LOSS)
(Millions of euros at constant exchange rates)
(1) At current exchange rates: +96.3%
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | 1H22 | ∆% | ∆% (1) | 1H21 (2) |
|---|---|---|---|---|
| Net interest income | 1,849 | 39.3 | 39.8 | 1,328 |
| Net fees and commissions | 401 | 50.3 | 47.5 | 267 |
| Net trading income | 203 | 12.7 | 10.3 | 180 |
| Other operating income and expenses | (478) | 62.2 | 64.9 | (295) |
| Gross income | 1,975 | 33.4 | 32.7 | 1,480 |
| Operating expenses | (923) | 33.1 | 32.6 | (693) |
| Personnel expenses | (447) | 34.5 | 34.2 | (332) |
| Other administrative expenses | (394) | 35.2 | 35.1 | (291) |
| Depreciation | (83) | 18.1 | 14.6 | (70) |
| Operating income | 1,052 | 33.7 | 32.8 | 786 |
| Impaiment on financial assets not measured at fair value through profit or loss | (272) | (20.9) | (23.3) | (343) |
| Provisions or reversal of provisions and other results | (42) | 41.0 | 36.7 | (29) |
| Profit (loss) before tax | 738 | 78.5 | 81.4 | 414 |
| Income tax | (142) | 10.9 | 10.7 | (128) |
| Profit (loss) for the period | 597 | 108.7 | 113.9 | 286 |
| Non-controlling interests | (183) | 143.5 | 146.2 | (75) |
| Net attributable profit (loss) | 413 | 96.3 | 102.1 | 210 |
- (1) At constant exchange rates.
- (2) Restated balances. For more information, please refer to the “Business Areas” section.
| Balance sheets | 30-06-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 8,883 | 3.9 | (2.9) | 8,549 |
| Financial assets designated at fair value | 11,048 | 54.0 | 43.8 | 7,175 |
| Of which: Loans and advances | 363 | 131.5 | 120.1 | 157 |
| Financial assets at amortized cost | 43,317 | 14.8 | 6.4 | 37,747 |
| Of which: Loans and advances to customers | 40,176 | 16.1 | 6.8 | 34,608 |
| Tangible assets | 1,100 | 23.0 | 18.1 | 895 |
| Other assets | 1,995 | 13.5 | 9.1 | 1,758 |
| Total assets/liabilities and equity | 66,343 | 18.2 | 10.0 | 56,124 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 3,105 | 64.8 | 54.1 | 1,884 |
| Deposits from central banks and credit institutions | 5,653 | 2.8 | (8.2) | 5,501 |
| Deposits from customers | 43,314 | 19.2 | 10.6 | 36,340 |
| Debt certificates | 3,818 | 18.8 | 10.9 | 3,215 |
| Other liabilities | 4,407 | 4.8 | 4.6 | 4,207 |
| Regulatory capital allocated | 6,046 | 21.5 | 13.1 | 4,977 |
| Relevant business indicators | 30-06-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) | 40,175 | 16.2 | 6.9 | 34,583 |
| Non-performing loans | 1,960 | 8.1 | (1.5) | 1,813 |
| Customer deposits under management (3) | 43,333 | 19.2 | 10.6 | 36,364 |
| Off-balance sheet funds (4) | 17,511 | 7.9 | 0.9 | 16,223 |
| Risk-weighted assets | 49,641 | 14.6 | 6.6 | 43,334 |
| Efficiency ratio (%) | 46.7 | 48.2 | ||
| NPL ratio (%) | 4.2 | 4.5 | ||
| NPL coverage ratio (%) | 100 | 99 | ||
| Cost of risk (%) | 1.24 | 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 | 1H22 | ∆% | ∆% (1) | 1H21 (2) | 1H22 | ∆% | ∆% (1) | 1H21 (2) |
| Argentina | 183 | 103.9 | n.s. | 90 | 101 | n.s. | n.s. | 13 |
| Colombia | 350 | 22.6 | 20.1 | 285 | 149 | 44.1 | 41.2 | 103 |
| Peru | 427 | 25.7 | 15.4 | 340 | 117 | 122.4 | 104.2 | 53 |
| Other countries (3) | 92 | 28.5 | 24.9 | 72 | 46 | 12.0 | 9.8 | 41 |
| Total | 1,052 | 33.7 | 32.8 | 786 | 413 | 96.3 | 102.1 | 210 |
- (1) Figures at constant exchange rates.
