Among the novelties in BBVA´s 2020 results presentation is its objective of repurchasing 10 percent of the shares once the sale of the subsidiary in the United States is completed with the capital generated by this operation. At the press conference, Carlos Torres Vila, BBVA Group´s Executive Chairman, stated that “we are saying loud and clear that we consider BBVA´s share the best investment we can make.” In addition, he reviewed different strategic options that the bank was considering for investing that capital.
At the beginning of the presentation, the BBVA executive chairman reviewed the institution’s achievements in a year that he defined as “very special.” First of all, “we took a step forward to support society and with great pride we can say that we have been part of the solution.” By doing this, BBVA has financially supported families, companies and the self-employed, and has also alleviated their financial burden with moratoriums. Second, “COVID has been a catalyst for trends”: digitization and sustainability, which are precisely at the core of the bank’s strategy. Third, he pointed to the strength of the group’s underlying performance. Lastly, he discussed the “historic operation” regarding the sale of the US subsidiary, which “gives us flexibility and will allow a significant increase in shareholder remuneration.”
“BBVA is in a position of strength that no one else has”
Another novelty of the presentation is the new fully-loaded CET1 ratio target, which rises to a range between 11.5 percent and 12 percent. The BBVA executive chairman ensured that the excess capital of about €8 billion from the top of this objective (12%) to the pro forma ratio including the United States operation (14.58%) places BBVA in a position of “strength that no one else has.” How will BBVA use this capital? Carlos Torres Vila stated that “we can apply that capital to grow, as long as we find profitable opportunities. We can also use it to strengthen our position via growth or via costs. And we are going to increase the remuneration to our shareholders..”
Regarding the latter, Carlos Torres Vila summarized the three lines of action. The first, with regards to the results of the 2020 financial year: the bank intends to pay 5.9 Euro cents¹ per share next April, a payment that is subject to the approval of shareholders and supervisors. Secondly, he stated that “in 2021 we will recover the usual policy² [distribute between 35 percent and 40 percent of the profit for each year], a payout that seems convenient to us with the geographical distribution we have, depending on what the ECB says.” The third block has to do with extraordinary distributions, among which the share buyback³ is set as an objective: “We anticipate making a buyback of around 10 percent once we close the US sale.”
In short, “we face 2021 with strength, and with a commitment to all: our clients and to society, the same commitment that we had in 2020. Thanks to this strength, we will continue supporting society for the duration of this pandemic and in the recovery,” he pointed out.
Carlos Torres Vila, BBVA Group´s executive chairman. - BBVA
“It is time to achieve growth together”
Carlos Torres Vila referred to the enormous impact that the COVID crisis had on the economy in 2020, despite the very rapid reaction from central banks, as well as governments, from a fiscal point of view, and with measures such as ERTEs and public guarantees. Regarding the year that has just begun, BBVA Group´s executive chairman emphasized the importance of an effective vaccination campaign to dispel uncertainty. In his opinion, it is necessary to work so that “vaccines reach the countries with epidemiological criteria above anything else.”
Regarding Spain, he considers that the measures of the public authorities, as in many other countries, have been decisive in mitigating the impact of the health crisis on the economy. However, “they are measures aimed at trying to alleviate short-term damage.” Now is the time to “achieve growth together,” he said. And for this, it is essential to promote private investment, “generating trust, through institutional stability and a predictable legal framework.”
“In 2021, the risk costs will be below the 2020 level”
For his part, BBVA´s CEO reviewed the main metrics for the year in the markets in which the bank operates. In addition, he anticipated some trends for 2021, taking into account the high uncertainty. Specifically, Onur Genç foresees that recurring income will continue to grow, “thanks to improving mix, price management and fee incomes.” In addition, he anticipates cost growth below inflation and lower provisions and consequently the 2021 risk costs to be below 2020 levels.
Asked about the maintenance fee for individual deposits, Onur Genç stated that “in no case do we contemplate charging retail customers for deposits as a general rule.” BBVA only charges this commission to a very small number of clients, with very few connections and with very high balances.
Regarding the cost reduction levers that the institution is considering, Onur Genç indicated that “we have a proven track record of discipline in managing expenses.” In this sense, he explained that the institution is committed to adjusting its cost structure given the growing use of digital channels and therefore “evaluate all the alternatives.” In this regard, “we will define a plan with measures that will begin to be implemented, predictably, in the first semester,” he announced.
¹Includes the accrual of a dividend of 5.9 Euro cents per share (gross amount) to be paid in April 2021, subject to the approval of shareholders and supervisors. Calculated as a 15 percent payout on 2020 results, excluding goodwill impairment, capital gains from the Allianz operation, and AT1 coupons.
²Subject to approval by shareholders and supervisors
³Any potential share buy-back would take place no earlier than the closing of BBVA USA’s operation, which is expected in mid-2021. Any decision in this regard (i) will require approval from shareholders and supervisors, in accordance with the recommendation of the ECB on dividends, and (ii) will be subject, among other factors, to the share price.
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