South America
Highlights
- Growth in lending activity and customer funds
- Improvement of the NPL ratio and coverage stability
- Favorable behavior of net interest income and NTI in the quarter
- Stability of the efficiency ratio in the quarter despite the growth of expenses in an inflationary environment
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: +39.0%.
Net attributable profit (LOSS)
(Millions of euros at constant exchange rates)
(1) At current exchange rates: +87.4%.
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | Jan.-Sep. 22 | ∆% | ∆% (1) | Jan.-Sep. 21 (2) |
|---|---|---|---|---|
| Net interest income | 3,074 | 49.2 | 51.8 | 2,061 |
| Net fees and commissions | 609 | 42.9 | 41.7 | 426 |
| Net trading income | 355 | 41.6 | 39.5 | 250 |
| Other operating income and expenses | (870) | 96.3 | 102.9 | (443) |
| Gross income | 3,167 | 38.1 | 38.9 | 2,294 |
| Operating expenses | (1,494) | 37.0 | 38.3 | (1,090) |
| Personnel expenses | (714) | 37.7 | 39.2 | (519) |
| Other administrative expenses | (650) | 39.7 | 42.2 | (465) |
| Depreciation | (130) | 21.9 | 17.4 | (107) |
| Operating income | 1,674 | 39.0 | 39.5 | 1,204 |
| Impaiment on financial assets not measured at fair value through profit or loss | (482) | (5.2) | (8.7) | (508) |
| Provisions or reversal of provisions and other results | (63) | 33.8 | 27.0 | (47) |
| Profit (loss) before tax | 1,129 | 74.0 | 81.4 | 649 |
| Income tax | (234) | 15.7 | 18.3 | (202) |
| Profit (loss) for the period | 895 | 100.3 | 110.7 | 447 |
| Non-controlling interests | (281) | 135.9 | 144.0 | (119) |
| Net attributable profit (loss) | 614 | 87.4 | 98.3 | 327 |
- (1) At constant exchange rates.
- (2) Restated balances. For more information, please refer to the “Business Areas” section.
| Balance sheets | 30-09-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 9,752 | 14.1 | 8.6 | 8,549 |
| Financial assets designated at fair value | 11,690 | 62.9 | 55.1 | 7,175 |
| Of which: Loans and advances | 143 | (8.9) | (10.7) | 157 |
| Financial assets at amortized cost | 44,431 | 17.7 | 10.5 | 37,747 |
| Of which: Loans and advances to customers | 41,017 | 18.5 | 10.1 | 34,608 |
| Tangible assets | 1,178 | 31.7 | 27.5 | 895 |
| Other assets | 2,046 | 16.4 | 13.8 | 1,758 |
| Total assets/liabilities and equity | 69,097 | 23.1 | 16.2 | 56,124 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 3,561 | 89.0 | 80.5 | 1,884 |
| Deposits from central banks and credit institutions | 6,113 | 11.1 | (1.4) | 5,501 |
| Deposits from customers | 44,547 | 22.6 | 15.7 | 36,340 |
| Debt certificates | 3,278 | 2.0 | (4.4) | 3,215 |
| Other liabilities | 5,293 | 25.8 | 29.6 | 4,207 |
| Regulatory capital allocated | 6,305 | 26.7 | 19.6 | 4,977 |
| Relevant business indicators | 30-09-22 | ∆% | ∆% (1) | 31-12-21 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) | 41,019 | 18.6 | 10.2 | 34,583 |
| Non-performing loans | 1,981 | 9.3 | 0.1 | 1,813 |
| Customer deposits under management (3) | 44,578 | 22.6 | 15.7 | 36,364 |
| Off-balance sheet funds (4) | 18,976 | 17.0 | 5.9 | 16,223 |
| Risk-weighted assets | 51,484 | 18.8 | 12.1 | 43,334 |
| Efficiency ratio (%) | 47.2 | 48.2 | ||
| NPL ratio (%) | 4.1 | 4.5 | ||
| NPL coverage ratio (%) | 100 | 99 | ||
| Cost of risk (%) | 1,43 | 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 | Jan.-Sep. 22 | ∆% | ∆% (1) | Jan.-Sep. 21 (2) | Jan.-Sep. 22 | ∆% | ∆% (1) | Jan.-Sep. 21 (2) |
