BBVA earnings: eight keys to understanding the bank’s third quarter results
BBVA’s 3Q19 earnings reveal how core revenues of the banking business –net interest income and net fees and commissions– keep growing steadily. BBVA CEO Onur Genç noted the impact that digital transformation is having on the business. “We’re leveraging digital transformation in everything we do to create a competitive advantage,” he pointed out.
BBVA earned €1.23 billion in the third quarter of 2019, 6.1 percent more yoy, excluding from the comparison the capital gains on the sale of BBVA Chile in July 2018. At €3.67 billion, the bank’s attributable profit for the year to September grew 1.2 percent compared to the same period of the previous year at current exchange rates, 0.5 percent in constant euros. Below are the eight keys to understanding BBVA’s earnings from January to September:
- Recurring revenues. Core banking revenues – net interest income and net fees and commissions – kept growing recurrently thanks to the Group’s geographic diversification. Emerging countries were able to offset the impact of lower interest rates in Spain and the U.S. Both lines combined grew 6.3 percent at constant exchange rates.
- Transformation. The number of digital customers increased 17 percent over the past year to 31 million. This figure represents 55.7 percent of the total customer base. Mobile customers have grown 26 percent since Sept 2018 to 27.6 million, or 49.7 percent of the digital customer base, inching closer to the target set for the year (50 percent). BBVA Spain’s app was named the world’s best for the third year running by Forrester Research.
- Efficiency. Cost containment efforts contributed to improve the efficiency ratio by 75 basis points (at constant terms) compared to December 2018, to 48.7 percent. BBVA’s efficiency ratio stands out when compared to the average of European peers (63.5 percent as of June 2019).
- Risk management. BBVA’s risk indicators remained solid. Geographic diversification has contributed to stabilizing the NPL ratio (3.9 percent), the coverage ratio (75 percent) and the cost of risk (1.01 percent).
- Capital adequacy. BBVA’s capital position remained solid. The bank’s fully-loaded CET1 ratio grew 22 basis points in the year to September, after absorbing regulatory impacts, to 11.56 percent, and remains within the bank’s 11.5 to 12 percent target range.
- Profitability. BBVA continued posting double-digit profitability metrics, well above the average of European peers, with Return on Tangible Equity (ROTE) of 12.2 percent (compared to peers’ 10.3 percent) and Return on Equity (ROE) of 10.1 percent (compared to an 8.7 percent average of European peers).
- Value creation for the shareholder. Book value per share – the indicator that represents the book value of a company for each share owned by shareholders – plus dividends payouts was €6.51 during the first nine months of the year, which represents a 14.2 percent increase compared to the same period of 2018.
- Sustainability. BBVA kept delivering on in its commitment to sustainable banking. In September 2019, BBVA signed the Principles for Responsible Banking, promoted by the United Nations Environment Programme Finance Initiative (UNEP FI) during the General Assembly of the United Nations. Additionally, the bank joined the Collective Commitment to Climate Action launched by 31 international financial institutions.
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