BBVA improves guidance for its business outlook in Spain and Mexico for 2022
At the presentation of results for the first quarter, BBVA's CEO, Onur Genç, said the bank sees an improved outlook for Spain and Mexico in 2022, "thanks to better-than-expected business dynamics." He pointed out that business dynamics are "highly positive" in all geographies.
Over the first three months of 2022, BBVA in Spain experienced "excellent revenue performance and a significant improvement in cost-to-income and provisions," stated Onur Genç. The CEO emphasized that BBVA's growth focused on the key profitable segments: corporate, consumer and credit card lending. These positive business dynamics and the expected rise in interest rates enable the bank to improve its expectations regarding net interest income performance for the year, even in the face of a low interest rate environment and the uncertainty in the Spanish economy arising from the invasion of Ukraine.
Regarding Mexico, Onur Genç again pointed to a strong performance in net interest income, which grew by more than 20% compared to the same period in 2021, "driven by higher business volume, improved spreads, and a significant improvement in cost-to-income." Based on performance at the start of the year, the bank has revised its outlook for lending upward, from expected growth of around 5% to growth of just under 10%. BBVA also expects net interest income to grow in double digits. "This translates into better figures in terms of activity and net interest income," Genç said.
The BBVA CEO indicated that for the remainder of the year the rise in interest rates is expected to have a positive effect in both geographies. Specifically, the bank expects two rate hikes by the ECB in 2022, "possibly in September and another at the end of the year," and four more hikes in 2023. In Mexico, "we have already seen a 100 basis point increase this year. We expect an increase to 175 basis points in 2022," the CEO explained.
"In my view, the milestone of the quarter is that we attained very good numbers in all segments and in all countries," Genç pointed out. "We have achieved significant incremental growth in Mexico and Spain."
BBVA's CEO Onur Genç
Lending rebounds in Spain
During his speech, the CEO emphasized that, in the first quarter, the stock of loans grew by 10.6% across the Group as a whole. In Spain, new loan production grew by 27% compared to the first quarter of 2021 in all segments except government bodies.
Onur Genç also pointed out the 3.4% growth in the stock of loans in Spain in the first quarter. "This is something we haven't seen in a very long time," he said. Moreover, the strongest increase in activity was seen in the most profitable segments, such as the corporate portfolio, which grew 13.9% year-on-year, and consumer lending and credit cards, up 9.6%. "In Spain, business is recovering healthily and we are gaining market share," the CEO stressed.
As to asset quality, BBVA's Chief Financial Officer, Rafael Salinas, said that as of today macroeconomic projections resulting from the Ukraine crisis "do not necessarily indicate a worsening in non-performing loans." In fact, "we are seeing that the healthy pace of growth in activity is making the impaired portfolio weigh less in all portfolios as a whole, while the NPL ratio at Group level is clearly improving."
Regarding the question of whether the bank has recognized additional provisions to face the potential future effects of the crisis in Ukraine, the CEO stated that BBVA has set aside around €200 million for the Group for this reason, of which €97 million were allocated to Spain.