Quarterly Report • Mar 31, 2018
Quarterly Report
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| BBVA Group highlights | 2 |
|---|---|
| Group information | 3 |
| Relevant events | 3 |
| Results | 5 |
| Balance sheet and business activity | 12 |
| Solvency | 14 |
| Risk management | 16 |
| The BBVA share | 19 |
| Responsible banking | 22 |
| Business areas | 24 |
| Banking activity in Spain | 27 |
| Non Core Real Estate | 30 |
| The United States | 33 |
| Mexico | 37 |
| Turkey | 41 |
| South America | 45 |
| Rest of Eurasia | 49 |
| Corporate Center | 51 |
| Corporate & Investment Banking | 52 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| 31-03-18 | ∆ % | 31-03-17 | 31-12-17 | |
| Balance sheet (million euros) | ||||
| Total assets | 685,441 | (4.7) | 719,193 | 690,059 |
| Loans and advances to customers (gross) | 381,683 | (11.6) | 431,899 | 400,369 |
| Deposits from customers | 360,213 | (9.6) | 398,499 | 376,379 |
| Other customer funds | 130,440 | (3.6) | 135,290 | 134,906 |
| Total customer funds | 490,653 | (8.1) | 533,789 | 511,285 |
| Total equity | 51,823 | (5.6) | 54,918 | 53,323 |
| Income statement (million euros) | ||||
| Net interest income | 4,288 | (0.8) | 4,322 | 17,758 |
| Gross income | 6,096 | (4.5) | 6,383 | 25,270 |
| Operating income | 3,117 | (4.0) | 3,246 | 12,770 |
| Profit/(loss) before tax | 2,237 | 8.3 | 2,065 | 6,931 |
| Net attributable profit | 1,340 | 11.8 | 1,199 | 3,519 |
| The BBVA share and share performance ratios | ||||
| Number of shares (million) | 6,668 | 1.5 | 6,567 | 6,668 |
| Share price (euros) | 6.43 | (11.6) | 7.27 | 7.11 |
| Earning per share (euros) (1) | 0.19 | 10.7 | 0.17 | 0.48 |
| Book value per share (euros) | 6.81 | (6.9) | 7.32 | 6.96 |
| Tangible book value per share (euros) | 5.58 | (5.2) | 5.88 | 5.69 |
| Market capitalization (million euros) | 42,868 | (10.2) | 47,739 | 47,422 |
| Yield (dividend/price; %) | 3.4 | 5.1 | 4.2 | |
| Significant ratios (%) | ||||
| ROE (net attributable profit/average shareholders' funds +/- average accumulated other comprehensive income) (2) |
11.9 | 10.2 | 7.4 | |
| ROTE (net attributable profit/average shareholders' funds excluding average intangible assets +/- average accumulated other comprehensive income) (2) |
14.6 | 12.8 | 9.1 | |
| ROA (Profit or loss for the year/average total assets) | 0.97 | 0.84 | 0.68 | |
| RORWA (Profit or loss for the year/average risk-weighted assets) | 1.83 | 1.56 | 1.27 | |
| Efficiency ratio | 48.9 | 49.1 | 49.5 | |
| Cost of risk | 0.85 | 0.90 | 0.87 | |
| NPL ratio | 4.4 | 4.9 | 4.6 | |
| NPL coverage ratio | 73 | 71 | 65 | |
| Capital adequacy ratios (%) | ||||
| CET1 fully-loaded | 10.9 | 11.0 | 11.1 | |
| CET1 phased-in (3) | 11.1 | 11.6 | 11.7 | |
| Tier 1 phased-in (3) | 12.8 | 12.8 | 13.0 | |
| Total ratio phased-in (3) | 15.4 | 15.3 | 15.5 | |
| Other information | ||||
| Number of shareholders | 890,146 | (3.2) | 919,274 | 891,453 |
| Number of employees | 131,745 | (0.9) | 133,007 | 131,856 |
| Number of branches | 8,200 | (3.5) | 8,499 | 8,271 |
| Number of ATMs | 31,602 | 1.3 | 31,185 | 31,688 |
General note: data as of 31-03-17 and 31-12-17 are presented for comparison purposes only.
(1) Adjusted by additional Tier 1 instrument remuneration.
(2) The ROE and ROTE ratios include in the denominator the Group's average shareholders' funds and take into account another item within total equity with the heading "Accumulated other comprehensive income". Excluding this item, the ROE would stand at 9.1% in the first quarter 2017, 6.4% in 2018 and 9.9% in the first quarter 2017 and the ROTE on 11.1%, 7.7% and 11.7%, respectively.
(3) As of March 31, 2018 phased-in ratios include the temporary treatment on the impact of IFRS9 , calculated in accordance with Article 473 bis of CRR. For 2017 the capital ratios are calculated under CRD IV from Basel III regulation, in which a phase-in of 80% is applied.