| Argentina | 321 | 81.6 | n.s. | 177 | 156 | n.s. | n.s. | 39 |
| Colombia | 503 | 20.4 | 17.7 | 417 | 207 | 32.9 | 29.9 | 156 |
| Peru | 680 | 34.9 | 19.3 | 504 | 168 | 122.3 | 96.5 | 76 |
| Other countries (3) | 171 | 60.7 | 55.1 | 106 | 83 | 44.4 | 40.3 | 57 |
| Total | 1,674 | 39.0 | 39.5 | 1,204 | 614 | 87.4 | 98.3 | 327 |
- (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 | ||||
|---|---|---|---|---|---|---|
| 30-09-22 | 31-12-21 | 30-09-22 | 31-12-21 | 30-09-22 | 31-12-21 | |
| Performing loans and advances to customers under management (1) (2) | 4,101 | 2,705 | 14,662 | 12,588 | 17,972 | 18,101 |
| Non-performing loans and guarantees given (1) | 65 | 66 | 679 | 711 | 1,135 | 1,124 |
| Customer deposits under management (1) (3) | 7,411 | 4,937 | 14,522 | 13,078 | 18,198 | 16,231 |
| Off-balance sheet funds (1) (4) | 2,337 | 1,393 | 2,287 | 2,425 | 1,516 | 1,901 |
| Risk-weighted assets | 7,574 | 6,775 | 17,134 | 14,262 | 21,316 | 18,016 |
| Efficiency ratio (%) | 65.4 | 69.0 | 36.6 | 37.0 | 36.9 | 38.2 |
| NPL ratio (%) | 1.5 | 2.3 | 4.2 | 5.0 | 4.9 | 4.9 |
| NPL coverage ratio (%) | 165 | 146 | 107 | 103 | 89 | 89 |
| Cost of risk (%) | 2.53 | 2.20 | 1.50 | 1.85 | 1.20 | 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 nine months of 2022 were:
- Lending activity (performing loans under management) increased +10.2% in the first nine months of 2022, with growth in all segments, particularly in the corporates (+7.5%) consumer (+17.6%) and credit cards (+36.5%) portfolios.
- Customer funds under management increased (+12.6%) compared to the closing balances at the end of 2021, with growth focused on time deposits (+58.3%) in an environment of rising reference rates in broadly the entire region and, to a lesser extent, on off-balance sheet funds (+5.9%) and demand deposits (+2.0%).
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 (+3.4%) with growth in all segments except the public sector, in particular, the corporate (+3.6%), consumer (+3.7%) and credit cards (+9.3%) portfolios.
- With regard to asset quality, the NPL ratio stood at 4.1%, with a decrease of 4 basis points in the quarter, supported by the aforementioned growth in activity, mainly due to the reduction originating in Colombia, as a result of both increased activity and the proactive management of recoveries and write-offs. For its part, the NPL coverage rate reached 100%.
- Total customer funds increased in the quarter, boosted by growth in time deposits (+16.9%) and off-balance sheet funds (+5.1%). For its part, demand deposits remained stable in the quarter (-0.1%).
South America generated a net attributable profit of €614m in the first nine months of 2022, which represents a year-on-year variation of +98.3%, mainly due to the improved performance of recurring income (+50.0%) and NTI, which together with lower loan- loss requirements, more than offset the growth of expenses in a highly inflationary environment throughout the region. At the end of September 2022, the cumulative impact of the hyperinflation in Argentina in the "Other operating income and expenses" line was €-669m, notably above the €-271m accumulated at the end of September 2021 under this caption.
In the third quarter of 2022, and excluding the effect of exchange rate fluctuations, South America generated a net attributable profit of €217m, 11.4% below the previous quarter, which is mainly explained by a more negative adjustment for inflation in Argentina.
