BBVA presented its 2016 accounts today. In the words of Global Executive Chairman Francisco González, “Our profit has grown dramatically thanks to the Group’s geographic diversification and business model.”
Here are five keys to BBVA’s results:
1. BBVA earned 31.5% more in 2016 than in 2015. What led to the higher profit? Basically three factors. First, solid performance of recurring revenues, which were up 4.1% from 2015. The fourth quarter was especially remarkable - the highest of the year with €4.39 billion. Income from typical banking activities (such as net interest income and fees) played a significant role. Efforts to keep costs down were another important factor, which improved the efficiency ratio (the quotient between the gross income and operating expenses) to 51.9%.The third aspect of the higher profit in 2016 was the decline in impairment losses on financial assets, associated with higher credit quality. And all of this despite the provisions to cover possible claims for floor clauses.
2. Constant improvement in risk indicators during the year. The default rate at the end of 2016 was 4.9%, lower than the rate in September (5.1%) and 48 basis points less than the previous year.
3. Solid capital position. BBVA maintains a high level of solvency, evident in its fully-loaded CET1 ratio – the benchmark ratio to measure the health of a financial institution. BBVA ended December 2016 with a fully-loaded CET1 ratio of 10.9%. This figure indicates that BBVA generated 58 basis points of capital during the year. This means that it is in well positioned to reach its goal of 11% in 2017.
4. BBVA has 18.4 million digital customers. In 2016, customers who chose to engage with the bank through digital channels increased 20% from 2015. Of these customers, 12.4 million perform their transactions on their smartphones (+38%). Also part of its digital transformation process, BBVA is making progress in attaining its goal of increasing digital sales across all channels. For example, digital sales in Spain represented 17.1% of all transactions in 2016, compared to 8.4% in 2015. Turkey is another example, with 26.1% of all transactions, making it the location where digital sales had the greatest weight.
5. In terms of results by business area, in emerging markets, the higher levels of activity are striking. BBVA Bancomer in Mexico consolidated its leadership in both investment and deposits, with growth rates surpassing 10%. This boosted growth in both recurring revenues and gross income, which reached €6.77 billion. Furthermore, expenses grew less than income and risk indicators remain stable. In 2016, Mexico’s profit climbed to €1.98 billion (+11.0% year-on-year, without taking into account currency variations). In South America, activity was up, increasing income. In some countries expenses were impacted by high inflation and currency effects. In addition, risk metrics were slightly worse due to the macro-environment. Nevertheless, the net attributable profit rose 1.1% year-on-year to €771 million. In Turkey, recurring revenue was especially strong, as were expenses since growth was in line with inflation. Credit quality also did well in a complex environment. Net attributable profit grew 40.5% year-on-year, reaching €599 million.