"We face 2021 with an unparalleled position of strength to invest in growth and to increase shareholder distributions”
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In an interview posted on BBVA’s corporate website, Carlos Torres Vila takes stock of 2020 and offers his vision for next year. The Chairman assures that, despite its complexity, “it has been a year of relevant strategic achievements” and “we face 2021 with an unparalleled position of strength to invest in growth and to increase shareholder distributions.” In this sense, and after the recent sale of the franchise in the U.S. and the ECB decision on dividend payments, BBVA considers “a sizeable share buyback¹ as a very interesting option.”
Carlos Torres Vila highlights the importance of the sale of the franchise in the U.S. and the significant value created with the transaction. BBVA is prepared to “face the difficulties that may continue to arise,” but also “to invest profitably in the markets where we have leadership and to increase distributions to our shareholders.” “In essence, it is an operation that demonstrates BBVA’s commitment to generating value for shareholders,” he sums up.
“At current share prices, a share buyback is a very interesting alternative”
In this sense, he considers the update of the ECB recommendation regarding dividends “very good news.” He affirms that starting in September 2021, “the dividend policy of European banks will have normalized, something very necessary.”
In BBVA’s case, he recalls that “when we announced the U.S. sale we considered a sizeable share buyback as a very interesting option, in addition to dividends.” Carlos Torres Vila indicates that “at the current share prices of our stock”, it continues to be “a very interesting alternative for distribution to shareholders.”
The BBVA Chairman also shares the reasons that led to the end of the negotiations of a potential merger with Banco Sabadell. “It was a good example of investment in markets where we have leadership and where we can generate value for shareholders. We did not go ahead with it because we have not reached an agreement on economic terms,” he says. Likewise, he rules out expanding BBVA’s presence in Turkey: “The position we have now in Garanti allows us to be in control and to manage the bank, and we do not foresee any change” in the current stake, which stands at 49.85 percent.
An optimistic vision for the future, but with caution
Carlos Torres Vila describes the economic and health situation with one adjective: “uncertain.” While he speaks with some optimism about the vaccine, he also recommends caution regarding the moment when “the immunity that is necessary to return to normal” will finally occur. Right now “it is important to closely follow the measures,” he points out.
Regarding the economy, he foresees “a major rebound in the second half of 2021” but an uneven recovery between regions, where countries such as China, the U.S. and Turkey will recover their GDP next year, while other areas such as Europe and South America will probably have to wait until 2022.
This is also true for Spain. The BBVA Chairman emphasizes that the country should encourage private investment to “generate economic growth, employment, and well-being.” How to encourage this investment? “Building trust,” he reiterates, through four ways: 1) Institutional stability; 2) regulatory predictability; 3) a tax system that does not distort decision-making and that is efficient; and 4) maintaining the stimuli by the authorities, which “have worked well in 2020 and are still necessary,” both the monetary ones that the ECB has launched, and the fiscal ones in Spain. Likewise, he sees the need for “reforms that bring private investment,” in line with recommendations from the European Commission.
“The banks can expand on public funds with our financial capacity and support project analysis and the processing that is necessary to reach all economic agents”
Along the same lines, as a fifth recommendation, he asks for “incentives for additional private investment.” And this, in his opinion, “links well with European funds” (Next Generation EU). Carlos Torres Vila estimates that the focus on the investment of these funds, as well as the private funds, should be on several axes such as sustainability, inclusive growth, digitization to modernize the Spanish economy towards data, and programs “with a broader spectrum that reach small and medium-sized companies, the self-employed and families.” All of this “always with transparent, agile and competitive schemes in the allocation of resources.”
From the financial sector “we can expand on public funds with our financial capacity and support project analysis and the processing that is necessary to reach all economic agents,” he indicates. To do this, BBVA is already working with Spanish authorities in the design of products and solutions “that will allow this to happen.”
BBVA Chairman Carlos Torres Vila during the interview - BBVA
A year of progress in BBVA’s strategy
In Carlos Torres Vila’s opinion, the greatest lesson that we can draw from this crisis is “how vulnerable we are as a society in the face of unforeseen events of great magnitude that affect the entire planet.” But from a more positive perspective, society’s response was also notable. “The fact that we have a vaccine so soon after illustrates that when we join together, we can overcome these great difficulties,” he emphasizes.
And here, the role of companies is important. Carlos Torres Vila speaks proudly of BBVA’s response to the crisis, “which has been incredible.” “At BBVA we have taken a decisive step forward to face this crisis,” prioritizing the health of customers and employees, providing a service deemed essential. ” He also recalled that BBVA contributed with donations and medical equipment, as well as “providing financing and alleviating the financial burden,” while participating in public financing programs, which “have been very effective.”
Carlos Torres Vila emphasizes that this crisis highlights “the success of BBVA’s digitization strategy.” In this regard, he recalls that in the first wave, and thanks to technology, more than 80,000 employees worked from home, with digital tools allowing customers to operate remotely without losing their personal relationships with their managers.
In addition the bank has seen how the pandemic reaffirmed the two pillars of its strategy: financial health and sustainability. On the one hand, Carlos Torres Vila makes special mention of financial health tools, which are already used by 40 percent of the bank’s digital clients to “manage their money in a simpler way and to make better decisions.”
The other major axis of BBVA’s strategy to which he refers is sustainability, related to relevant challenges for society and businesses such as climate change or the need for inclusive growth. “Our desire is to help our clients” but also “to finance that transition,” he says. He anticipates that BBVA plans to far exceed the goal of mobilizing €100 billion in sustainable finance by 2025. All this, with “an active management of our direct impact” that allowed BBVA to become in 2020 a neutral company in direct CO2 emissions.
¹ Any potential repurchase would never occur before the closing of the transaction, estimated in mid-2021. Any repurchase proposal: (i) would take into consideration the share prices, among other factors, and (ii) would require approval by the Shareholders and the Supervisor.
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