- (2) Restated balances. For more information, please refer to the “Business Areas” section.
- (3) Bolivia, Chile (Forum), Uruguay and Venezuela. Additionally, it includes eliminations and other charges.
South America. Relevant business indicators per country (Millions of euros)
| Argentina | Colombia | Peru | ||||
|---|---|---|---|---|---|---|
| 30-06-22 | 31-12-21 | 30-06-22 | 31-12-21 | 30-06-22 | 31-12-21 | |
| Performing loans and advances to customers under management (1) (2) | 4,018 | 2,986 | 14,584 | 12,972 | 17,578 | 17,852 |
| Non-performing loans and guarantees given (1) | 58 | 73 | 703 | 733 | 1,111 | 1,109 |
| Customer deposits under management (1) (3) | 7,491 | 5,450 | 15,291 | 13,477 | 16,146 | 16,008 |
| Off-balance sheet funds (1) (4) | 1,987 | 1,538 | 2,309 | 2,498 | 1,445 | 1,874 |
| Risk-weighted assets | 7,344 | 6,775 | 16,834 | 14,262 | 20,344 | 18,016 |
| Efficiency ratio (%) | 66.4 | 69.0 | 34.9 | 37.0 | 36.9 | 38.2 |
| NPL ratio (%) | 1.4 | 2.3 | 4.3 | 5.0 | 5.0 | 4.9 |
| NPL coverage ratio (%) | 172 | 146 | 106 | 103 | 89 | 89 |
| Cost of risk (%) | 2.15 | 2.20 | 1.54 | 1.85 | 0.84 | 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 half of 2022 were:
- Lending activity (performing loans under management) increased +6.9% in the first six months of the year, with growth in all segments highlighting the performance of the consumer (+13.4%) and business (+4.1%) portfolios.
- Customer funds under management increased (+7.6%) compared to the closing balances at the end of 2021, with growth in customer deposits, both in time deposits (+35.5%) and in demand deposits (+2.5%), as well as off-balance sheet funds (+0.9%).
The most relevant aspects of the evolution of the area's activity in the quarter were:
- Lending activity (performing loans under management) was higher than in the previous quarter (+5.1%) with growth in all segments, in particular, the business portfolio (+4.0%) and consumer (+6.6%).
- With regard to asset quality, the NPL ratio stood at 4.2%, a decrease of 13 basis points in the quarter, with reductions in Colombia and Argentina as a result of a good management of recoveries and activity growth. For its part, the NPL coverage rate reached 100%.
- Total customer funds increased in the quarter, boosted by growth in, both, time deposits (+31.4%) and demand deposits (+3.2%). Off-balance sheet funds remained stable in the quarter (-0.6%).
South America generated €413m in the first half of 2022, a year-on-year increase of +102.1%, mainly due to the improved performance of recurring income (+41.1%) and lower loan-loss provisions (-23.3%), which more than offset the growth of expenses (+32.6%) in an environment of high inflation throughout the region. At the end of June 2022, the cumulative impact of hyperinflation in Argentina in the "Other operating income and expenses" line of the area was €-360m compared to €-189m accumulated at the end of June 2021.
In the quarter and excluding the effect of exchange rate fluctuations, South America generated a net attributable profit of €256m, supported mainly by the good performance of recurring income (+28.1% compared to the previous quarter). The aforementioned, together with a positive performance of the NTI (+17.4%), a lower level of loan loss provisions (-7.7%) and a reduced tax rate originated in Argentina, offset the increase in operating expenses (+23.2%) in the context of higher activity and inflation.