(2) Includes the areas Banking activity in Spain and Non Core Real Estate.
(1) Data pro-forma includes + 57 basis points of impacts from announced corporate transactions pending to be closed (sale of real-estate assets to Cerberus and BBVA Chile).
Good performance in the quarter of the main credit risk metrics: as of 31-March-2018, the NPL ratio closed at 4.4%, the NPL coverage ratio at 73% and the cumulative cost of risk at 0.85%.
(1) Excluding repos.
Transformation
The Group's digital and mobile customer base and digital sales continue to increase in all the geographic areas where BBVA operates.
On April 10th there was a cash payment of €0.15 gross per share, corresponding to the final dividend for 2017, approved by the General Shareholders' Meeting held on March 16, 2018.
BBVA generated a net attributable profit of €1,340m in the first three months of 2018, which represents a year-on-year increase of 11.8% (up 22.3% at constant exchange rates). Once more highlights were the good performance of recurring revenue, containment of operating expenses and lower loan-loss provisions, which offset the lower contribution from net trading income (NTI) compared with the same period the previous year.
| IFRS 9 | IAS 39 | ||||
|---|---|---|---|---|---|
| 2018 | 2017 | ||||
| 1Q | 4Q | 3Q | 2Q | 1Q | |
| Net interest income | 4,288 | 4,557 | 4,399 | 4,481 | 4,322 |
| Net fees and commissions | 1,236 | 1,215 | 1,249 | 1,233 | 1,223 |
| Net trading income | 410 | 552 | 347 | 378 | 691 |
| Dividend income | 12 | 86 | 35 | 169 | 43 |
| Share of profit or loss of entities accounted for using the equity method |
8 | 5 | 6 | (2) | (5) |
| Other income and expenses | 142 | (54) | 154 | 77 | 108 |
| Gross income | 6,096 | 6,362 | 6,189 | 6,336 | 6,383 |
| Operating expenses | (2,979) | (3,114) | (3,075) | (3,175) | (3,137) |
| Personnel expenses | (1,566) | (1,640) | (1,607) | (1,677) | (1,647) |
| Other administrative expenses | (1,106) | (1,143) | (1,123) | (1,139) | (1,136) |
| Depreciation | (307) | (331) | (344) | (359) | (354) |
| Operating income | 3,117 | 3,248 | 3,115 | 3,161 | 3,246 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(823) | (1,885) | (976) | (997) | (945) |
| Provisions or reversal of provisions | (99) | (180) | (201) | (193) | (170) |
| Other gains (losses) | 41 | (267) | 44 | (3) | (66) |
| Profit/(loss) before tax | 2,237 | 916 | 1,982 | 1,969 | 2,065 |
| Income tax | (611) | (499) | (550) | (546) | (573) |
| Profit/(loss) for the year | 1,626 | 417 | 1,431 | 1,422 | 1,492 |
| Non-controlling interests | (286) | (347) | (288) | (315) | (293) |
| Net attributable profit | 1,340 | 70 | 1,143 | 1,107 | 1,199 |
| Net attributable profit excluding results from corporate operations |
1,340 | 70 | 1,143 | 1,107 | 1,199 |
| Earning per share (euros) (1) | 0.19 | (0.00) | 0.16 | 0.16 | 0.17 |
Consolidated income statement: quarterly evolution (Million euros)
(1) Adjusted by additional Tier 1 instrument remuneration.
| Consolidated income statement (Million euros) | ||||
|---|---|---|---|---|
| IFRS 9 | IAS 39 | |||
| ∆ % at constant | ||||
| 1Q18 | ∆ % | exchange rates | 1Q17 | |
| Net interest income | 4,288 | (0.8) | 9.3 | 4,322 |
| Net fees and commissions | 1,236 | 1.1 | 9.8 | 1,223 |
| Net trading income | 410 | (40.6) | (38.5) | 691 |
| Dividend income | 12 | (73.1) | (72.6) | 43 |
| Share of profit or loss of entities accounted for using the equity method |
8 | n.s. | n.s. | (5) |
| Other income and expenses | 142 | 32.2 | 43.4 | 108 |
| Gross income | 6,096 | (4.5) | 4.2 | 6,383 |
| Operating expenses | (2,979) | (5.0) | 3.2 | (3,137) |
| Personnel expenses | (1,566) | (5.0) | 3.3 | (1,647) |
| Other administrative expenses | (1,106) | (2.6) | 6.3 | (1,136) |
| Depreciation | (307) | (13.1) | (7.2) | (354) |
| Operating income | 3,117 | (4.0) | 5.1 | 3,246 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(823) | (12.9) | (5.2) | (945) |
| Provisions or reversal of provisions | (99) | (41.7) | (41.3) | (170) |
| Other gains (losses) | 41 | n.s. | n.s. | (66) |
| Profit/(loss) before tax | 2,237 | 8.3 | 20.1 | 2,065 |
| Income tax | (611) | 6.5 | 17.3 | (573) |
| Profit/(loss) for the year | 1,626 | 9.0 | 21.1 | 1,492 |
| Non-controlling interests | (286) | (2.2) | 15.8 | (293) |
| Net attributable profit | 1,340 | 11.8 | 22.3 | 1,199 |
| Net attributable profit excluding results from corporate operations |
1,340 | 11.8 | 22.3 | 1,199 |
| Earning per share (euros) (1) | 0.19 | 0.17 |
(1) Adjusted by additional Tier 1 instrument remuneration.
