BBVA’s chief executive officer presented the media with 2020's second quarter results. Onur Genç expects the bank to “certainly beat our capital target by the end of the year,” given that in June the bank had already hit the high end of its target range. He therefore believes that “in 2021, we will return to paying dividends,” as per recommendations the supervisory authority may make.
In his view, one of the accomplishments of the second quarter is the “very positive capital ratio trend”: The CET1 ratio rose by 38 basis points and stands at 11.22 percent, at the top end of the bank’s target range, which was expected to be reached by the end of the year. This is in addition to maintaining a buffer of between 225 and 275 basis points over the new requirement, currently at 8.59 percent.
When asked about the company's dividend policy, following the European Central Bank’s recent recommendation not to pay shareholders until next year, Onur Genç explained that, from 2021, “Once the uncertainties of COVID-19 dissipate and the existing supervisory recommendation is eliminated, our clear intention is to return to dividend payments” given the Group’s high capital-generating capacity. The BBVA Board of Directors in April had already established a change in its dividend policy, which is in line with the supervisor's recommendation. The policy stipulates that there will be no dividend payment for the 2020 financial year, until the uncertainties caused by COVID-19 disappear — certainly not until the end of fiscal year 2020. He further clarified that the bank is not considering a return to a scrip dividend, but will continue to follow a policy that delivers a predictable, 100% cash dividend.
Onur Genç: Once the uncertainties of COVID-19 dissipate and the existing supervisory recommendation is eliminated, our clear intention is to return to dividend payments
With respect to the full first half of the year, Genç mentioned the “magnificent growth” (+19.2%) in operating income that put the bank in a position to stay ahead of write-offs and provisions caused by COVID-19. The adjustments totaled €1.46 billion in Q1 and €644 million in Q2.
While BBVA has not seen significant deterioration in credit quality in the first half – “which is good news,” said Onur Genç – “it is still very early, and the economic impact is very big, so we decided to be conservative in our provisions.” Nevertheless, he expects that provisions in the second half of the year will be much less than the first, and he continues to be confident that the cost of risk will fall within the 150-180 basis points for the whole of the year.
Supporting customers during the crisis
Onur Genç reiterated that BBVA's priorities during the crisis continue to be: “First, to protect the health of our employees, customers, and society as a whole; second, to continue delivering uninterrupted service, which is essential for the economy.” As such, BBVA is managing the reopening of its network of branches, “dynamically, based on data about the pandemic trends and the level of business activity.” In June, 87 percent of the Group’s physical offices were open, compared to 59 percent in March.
During the pandemic, BBVA benefited “more than ever from its digital competitive advantage, which allowed us to redirect our customers to online digital channels for remote access.” Consequently, the online and mobile customer bases continued to grow, reaching highs of 60 and 56 percent, respectively, of the total customer base.
BBVA's third priority has been to provide its customers financial support to help them weather the crisis. Examples include the payment moratoria granted by the bank, which have helped many customers deal with payment difficulties, mainly during the worst times of the pandemic. BBVA analyzed each customer situation in order to be able to provide the most appropriate solution for the circumstances. By the end of June, the bank had administered 4 million loan deferrals across its operating footprint (representing 9 percent of its loan portfolio), of which there are operations worth €29.7 billion (7 percent of the loan portfolio), active through June 30th. Specifically in Spain, deferrals totaling more than €4.1 billion have been agreed. €3.3 billion of which are for mortgages, explained the CEO.
As for employees, he reiterated that the company does not plan to make any extraordinary adjustments to its workforce: “We are working hard to protect employment at BBVA.”