More detailed information on the most representative countries of the business area is provided below:
Argentina
Macro and industry trends
Volatility in financial markets has increased significantly in recent months, particularly in the foreign exchange and local currency government debt markets. This is largely due to the less favorable global economic backdrop, the difficulty in correcting current macroeconomic distortions, further exacerbated by the question of meeting the targets set in March 2022 in the loan agreement with the International Monetary Fund. There is a lot of uncertainty regarding future policy developments. However, BBVA Research projects that inflation, which was 64,0% in May, will rise further. It also forecasts that GDP is expected to grow by 2.5% in 2022, down from the previous forecast of 3.5%, and slowing (or even shrinking) through 2023.
Inflation continues to drive the banking system's balances. At the end of June 2022, lending grew by 51.2% compared to the same month in 2021, while deposits grew by 52.0%. The NPL ratio fell to 3.6% in April 2022 (a decrease of 60 basis points compared to April 2021).
Activity and results
- Lending activity increased by 34.6% compared to the close of December 2021, a figure that is below inflation, with similar growth in the business segment (+42.8%) and in the retail segment (+29.3%) balances, highlighting in the latter consumer loans (+33.1%) and, especially, credit cards (+29.6%). In the quarter, the NPL ratio stood at 1.4% mainly driven by activity, together with a decrease in the balance of non-performing loans. For its part, the NPL coverage ratio increased to 172% thanks to the aforementioned decrease in the balance of non-performing loans in the quarter.
- Balance sheet funds grew by 37.5% in the first half of 2022 and off-balance sheet funds (mutual funds) grew by 29.2% in the same period.
- The cumulative net attributable profit at the end of June 2022 stood at €101m, above the figure achieved in the first half of 2021. The good year-on-year performance of the net interest income was mainly favored by a higher investment volume, and a favorable evolution of fees, highlighting payment channels, which were partially offset by a more negative adjustment for inflation, as well as higher expenses. In the second quarter of 2022, the growth in recurring income and NTI as well as an extraordinary payment in the income tax, as a result of the regularization of its tax deferrals due to considering the tax revaluation of certain fixed assets, can be highlighted.
Colombia
Macro and industry trends
Economic activity in general and domestic demand, in particular, have been more dynamic than expected in recent months. Thus, growth in 2022 could be 6.8%. This is significantly higher than the previous forecast of 4.5% by BBVA Research. High inflation has contributed to the Bank of the Republic raising interest rates in June to 7.5% from 1.75% in August 2021. BBVA Research forecasts that, with additional interest rate hikes on the horizon, inflation will stay relatively high in 2022 (9.1%, on average) and ease somewhat in 2023 (5.9%, on average), and for growth to converge at around 2.0% in 2023.
May 2022 saw total credit growth accelerate to 15.3% year-on-year in the banking system. This was largely driven by loans for households (consumer and mortgages grew 21.5% and 14.3% year-on-year, respectively). Corporate credit growth also accelerated to 11.8% year-on-year in the same month. Total deposits at the end of May 2022 stabilized at 12.9% year-on-year, with clearer indications of return to growth in term deposits (+15.9% year-on-year at the end of May) and still significant growth in demand deposits of 11.5% for the same month. The system's NPL ratio fell to 3.81% in April 2022, down 110 basis points from the same month in 2021.
Activity and results
- Lending activity accelerated its growth rate compared to the end of 2021 to 12.4%, with a more dynamic performance in the wholesale portfolio (+18.4%), due to the behavior of the business segment and slightly less in the retail portfolio (+8.8%), where the consumer loans "libranzas" and "free investment" stood out, both aimed at customers with payroll or fixed income. In terms of asset quality, the NPL ratio stood at 4.3% at the end of the first half of 2022, which represents a reduction of 28 basis points in the quarter driven by activity (wholesale and consumer) together with retail NPL entries, offset by a good management of recoveries, portfolio sales and write-offs. For its part, the NPL coverage ratio increased to 106%, due to the good performance of the non-performing loans.