Unless expressly indicated otherwise, to better understand the changes in the main headings of the Group's income statement, the year-on-year percentage changes given below refer to constant exchange rates.
Cumulative gross income grew by 4.2% year-on-year, once more strongly supported by the positive performance of the more recurring items.
(1) At constant exchange rates: 4.2%.
Net interest income grew by 9.3% year-on-year. This positive trend can once again be explained by growth of activity in emerging economies and good management of customer spreads. Over the quarter it fell by 2.6%, largely due to the performance of inflation-linked bonds in Turkey from December 2017 to March 2018 and the seasonal nature of the first quarter each year compared with the fourth quarter of the immediately preceding year (which mainly affects Spain and Mexico).
Cumulative net fees and commissions performed well in all the Group's areas (up 9.8% year-on-year), driven by good diversification. The quarterly figure was also good (up 4.5% in the last three months).
As a result, more recurring revenue items (net interest income plus net fees and commissions) increased by 9.4% year-on-year (down 1.1% over the last three months).
NTI between January and March 2018 moderated in comparison with the same period of 2017, when it was exceptionally high, largely due to the registration of the capital gains of €204m before tax from the sale on the market of 1.7% of China Citic Bank (CNCB).
Finally, other operating income and expenses increased by 43.4% in year-on-year terms. Of note is that the net contribution of the insurance business rose by 0.4% over the same period and a 6.7% over the quarter.
Operating expenses increased year-on-year by 3.2%, strongly affected by the exchange rates (down 5.0% at current exchange rates). The above is due to the cost discipline implemented in all the Group's areas through various efficiency plans. By business area the biggest reductions were in Spain and the rest of Eurasia and, over the quarter, in the United States and Mexico. In the rest of the geographic areas (Turkey and South America), the year-on-year rise in costs was below the local inflation rate.
(1) At constant exchange rates: 3.2%.
Breakdown of operating expenses and efficiency calculation (Million euros)
| 1Q18 | ∆ % | 1Q17 | |
|---|---|---|---|
| Personnel expenses | 1,566 | (5.0) | 1,647 |
| Wages and salaries | 1,220 | (4.8) | 1,282 |
| Employee welfare expenses | 234 | (3.7) | 243 |
| Training expenses and other | 111 | (9.1) | 122 |
| Other administrative expenses | 1,106 | (2.6) | 1,136 |
| Property, fixtures and materials | 249 | 3.0 | 265 |
| IT | 283 | 16.9 | 242 |
| Communications | 61 | (18.3) | 75 |
| Advertising and publicity | 83 | (7.9) | 90 |
| Corporate expenses | 23 | 1.3 | 22 |
| Other expenses | 287 | (8.9) | 315 |
| Levies and taxes | 120 | (4.6) | 126 |
| Administration costs | 2,672 | (4.0) | 2,783 |
| Depreciation | 307 | (13.1) | 354 |
| Operating expenses | 2,979 | (5.0) | 3,137 |
| Gross income | 6,096 | (4.5) | 6,383 |
| Efficiency ratio (operating expenses/gross income; %) | 48.9 | 49.1 |
As a result of the above, the efficiency ratio closed at 48.9%, below the figure for the same period in 2017 (49.1%), and the cumulative operating income increased by 4.9% over the last twelve months.
(1) At constant exchange rates: 5.1%.
Impairment losses on financial assets in the first three months of the year were 5.2% below the figure for the same period in 2017. By business area, they continued to fall in Spain, due to lower loan-loss provisioning requirements. They also fell in the United States, due to the lower provisioning requirements in retail portfolios affected by hurricanes in 2017 and, to a lesser extent, in Mexico. In contrast, they increased in Turkey, due to a temporary deterioration in wholesale customers, and in South America.
(1) At constant exchange rates: -5.2%.
Net attributable profit (Million euros) Earning per share (1) (Euros)
Finally, there was a decline of 41.3% in provisions or reversal of provisions (hereinafter, provisions), while other gains (losses) registered a positive balance against the negative of the first quarter of 2017, which included a charge of 177 million euros for restructuring costs.
