BBVA Results: six key takeaways from the 2021 first quarter accounts
The BBVA Group obtained a net attributable profit of €1.21 billion in the first quarter of 2021 - a figure that shows a return to levels prior to the outbreak of the COVID pandemic. These results were achieved thanks to strong recurring revenue - despite the complex environment - and lower impairments and provisions compared to those made in the first quarter of 2020 in anticipation of the crisis. “In the first quarter of 2021, we produced positive results in an environment that continues to be very challenging. In a context of profound change in our sector, we continue to move forward in key areas of our strategy: sustainability and digital transformation,” said Onur Genç, CEO of BBVA.
The variations mentioned below are at constant exchange rates (not taking into account the fluctuation of currencies in relation to the euro) in order to better compare the evolution of each area.
Positive evolution of recurring revenue. In an environment that remains complex, the bank’s recurring revenue - comprised of net interest income and fees and commissions - grew 0.5 percent yoy. The strong performance of net trading income stands out, growing 16.1 percent compared to the same period last year. As a result, gross income reached €5.16 billion - an increase of 0.2 percent yoy.
Cost containment. Operating expenses were kept under control in the quarter, growing 1.8 percent yoy, well below the average inflation rate in the countries where BBVA has a presence (+4.7 percent). Similarly, the efficiency ratio, which measures the expenses needed to obtain income in a given period, stood at 45 percent. Operating income (gross income minus operating expenses) reached €2.85 billion (-1 percent yoy).
Solid risk indicators. NPL and coverage ratios remained practically stable from December, ending the quarter at 4.3 percent and 81 percent respectively. The cost of risk continued its downward trend at 1.17 percent - excluding the U.S. business unit being sold - compared to 1.55 percent for the entire year in 2020. This indicator measures the provisions made for insolvency compared to the total portfolio of loans to customers. The lower this indicator is, the lower the risk profile for a financial institution.
Solvency. BBVA continued to generate capital in the first quarter of 2021, adding 15 basis points to the fully-loaded CET1 ratio to reach 11.88 percent. This figure is 329 basis points above the minimum requirement set by supervisors for BBVA (currently 8.59 percent). If the capital gains obtained from the sale of the U.S. business, and the bank’s goal of repurchasing 10 percent of the Group’s shares¹ are not included, this ratio climbs to 13.55 percent. This is 155 basis points above the target range established by the Group (between 11.55 percent and 12 percent).
Value creation for shareholders. BBVA continues to create value for its shareholders. The tangible book value per share plus dividends stood at €6.15 per share at the end of March 2021, compared to €5.78 per share one year ago.
Progress in strategy. BBVA made progress in key areas of its strategy in the first quarter, such as transformation and sustainability. Regarding the transformation, the Group was ahead of the trends that have accelerated during the pandemic, like digitization. Customer transactions on digital channels have more than doubled in two years, while operations at branches have declined 25 percent (-50 percent in Spain). In the last 12 months, the number of new customers acquired on digital channels rose 64 percent. In terms of sustainability, BBVA has mobilized €59 billion in sustainable finance - over half of the €100 billion it pledged for the 2018 to 2025 period to fight against climate change.
¹Any potential share buyback is subject to obtaining the corresponding regulatory authorizations, as well as, among other factors, the share price.
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