"In 2021 and 2022, we expect to distribute more than €7 billion to our shareholders"
BBVA Chair Carlos Torres Vila announced in an interview posted to the bank’s corporate website that, “In 2021 and 2022 we expect to distribute more than €7 billion to our shareholders, or nearly 20 percent of the bank’s current market capitalization.” This figure includes the share buyback program and the expected dividends for both years. As for the excess capital held by BBVA, Carlos Torres Vila said that the priority is “profitable growth,” but he did not rule out “additional distributions” to shareholders. The bank’s goal is to be in its target range of 11.5-12 percent in 2024.
Carlos Torres Vila explained that the amount that BBVA expects to distribute to shareholders, more than €7 billion in 2021-2022, is the result of the €3.5 billion share buyback¹ and the expected dividends for those two years. These dividends are calculated based on the consensus of analysts and the bank’s shareholder distribution policy, which sets a payout of 40 to 50 percent of the annual ordinary profit.
The BBVA Chair stressed that following the share buyback program initiated in the closing quarter of 2021, “of which we have already executed a substantial amount of the first tranche” of €1.5 billion, and assuming a 100 percent acceptance of the takeover bid for the 50.15 percent it does not own in its Turkish unit - a transaction pending regulatory approval-, “we will still have a significant excess capital of more than €2 billion.” BBVA will use this capital and any further capital it generates in future “to continue investing in growing our franchises and making additional distributions to our shareholders.”
In this sense, the Chair recalled that the bank’s priority is “profitable growth that creates long-term value for our shareholders,” though without ruling out “additional distributions” in order to be within its target range of a fully loaded CET1 capital ratio of 11.5 to 12 percent in 2024.
Carlos Torres Vila also discussed the bank’s strengths and the levers it can use to achieve the ambitious goals of the growth plan unveiled at the recent Investor Day. Strengths include the BBVA Group’s leading franchises in highly attractive markets, such as Mexico, Turkey, Spain and South America; better financial metrics than peers (in efficiency and profitability); and the bank’s “strategic position as a pioneer and trendsetter” in digitization and sustainability. Torres Vila also had words for the bank’s human talent as its “main strength,” with a “very strong customer-focused” purpose, culture and values, ambition, innovation and teamwork.”
With all these assets, BBVA unveiled its goals for 2024 in November, which are “among the most ambitious of any bank in Europe:” a 42 percent cost-to-income ratio, 14 percent ROTE, 9 percent average annual growth in tangible book value per share plus dividends, 10 million new target customers, and €200 billion in sustainable finance from 2018 to 2025, double the amount of its initial pledge.
As for the takeover bid for its Turkish franchise, Carlos Torres Vila underlined that, “Turkey is a strategic country for BBVA, where we see huge long-term potential,” due to its size, demographics, and trade partners, as well as a low banking penetration, which contribute to a long-term potential for this market. He pointed out that Garanti BBVA is a leading private bank in the country, “which can achieve high returns even in a complex environment, with an average result of more than €1.2 billion each year, over the past five years.”
In the words of BBVA's Chair, "We have been presented with an opportunity to increase our stake by making an offer for the 50 percent that we do not own, in a bank that we already consolidate globally, in other words, one that does not change the Group's risk profile, but that allows us to increase our share in the net result, thus achieving very attractive financial returns and optimizing capital, because we eliminate the inherent inefficiency of minority interests." Ultimately, "we see this as an operation that is, without a doubt, very attractive for BBVA and its shareholders in the long term".
BBVA Chairman Carlos Torres Vila during the interview - BBVA
Economic recovery to continue in 2022
The BBVA Chairman is confident that the economic recovery will continue in 2022, as uncertainties around inflation, supply chain tensions and new COVID-19 variants gradually clear up. Looking beyond purely economic concerns, Carlos Torres Vila said he expects “the unprecedented changes we are seeing around the world in terms of digitization and technological innovation and in terms of sustainability, especially decarbonization, will continue to play a key role. This affects all businesses and all sectors, in all countries. I think these are big challenges ahead of us, but also great opportunities.”
The Chairman said that decarbonization is a key priority on government agendas in 2022. To achieve decarbonization, he believes emerging countries need to join the effort. He also believes that “private companies should look at decarbonization as a driving factor of their strategy and investment.”
Focusing on creating value for shareholders
Carlos Torres Vila took stock of BBVA’s performance over the past few years, which have been “affected by the pandemic.” He is “very proud,’’ he said, of the bank and its people to help society, supporting more than three million families, self-employed and businesses with €63 billion in deferrals and financing. He made special mention of the work of all teams and “the leadership of our CEO Onur Genç throughout this process.”
Furthermore, “we have seen how the pandemic accelerated trends that our strategy is based on: digitization and sustainability,” he said. During this period, “we made very relevant strategic decisions”, such as the sale of the U.S. subsidiary, the takeover bid for Garanti BBVA minorities - one of the largest share buybacks in Europe -, and the ambitious targets announced at the Investor Day. In addition, "we have launched our most ambitious social plan to date, committing €550 million to support inclusive growth from BBVA and our foundations."
Another way to assess the bank’s performance over this period is to look at its share price. “Since January 2019 the BBVA share plus dividends appreciated 37 percent, compared to a 30 percent rise for European banks and a 6 percent drop for Spanish banks,” he added. When comparing 2019, 2020 and 2021, in each of these three years BBVA has outperformed its Spanish competitors by 10 percentage points, including share price appreciation and dividends.
Looking ahead, Carlos Torres Vila concluded, “We have highly ambitious goals, great capital strength, the best team and all the right ingredients to create opportunities for our customers and clients, employees and society as a whole.”