More detailed information on the most representative countries of the business area is provided below:
Argentina
Macro and industry trends
In a less favorable global economic backdrop, the difficulty in correcting current macroeconomic distortions, further exacerbated by the uncertainty of meeting the objectives established in the loan agreement reached in March 2022 with the International Monetary Fund, volatility in the financial markets has increased significantly in recent months, particularly in the foreign exchange and the local currency government debt markets. High uncertainty regarding future policy developments exists. However, BBVA Research believes that inflation, which was 83.0% in September, will rise further. It also forecasts GDP growth by 4.0% in 2022 (above the previous forecast of 2.5%, largely due to the relatively positive GDP figure for the second quarter, which was stronger than expected) and slightly shrinking in 2023.
Banking system's balances continue to be driven by high inflation. At the end of August 2022, total lending accelerated after growing 67.6% compared to the same month of 2021, supported by both consumer and corporate portfolios, reaching a year-on-year growth of 73.8% and 65.4%, respectively. Meanwhile, deposits moderated their growth compared to previous months, growing in August 2022, 42.6% year-on-year. Finally, the NPL ratio continued to fall to 3.1% in July 2022 (210 basis points less than the same month of 2021).
Activity and results
- Lending activity increased by 51.6% compared to the close of December 2021, well below inflation, with growth in both the business portfolio (+62.6%) and the retail portfolio (+44.6%), highlighting in the latter credit cards (+43.6%) and, to a lesser extent, consumer loans (+49.8%). In the quarter, the NPL ratio stood at 1.5% with an increase in non-performing loans compared to the previous quarter due to higher entries in the retail and the wholesale portfolio, affected by a significant customer, although the rate is below the end of 2021. For its part, the NPL coverage ratio decreased to 165% due to the aforementioned increase in non-performing loans in the quarter.
- Balance sheet funds grew by 50.1% in the first nine months of 2022, mainly driven by the evolution of time deposits, and off-balance sheet funds (mutual funds) grew by 67.8% in the same period.
- The cumulative net attributable profit at the end of September 2022 stood at €156m, well above the figure achieved in the first nine months of 2021, mainly driven by the boost in the securities portfolio and, to a lesser extent, the impact of interest rate hikes, both impacting net interest income. The year-on-year performance of commissions was also positive, highlighting payment channels, as well as the evolution of NTI. The aforementioned was offset by a more negative inflation adjustment and higher expenses. In the third quarter of 2022, the growth in NTI, provided the higher volume of securities and futures trading operations, together with a less negative adjustment for inflation and the control of operating expenses, contributed to offsetting the lower recurring revenue performance.
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 7.6%, significantly higher than the previous forecast of 6.8% by BBVA Research. In addition, high inflation has contributed to the Bank of the Republic raising interest rates in October to 10.0% from 1.75% in August 2021. Against this backdrop, BBVA Research forecasts that, with additional interest rate hikes on the horizon, inflation will remain relatively high in 2022 (9.9%, on average) and ease somewhat in 2023 (9.1%, on average), and growth will slow down significantly at around 0.7% in 2023 (seven-tenths of a percentage point lower than the previous forecast).
In June 2022 total credit growth in the banking system stood at 14.9% year-on-year, mainly driven by loans to households. Corporate credit growth accelerated to 12.3% year-on-year in the same month. In addition, total deposits at the end of June 2022 increased at 13.6% year-on-year, characterized by term deposits ́ recovery and certain restraint in demand deposits. The system's NPL ratio fell to 3.71% in June 2022, down 94 basis points from the same month in 2021.
Activity and results
- Lending activity continued to accelerate its growth rate compared to the end of 2021 by 16.5%, with a more dynamic performance in the wholesale portfolio (+24.7%), due to the behavior of the business portfolio. In terms of asset quality, the NPL ratio stood at 4.2% at the end of the first nine months of 2022, which represents a reduction of 16 basis points in the quarter due to an increase in the loan portfolio together with a slight decrease in non-performing loans. For its part, the NPL coverage ratio increased in the quarter to 107%.
