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BBVA’s diversification: the key to stable results and dividend payments

The BBVA Group’s Chief Financial Officer participated in Bank of America Merrill Lynch’s Annual Financials CEO Conference in London today. The event is one of the most important banking forums in the world and includes only qualified investors. Jaime Sáenz de Tejada used his presentation to underscore BBVA’s main competitive advantages.

The financial director started by briefly reviewing the challenges facing the banking industry and BBVA’s strengths in this complex environment. In his opinion, the bank has three main strong points: a diversified retail banking business model; a strong solvency position and a leading transformation strategy.

In terms of the first strength, Jaime Sáenz de Tejada indicated that “BBVA has a well-diversified footprint with leading franchises that provides resilience and low volatile earnings.” The balanced distribution of its business between developed and emerging economies ensures high growth prospects that will benefit business development. In fact, the bank estimates that the economies of the countries where BBVA operates will grow 2.3% this year, compared to the eurozone and U.K., which will grow 1.6%.

The financial director started by briefly reviewing the challenges facing the banking industry and BBVA’s strengths in this demanding environment.  In his opinion, the bank has three main strong points:  a diversified retail banking business model; a strong solvency position and a leading transformation strategy.

In terms of the first strength, Jaime Sáenz de Tejada indicated that “BBVA has a geographically diverse business with leading franchises markets that provide resilience and low volatility earning generation capability.”  The balanced distribution of its business between developed and emerging economies ensures high growth prospects that will benefit business development.  In fact, the bank estimates that the economies of the countries where BBVA operates will grow 2.3% this year, compared to the eurozone and U.K., which will grow 1.6%.

The financial director also emphasized the high quality of its franchises in core markets.  “BBVA has continued generating positive results and paying dividends all through the crisis,” he recalled. In each of these areas, it is important to note that:

  • In Spain, the group has a strong and stable franchise. The management team’s priority is to manage the customer spread and control costs.
  • In Mexico, the dynamic loan portfolio has allowed BBVA Bancomer to continue preserving its position as the country’s leading franchise in market share and profitability.
  • In South America, BBVA’s notably diversified business mix allows the region to contribute to the Group’s results on a recurrent basis.
  • In Turkey, BBVA has an outstanding franchise that generates robust profitability, above the system average, despite the volatile environment at the moment.
  • In the U.S., the franchise is concentrating its efforts on selective growth and cost control as the main drivers to improve profitability.

Regarding solvency, Jaime Saénz de Tejada stressed the group’s solid capital ratios. “We are on track to achieve a CET1 fully-loaded 11% target in 2017 even though Moody’s downgraded Turkey’s credit rating,” he indicated. He also commented that, thanks to its ability to generate capital and the higher quality of BBVA Group’s capital compared to its peers, the bank is in a good position to face upcoming regulatory requirements. He specifically mentioned the high percentage of risk weighted assets out of total assets (53%) and the leverage ratio (6.4%).

The final part of his presentation focused on BBVA’s transformation journey. The bank is working to offer the best customer experience and strives to be the bank customers most recommend, he explained. The Group is also driving digital sales of products and services. As a result, by the end of July, BBVA had 16.7 million customers who primarily engage with the bank through digital channels (+21% year-on-year), most of whom prefer to use their cell phones (10.5 million, +45% year-on-year). Finally, he referred to BBVA’s different formulas to lead the fintech ecosystem, including strategic partnerships; venture capital investments; acquisitions of innovative firms; internal incubation; and collaboration through open platforms.

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