The BBVA Group obtained an attributable profit of 4,653 million euros in 2021, more than triple that of a year ago, when profits suffered the impact of the pandemic and stood at 1,305 million, and above 2019, before the arrival of the virus. In those 12 months, the bank broke its all-time record for customer acquisition, adding 8.7 million. And it benefited from the growth in bank margins and the reduction in provisions, less necessary in that year than in the outbreak of the health crisis: losses due to impairment of financial assets fell to 3,034 million (41.4% less ), and allocations to provisions to 262 million (75.9% lower).
The recurring profit (excluding the profits in the US subsidiary, sold last June, and the costs of dismissals and the closure of offices in Spain) was 5,069 million, 95.5% more than a year before, and the highest in the last 10 years. “This has been possible due to the recovery of activity, which has translated into a significant increase in our revenues, and lower provisions,” said the president of BBVA, Carlos Torres. BBVA shares fell 3% mid-session on the Ibex 35, the worst value in the index, although so far this year its titles have accumulated a rise of 6%. “It is not the first time that there may be a negative reaction that the market then corrects,” Torres pointed out in this regard.
Mexico was once again the engine of the group. The benefit in that country, of 2,568 million, improved by 45.8%, and represents 45% of the total. In other words, the result of Mexico is higher than that achieved jointly in Spain (1,581 million, 142.6% more) and Turkey (740 million, 31.3% more, affected by the 40% depreciation of the lira). , the other two geographical areas where the bank is more powerful, which together add up to 41% —28% Spain and 13% Turkey—. In its fourth largest area of influence, South America, the benefit was 491 million, 10.1% more.
During the analyst conference, the CEO of BBVA, Onur Genç, has avoided commenting on whether they will participate in the sale process of Banamex, the Mexican subsidiary of Citigroup, in which Banco Santander will take part, and that could alter the hierarchy of powers in the sector. “Whatever happens, whoever buys, we will continue to invest in Mexico,” Genç assured. In the subsequent press conference, Torres gave some more clues. “Any operation in attractive markets we look at it, we analyze it. Surely we will see if there is the possibility of doing something, “he said. It is still unknown exactly which parts of the Banamex business will go up for sale.
The president of the bank lamented the six-month extension, by the judge investigating the orders made by BBVA — the entity investigated in the case — to the retired commissioner José Manuel Villarejo. The National Court will take statements from 14 people, including witnesses and investigated, in addition to carrying out other proceedings. “The instruction opened in 2018, and we are in 2022”, he stated about some investigations that he estimates have taken too long. Torres defended that they have cooperated at all times with justice. “It is difficult to collaborate in a more intense way.” In the past, the judge and the Prosecutor’s Office criticized BBVA for its lack of collaboration with the investigation.
Regarding the problems of the elderly in adapting to digital banking tools, whose operation is sometimes too complex and prevents them from operating with their accounts, Torres explained that BBVA will participate in the plan that financial entities are preparing after the requirement of the Government to employers that they must offer solutions. And he insisted that they have been aware of the problem for a long time, and have already taken measures such as agents, remote management bankers and training courses.
He knows in depth all the sides of the coin.
Returning to the results, the entity has highlighted that last year was the best in Spain in the last 11 years, thanks in part to the growth in commission income (21.5% more), the recovery of activity and the highest income in insurance and financial operations. Delinquency in Spain stood at 4.2%, somewhat higher than in Mexico, but below that recorded in Turkey, where it has risen from 6.6% to 7.1%. The default rate for the entire group ended the year at 4.1%, one tenth lower. And the coverage rate worsened, going from 82% to 75%.
Payment of dividends
The bank will dedicate part of the profits to improve shareholder remuneration. It will deliver a dividend of 31 cents per share against 2021: eight cents that it already paid in October and another 23 cents that it plans to distribute through an additional dividend in April. This is the largest payment of this type in cash in the last 10 years, and leaves the portion of the profit dedicated to paying the shareholder at 44%. In parallel, it is running a share buyback program for a maximum amount of 3,500 million, of which it has already executed 60% of the first tranche of 1,500 million. The second, of 2,000 million, will begin at the end of the previous one, and will end before mid-October.
The aforementioned drop in loan-loss provisions due to the improvement in the economic situation has allowed the profit for the fourth quarter, of 1,341 million, to be enough by itself to exceed that obtained in all of 2020. It is 84% more than in the same quarter of that year, although it slows down slightly compared to the third of 2021, when it earned 1.4 billion.
The net interest income rose by 0.6% in 2021 to 14,686 million euros, the gross figure for loans and advances to customers increased by 2.1% compared to the end of December 2020, up to 330,055 million euros, and customer funds grew by 4.5%, to 465,529 million euros. The low interest rates, which have sunk the profitability of deposits, have caused customers to opt for sight deposits and investment funds (which grew by 15.3%), compared to time deposits, which fell by 27.2%.
Commissions added 15.6% more to the group’s turnover, reaching a total of 4,765 million, while RoTE, which measures profitability without taking goodwill into account, was 12%. The efficiency ratio —the lower it is, the better— worsens one tenth and is 45.2%, “the best of comparable European entities”, according to the bank. By 2024, BBVA aims to raise RoTE to 14% and improve efficiency to 42%. Regarding the solvency measured by the highest quality capital ratio, the so-called CET 1 fully loaded, stood at 12.75%, above the group’s target range of between 11.5 and 12%, and well above the 11.73% of 2020.
BBVA has 81.7 million customers worldwide, and in the midst of the sector’s digitization process, it continues to reduce both its workforce and its branches. It has 110,432 employees (almost 13,000 fewer than a year ago), and 6,083 offices, 1,350 fewer than at the end of 2020.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.