In a presentation sent to the CNMV on the occasion of an event with investors this Wednesday, BBVA highlights the bank's track record in creating value for shareholders and its competitive edge, focused on profitable growth. This enables BBVA to present a positive outlook with recent improvements in its forecasts for loan growth and net interest income in markets like Spain and Mexico. The document that BBVA CEO Onur Genç will present at the conference organized by Bank of America emphasizes that “BBVA is an engine of profitable growth.”
At the beginning of the presentation, BBVA reviews its track record and ability to grow profitably and create value for its shareholders. First, the bank underscores its leading profitability within the banking sector over the years, with a net margin on risk-weighted assets of 3.9 percent compared to 2.8 percent for its peer group in Europe. Profitability measured by ROTE was 14.3 percent, higher than 8.7 percent of its peers.
The document also stresses BBVA's unique history of digital transformation, which also serves as a catalyst for efficiency and growth. Proof of this is the fact that BBVA had record high customer acquisition during the first half of the year, with 5.3 million new customers, more than double the amount from five years ago. 55 percent of them joined the bank digitally, up from just 6 percent in 2017. In addition, nearly 77 percent of the Group's sales take place on digital channels.
Other indicators that show BBVA's powerful capacity for growth and shareholder value creation are the trends in its revenue, earnings per share and tangible book value per share plus dividends. In the period from the beginning of 2019 to June 30, 2022, the bank’s gross income grew by 3.2 percent (in compound annual growth rate or CAGR), significantly surpassing its European peers at 1.9 percent. As a result, earnings per share growth was higher than its competitors (+83 percent versus +74 percent). Finally, tangible value per share plus dividends (in compound annual growth rate or CAGR) increased by 9.2 percent, compared with 5.4 percent for the same peer group.
With regard to value creation, BBVA recalls that the bank's strategic decisions are always aligned with the goal of creating value for shareholders. In this regard, it compares the evolution of BBVA’s total shareholder returns (including dividends and share performance), which has risen 27 percent from 2019 to the present, versus an average drop of 9 percent between peers in Spain in the same period.
The presentation also emphasizes how BBVA's key strengths—digitization, innovation and sustainability—are a source of a sustainable competitive advantage over time. BBVA has leading franchises in all the countries in which it operates, in terms of market share and profitability alike. In addition, BBVA's market share in the higher-value business segments is either higher than its total share of loans in each country or is growing, proving once again its successful commitment to profitable growth.
The bank underscores the digital capabilities that set it apart, and its use of its global reach as advantages to improve efficiency through global products and platforms. Coupled with investment in innovation, with in-house projects such as the launch of digital banking in Italy or direct investments in startups (Atom, Solaris, Neon) and through venture capital funds—Propel Venture Partners, Sinnovation—enables the bank to develop new capabilities.
BBVA is also a leading bank in its commitment to sustainability. In 2021, the bank doubled its target for channeling sustainable finance between 2018 and 2025 to €200 billion, of which it has already channeled €112 billion (as of June 30, 2022).
All in, the bank emphasized its bright prospects for the future, and firmly believes that the market will recognize this potential.
The bank reiterates the improved business outlook for BBVA in 2022 in two of its key markets: Mexico and Spain. BBVA expects lending in Spain to grow at a low single-digit rate for the year as a whole and net interest income to increase by around 5 percent. In Mexico, the expected loan portfolio growth in 2022 is double-digit, while net interest income will grow by around 20 percent.
It also predicts strong performance from credit quality indicators, with the cost of risk in 2022 for the BBVA Group expected to be below 100 basis points, in line with the previous year, despite the complex environment.
BBVA would therefore be prepared to face the new economic cycle and other challenges, such as competition from new players and fintechs. The quality and resilience of the bank's capital helps to face future challenges, with a fully-loaded CET1 ratio at June 30, 2022, of 12.45 percent. This is well within the bank's target range between 11.5 percent and 12 percent, and well above the 8.60 percent SREP regulatory requirement set by the European Central Bank.
Overall, BBVA is in a strong position to deliver on the targets set for 2024 at its Investor Day.