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Economic results 01 Feb 2021

BBVA results: ten key takeaways to understand the 2020 results

In a year marked by the pandemic, BBVA produced solid results thanks to its strong income and cost containment measures. The bank’s results improved as the year progressed, mainly due to lower provisions in the second half of the year. “In 2020 we achieved excellent results in a year of great complexity. We have also announced a historic transaction for BBVA: the sale of our U.S. subsidiary. An operation that puts us in an unparalleled position of strength in the sector, allowing us to increase shareholder distributions,” said BBVA chairman Carlos Torres Vila.

The variations discussed below are at constant exchange rates in order to better compare the evolution of each area.

Net attributable profit. In order to understand BBVA’s 2020 results, the first thing we should take into account is that there are three unique factors that have affected results: the pandemic, which required write-offs and provisions in the first part of the year; the goodwill adjustment in the U.S. in the first quarter (€-2.08 billion); and the net capital gains from the sale of the non-life insurance business in Spain to Allianz (€304 million, recorded in the fourth quarter). Excluding these three elements, net attributable profit stood at €3.08 billion – 27.2 percent less than the previous year at constant exchange rates, or not taking into account currency fluctuations.  If these three elements are included, net attributable profit was €1.31 billion – 55.3 percent less. Looking solely at the fourth quarter, BBVA earned €1.32 billion – its best quarterly results in two years.

Solid recurring revenue. Despite the complex year, recurring revenue from the banking business (interest and commissions) rose 2.7 percent in 2020 compared to the same period in the previous year. Strong revenue performance and gains on financial transactions – raised gross income 4.5 percent yoy to €22.97 billion.

Excellent cost control. Operating expenses fell 2.6 percent in 2020. Cost reductions and strong revenue have made it possible to maintain positive jaws, meaning that income grew more than expenses. On a similar note, the efficiency ratio, which measures the expenses necessary to obtain revenue in a certain period, declined to 46.8 percent, 342 basis points below the 2019 ratio.

Strong profit before provisions. Operating income (gross income minus operating expenses) reached €12.2 billion in 2020 – 11.7 percent more than the previous year thanks to strong revenue and cost containment efforts.

Shareholder remuneration. The sale of the U.S. subsidiary will provide around €8.5 billion of capital, which the bank will allocate to profitable growth in its markets and to increasing shareholder remuneration. The bank will pay 5.9 euro cents per share charged to 2020 accounts, and in 2021 expects to resume its dividend policy of a 35 to 40 percent payout. In addition, the bank intends to buy back around 10 percent of the Group’s shares. All of this is subject to market conditions and the necessary approvals.

Risk indicators. The cost of risk, which measures loan-loss provisions for total loans to customers, stood at 1.51 percent. This figure is at the lowest end of the estimated range for the year, and is notably lower than 2.57 percent – the figure from the first quarter when the bank front-loaded provisions for the year. The bank expects it to continue to improve in 2021, according to its estimates. NPL and NPL coverage ratios ended the year at 4.0 percent and 81 percent (the latter, the highest in the Spanish financial sector), respectively.

Solid capital position. The fully loaded CET 1 capital ratio was 11.73 percent on December 31st, 21 basis points above the September 2020 level. As announced on January 29th, BBVA has decided to increase its capital target to a range between 11.5 and 12 percent. The agreement to sell the U.S. business to PNC raised the fully loaded CET 1 ratio to 14.58 percent – 600 basis points above the regulatory requirement (currently 8.58 percent).

Support for customers during the pandemic. In 2020, BBVA helped approximately three million customers affected by the pandemic, with nearly €63 billion of government backed credit lines and loan deferrals.

Advances in sustainability. In 2020, BBVA has focused on advisory services to accompany clients in their transition to a sustainable future. Over the course of the year, the Group has launched sustainable products for all segments of clients. In wholesale banking alone, BBVA financed around €11 billion in green loans and sustainable bonds. Since the Group announced its Pledge 2025 in 2018, BBVA has mobilized €50 billion – half of €100 billion pledged to fight against climate change and promote sustainable development.

Growth in the customer base. BBVA added 7.3 million new customers in 2020, 2.4 of which are digital customers (59 percent more than the digital customers added in 2019). The  bank now has a total of 37 million digital customers, 16 percent more than at the end of 2019. Mobile customers total 34.5 million – 20 percent more.

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