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Onur Genç (BBVA): “Value creation guides all of our business decisions”

The BBVA CEO indicated this Wednesday that creating value is the bank’s main priority and guides the way in which BBVA manages its business. At an investors conference organized by Goldman Sachs in Madrid, Onur Genç said that BBVA’s commitment to optimal capital allocation is what distinguishes the bank from its peers in the markets where it operates.

Onur Genç, CEO de BBVA

Onur Genç stressed that the commitment to value creation is reflected in the metrics the bank closely monitors to measure its performance, such as return on regulatory capital or growth of tangible value per share plus dividends.

Genç first spoke of the return on regulatory capital - an indicator that relates profitability of each business line with the capital it consumes. This decision-making framework is incorporated into the price setting policies, thus ensuring adequate return on regulatory capital in all business decisions.

The CEO then recalled that BBVA has had better performance than comparable European banks in terms of creating growth in the tangible value per share plus dividends. This value creation has been passed on to shareholders through consistent increases in the cash dividend (+23 percent in 2023) and the distribution of €13.2 billion among shareholders since 2021 through cash dividend payments and the subsequent share buybacks. The market is recognizing all of this, and it has translated into a total shareholder return of 202 percent between the beginning of 2019 through early May 2024.

Onur Genç emphasized that BBVA has an ROTE above the sector average in the geographies where the bank has a presence, thanks to its leading franchises in each country and having sufficient scale to be able to offset the costs from investing in technology, which represent 26 percent of the Group’s fixed costs. Furthermore, he stressed that BBVA’s strategy based on digitization and sustainability will be critical when it comes to setting BBVA apart from its competitors. “BBVA has a unique position” thanks to the combination of growth and profitability, the CEO maintained.

Onur Genç also discussed the main business areas. In Spain, he is predicting good economic performance, above than the average of eurozone countries. In addition, he noted that in his opinion, a scenario in which interest rates could be around 2.5 percent is a good scenario for banking. Despite the tightening of the net interest income this entails, it will be compensated by better performance in lending. It will also improve the cost of risk. Genç noted that the BBVA Group has a leading franchise in Spain in terms of profitability and efficiency in a highly competitive market. The executive feels that BBVA Spain will continue to offer good profitability levels in the coming years.

In terms of Mexico, he indicated that the macroeconomic dynamics are highly favorable for banks due to the proximity to the U.S. and the effect of nearshoring. “We are very optimistic about Mexico,” he said. The CEO recalled that BBVA Mexico is the best bank in the country and operates in a very dynamic market, with low levels of banking penetration. As a result, BBVA’s lending has grown at double-digit rates. The Group has developed a highly admired business model in Mexico that “cannot be replicated quickly or easily” thanks to a decade of transformation, significant investment, and a culture of innovation and customer service. This puts the Group in a good position to compete with new actors like neobanks. “We are the biggest fintech in Mexico,” he said. BBVA Mexico will continue to grow and deliver outstanding results due to its undisputed leadership and structural strengths, he added.

Regarding Turkey, he stressed that the country is showing signs of improvement in the economic environment. In his opinion, the new economic team appointed after the presidential elections in May last year has shown a clear commitment to combating the economic imbalances and laying the foundation for a model of healthier, more sustainable economic growth. In this context, Garanti BBVA is a great franchise, “the best bank in the country and a great option to create value for the Group.”