- Customer deposits under management increased by 11.0% during the first nine months of 2022, as a result of the growth in time deposits (+37.2%) -resulting from the successive rate hikes implemented by the central bank- which offset the drop of demand deposits (-1.5%) and off-balance sheet funds (-5.7%). Between July and September, customer deposits fell by 2.1%, with growth in time deposits, which could't offset the reduction in demand deposits. For its part, off-balance sheet funds increased by 2.1% over the same time horizon.
- The net attributable profit in the first nine months of 2022 stood at €207m, or 29.9% above that achieved in the same period of the previous year, due to the boost in recurring revenue and the NTI, as well as lower provisions for impairment on financial assets. The foregoing offset the increase in operating expenses and income tax as a result of the increase in the tax rate from 34% to 38%. In the third quarter of 2022, the increases in reference rates made by the central bank (250 basis points between July and September) had a negative impact on the net interest income -due to the remuneration of liabilities-. For its part, commissions showed a slight increase in the quarter (+3.5%) and NTI evolved positively (+8.9%) supported by the valuation of the derivatives portfolio and treasury gains. Lastly, there was an increase in provisions for impairment of financial assets (+7.0%) and in operating expenses (+9.4%).
Peru
Macro and industry trends
Activity indicators have been more positive than expected in the first months of the year, in part due to the process of economic reopening after pandemic-related mobility restrictions, the high level of private savings and tax stimulus measures. High inflation, tightening of monetary conditions and the global slowdown in economic growth will negatively impact future growth. Therefore, BBVA Research expects for 2022 a growth of around 2.3% — unchanged from the previous forecast — while it expects a growth rate of 2.5% in 2023, three-tenths of a percentage point lower than expected three months ago. Inflation is expected to remain high in 2022 (around 7.7%, on average), but should ease somewhat in 2023 (around 5.3%, on average), due in part to the tightening of local monetary conditions.
Total credit growth in the banking system moderated to 5.3% year-on-year in July 2022. The sharp slowdown in corporate lending continues, with a flat balance (+0.3% year-on-year) in this segment. It keeps offsetting the strong momentum in consumer loans, which grew by 25.0% year-on-year in July. The mortgage portfolio has maintained a stable growth rate compared to previous months, reaching a year-on-year increase of 8.5% in July. The system's total deposits decreased moderately (-1.1% year-on-year in July), with a greater contraction in demand deposits (-6.2% year-on-year), which contrasts with the strong rise in time deposits (+13.6% year- on-year,) growing the latter again after two years of falling balances. For its part, the system's NPL ratio fell slightly and reached 3.07% in August 2022 (3 basis points below the same month in 2021).
Activity and results
- Lending activity remained flat between January and September 2022 (-0.7%), with a very dynamic performance of consumer loans (+23.2%) and credit cards (+31.6%), which failed to offset the deleveraging of loans to corporates (-4.9%) in an environment of high competition, which failed to offset the amortizations of the program Reactiva Peru. In the quarter, the NPL ratio fell slightly to 4.9%, with a slight decrease in non-performing loans at constant exchange rate due to credit write-offs management. For its part, the NPL coverage ratio stood at 89%, in line with the previous quarter.
- Customers funds under management increased by 8.7% in the first nine months of 2022, due to the strong boost in time deposits (+89.1%), supported by the rise in reference rates by the central bank, which offset lower balances in demand deposits (-2.9%) and in off-balance sheet funds (-20.2%).
- BBVA Peru's net attributable profit stood at €168m at the end of September 2022, 96.5% higher than the figure achieved at the end of the same month of the previous year. During the first nine months of 2022, recurring income grew by 20.0%, 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. The aforementioned, together with the lower provisions for impairment on financial assets (-34.8%), offset the increase in operating expenses (+15.0%). In the third quarter, BBVA Peru continues to show an outstanding evolution in net interest income (+9.4%), due to the higher yield of surplus liquidity, supported by the higher reference rates and a positive evolution of the activity, which are offset by higher credit impairment requirements and higher operating expenses. As a result thereof, the result generated between July and September is 25.8% lower than the one of the previous quarter.