- Customer deposits under management increased by 13.5% during the first half of 2022, as a result of the recovery of time deposits (+23.2%) resulting from the rate hikes implemented by the central bank, as well as the growth in demand deposits, which accelerated their growth rate between April and June (+8.8% during the first semester). For its part, off-balance sheet funds (mutual funds and managed portfolios) registered a decrease in the same time horizon (-7.6%) between January and June 2022.
- The net attributable profit in the first half of 2022 stood at €149m, or 41.2% above that achieved in the same period of the previous year, due to the boost in net interest income and the favorable evolution of the NTI, as well as lower provisions for impairment on financial assets. This offset the increase in operating expenses and income tax because of the increase in the tax rate from 34% to 38%. In the second quarter of 2022, the dynamics shown by the BBVA Colombia account are similar to those mentioned in the accumulated year-on-year evolution, although commissions remained flat and the effective tax rate for the second quarter was lower than in the previous quarter.
Peru
Macro and industry trends
Activity indicators have been more positive than expected in the first months of the year, partly due to the process of economic reopening after pandemic-related mobility restrictions, the high level of private savings and fiscal stimulus measures. High inflation, tightening of monetary conditions, and the global slowdown in economic growth will all negatively impact future growth. Therefore, BBVA Research has revised its growth forecast for 2022 and expects growth of around 2% — unchanged from the previous forecast — while it expects a growth rate of 2.8% in 2023. Inflation is expected to remain relatively high in 2022 (around 7.4%, on average), but should ease somewhat in 2023 (around 4.8%, on average), due in part to the tightening of local monetary conditions.
Total credit growth in the banking system reached 7.4% year-on-year in April 2022. The moderation in lending to corporates continues, following a 4.4% year-on-year increase. This is offset by the strong momentum in consumer loans, which grew by 19.8% year-on-year in April. The housing loans portfolio maintained its year-on-year growth rate and stood at 8.1% in the same month. The system's total deposits have continued to shrink since the start of the year. They fell by 2.3% year-on-year to April. The NPL ratio for the system remained stable at around 3.2% in May of 2022, 3 basis points higher than at the same month in 2021).
Activity and results
- Lending activity decreased 1.5% between January and June 2022, mainly due to the deleveraging of loans to companies (-5.5%) in an environment of high competition, which makes it difficult to offset the amortizations of the program Reactiva Peru. In the quarter, the NPL ratio increased to 5.0%, mainly due to the growth in non-performing loans and positively affected by the evolution of lending activity. For its part, the NPL coverage ratio stood at 89%, in line with the end of 2021.
- Customers funds under management decreased by 1.6% in the first half of 2022, mainly due to lower balances in demand deposits (-9.1%) and, to a lesser extent, to the decrease in off-balance sheet funds (-22.9%), which together offset the growth of time deposits (+52.0%).
- BBVA Peru's net attributable profit stood at €117m at the end of June 2022, 104.2% higher than the figure achieved at the end of the first half of 2021. During the first half of 2022, recurring income grew by 20.1%, thanks to the favorable evolution of the net interest income, which benefited from the increase in the customer spread, the income from marketable debt securities and those derived from excess liquidity, and commissions, which include the reactivation of the economic activity in 2022. The aforementioned, together with the lower provisions for impairment of financial assets (-53.8%), offset the increase in operating expenses (+12.0%). In the second quarter, BBVA Peru has shown an outstanding evolution in the net interest income, due to the higher yield of surplus liquidity, supported by the higher benchmark rates and a somehow more favorable evolution of the activity. This, together with the increase in fees and commissions, linked to the aforementioned greater activity, and an improvement in NTI, largely explain the quarterly evolution of the account.