BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today net income of $175 million for the third quarter of 2018, a 34 percent increase from the $130 million earned during the third quarter of 2017. Included in third quarter 2017 results is approximately $60 million (pre-tax) of provision expense related to Hurricanes Harvey and Irma. Return on average assets and return on average tangible equity(1) for the third quarter of 2018 were 0.77 percent and 8.35 percent, respectively.
Net income for the first nine months of 2018 totaled $568 million, an increase of 39 percent from the $409 million earned during the first nine months of 2017. Return on average assets and return on average tangible equity1 for the first nine months of 2018 were 0.85 percent and 9.28 percent, respectively.
Genç: Results for the quarter continue to reflect the positive underlying trends throughout many of our businesses and allowed us to post record quarterly revenue.
“Results for the quarter continue to reflect the positive underlying trends throughout many of our businesses and allowed us to post record quarterly revenue,” said Onur Genç, president and CEO of BBVA Compass. “The increase in net interest income certainly reflects the benefit of higher short-term interest rates, coupled with our ability to expand new and existing loan and deposit relationships with our clients. During the quarter, newly funded loans totaled more than $5.9 billion and for the year exceed $16.0 billion, a 29 percent increase over last year. As we enter the final quarter of 2018, our balance sheet is well-positioned to continue benefiting from higher interest rates, our digital transformation efforts continue to drive new industry-leading product offerings and enhance customer experience, and our team is focused on ending the year on a strong note while building momentum for next year.”
Total revenue for the quarter was a record $917 million, an increase of 9 percent from the third quarter of 2017 and up 10 percent on a year-to-date basis. Revenue growth was driven by an increase in net interest income. Net interest income totaled $658 million, an increase of $69 million or 12 percent from the third quarter of 2017. The percent net interest margin in the third quarter of 2018 was 3.27 percent, an increase of 14 basis points from a year ago. On a year-to-date basis, net interest income totaled $1.9 billion, an increase of $198 million or 11 percent while the percentage net interest margin was 3.28 percent, up 21 basis points compared to the same timeframe a year ago.
Noninterest income for the quarter totaled $258 million, an increase of 1 percent compared to the $255 million recorded in the third quarter of 2017. Positive performances in card and merchant processing fees (+37 percent), corporate and correspondent investment sales (+143 percent), service charges on deposit accounts (+8 percent) and mortgage banking (+95 percent) were offset, in part, by a decline in underwriting activity associated with investment banking and advisory fees (-54 percent) and a decline in other income that primarily relates to certain interchange fees that were reclassified to card and merchant processing fees in 2018.
Noninterest expense totaled $606 million, an increase of 5 percent compared to the year ago quarter. On a year-to-date basis, overall expense growth has been well-contained at 3 percent. Maintaining good expense controls, coupled with strong revenue generation, resulted in positive operating leverage in the quarter as operating income totaled $311 million, an increase of $38 million or 14 percent compared to the prior year quarter.
Total loans at the end of the third quarter of 2018 were $64.5 billion, an increase of 7 percent from the $60.4 billion at the end of the third quarter of 2017.
Genç: Loan growth in the quarter was well-balanced between both our commercial and consumer loan portfolios.
“Loan growth in the quarter was well-balanced between both our commercial and consumer loan portfolios,” said Genç. “Commercial growth was driven by a 6 percent increase in C&I lending and consumer growth was paced by a 51 percent increase in direct consumer lending and a 29 percent increase in credit cards, reflecting the success of our fully-digital Express Personal Loan product and revamped credit card offering launched earlier this year.”
Total deposits at the end of the third quarter of 2018 were $70.4 billion, a 5 percent increase from the $67.2 billion at the end of the third quarter of 2017. The loan to deposit ratio ended the quarter at 92 percent, up slightly from 90 percent a year ago.
"While increasing activity with our customers and improving our profitability profile has been our primary focal point, we also recognize the importance of being committed to maintaining sound underwriting standards and a strong risk profile,” noted Genç.
During the quarter, many of our key credit quality metrics showed improvement. Nonperforming loans as a percentage of total loans were 1.04 percent, down 7 basis points from second quarter 2018 levels and down 14 basis points from the third quarter of 2017. Net charge-offs as a percentage of average loans were 49 basis points in the quarter. On a year-to-date basis, net charge-offs as a percentage of average loans were 45 basis points compared to 48 basis points in the same period a year ago. The allowance for loan losses as a percentage of total loans ended the quarter at 1.36 percent, unchanged from second quarter 2018 levels while the coverage ratio of nonperforming loans rose to 130 percent.
Total shareholder's equity at the end of the third quarter totaled $13.3 billion, a 2 percent increase from $13.1 billion at the end of the third quarter of 2017. The CET1 ratio stood at 12.08 percent(2) at the end of the third quarter of 2018, relatively unchanged from a year ago and up 28 basis points from the end of the fourth quarter of 2017. All of BBVA Compass’ regulatory capital ratios(2) continue to significantly exceed the requirements under “well-capitalized” guidelines.
The BBVA Compass Mobile Banking App was named a leader in both the ease of use and customer service categories in Javelin Strategy & Research’s 2018 Mobile Banking Scorecard, marking the fifth consecutive year the app has been recognized as a leader in mobile banking by the independent research firm. Together, the two categories make up more than a third of the weighting of the study, with ease of use being the most critical component. Only three banks are recognized as leaders in each category.
1 Return on average tangible equity and operating income are non-GAAP financial measures that we believe aid in understanding certain areas of our performance. The calculation of these measures is included on the page titled Non-GAAP Reconciliation.
2 Regulatory capital ratios at September 30, 2018, are estimated.
FTE – fully taxable equivalent