As a result of the above, the Group's net attributable profit continued to be very positive (up 22.3% year-on-year at constant exchange rates, 11.8% at current exchange rates).
By business area, banking activity in Spain generated a profit of €437m, Non Core Real Estate a loss of only €27m, the United States contributed a profit of €195m, Mexico €571m, Turkey €201m, South America €210m and the Rest of Eurasia €47m.
(1) At constant exchange rates: 22.3%. (1) Adjusted by additional Tier 1 instrument remuneration.
The following table presents the changes in the Group's balance sheet and activity, from the opening balance calculated after the initial implementation of IFRS 9 to the close of the first quarter of 2018. This balance sheet includes the new categories included in the above standard.
With respect to the Group's activity, its most significant aspects during the period are summarized below:
| Consolidated balance sheet (Million euros) | |||
|---|---|---|---|
| 31-03-18 | ∆ % | 01-01-18 | |
| Cash, cash balances at central banks and other demand deposits | 43,167 | 1.1 | 42,680 |
| Financial assets held for trading | 94,745 | 3.1 | 91,854 |
| Non-trading financial assets mandatorily at fair value through profit or loss | 4,360 | 0.5 | 4,337 |
| Financial assets designated at fair value through profit or loss | 1,330 | 30.5 | 1,019 |
| Financial assets at fair value through accumulated other comprehensive income | 59,212 | (4.8) | 62,202 |
| Financial assets at amortized cost | 417,646 | (1.0) | 421,712 |
| Loans and advances to central banks and credit institutions | 17,751 | 0.2 | 17,713 |
| Loans and advances to customers | 367,986 | (1.6) | 374,012 |
| Debt securities | 31,909 | 6.4 | 29,986 |
| Investments in subsidiaries, joint ventures and associates | 1,395 | (12.2) | 1,589 |
| Tangible assets | 6,948 | (3.4) | 7,191 |
| Intangible assets | 8,199 | (3.1) | 8,464 |
| Other assets | 48,439 | 0.1 | 48,368 |
| Total assets | 685,441 | (0.6) | 689,414 |
| Financial liabilities held for trading | 86,767 | 7.4 | 80,783 |
| Other financial liabilities designated at fair value through profit or loss | 6,075 | 10.6 | 5,495 |
| Financial liabilities at amortized cost | 497,298 | (1.7) | 506,118 |
| Deposits from central banks and credit institutions | 63,031 | (8.6) | 68,928 |
| Deposits from customers | 360,213 | (1.0) | 363,689 |
| Debt certificates | 60,866 | (1.3) | 61,649 |
| Other financial liabilities | 13,188 | 11.3 | 11,851 |
| Liabilities under insurance contracts | 9,624 | 4.3 | 9,223 |
| Other liabilities | 33,854 | (4.3) | 35,392 |
| Total liabilities | 633,618 | (0.5) | 637,010 |
| Non-controlling interests | 6,592 | (5.9) | 7,008 |
| Accumulated other comprehensive income | (9,201) | 3.5 | (8,889) |
| Shareholders' funds | 54,432 | 0.3 | 54,285 |
| Total equity | 51,823 | (1.1) | 52,404 |
| Total liabilities and equity | 685,441 | (0.6) | 689,414 |
| Memorandum item: | |||
| Guarantees given | 47,519 | (0.3) | 47,668 |
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| 31-03-18 | ∆ % | 31-12-17 | |
| Public sector | 28,176 | (8.0) | 30,626 |
| Individuals | 169,541 | 3.5 | 163,873 |
| Mortgages | 101,670 | (9.4) | 112,274 |
| Consumer | 22,449 | (30.0) | 32,092 |
| Credit cards | 13,263 | (2.7) | 13,630 |
| Other loans | 32,159 | n.s. | 5,877 |
| Business | 165,398 | (11.3) | 186,479 |
| Non-performing loans | 18,569 | (4.2) | 19,390 |
| Loans and advances to customers (gross) | 381,683 | (4.7) | 400,369 |
| Loan-loss provisions | (13,697) | 7.4 | (12,748) |
| Loans and advances to customers | 367,986 | (5.1) | 387,621 |
Loans and advances to customers (gross) (Billion euros)
(1) At constant exchange rates: -3.7%. (1) At constant exchange rates: -3.6%.
Customer funds (Billion euros)
| IFRS 9 | |||
|---|---|---|---|
| 31-03-18 | ∆ % | 31-12-17 | |
| Deposits from customers | 360,213 | (4.3) | 376,379 |
| Of which current accounts | 239,358 | (0.6) | 240,750 |
| Of which time deposits | 113,469 | (2.0) | 115,761 |
| Other customer funds | 130,440 | (3.3) | 134,906 |
| Mutual funds and investment companies | 64,327 | 5.6 | 60,939 |
| Pension funds | 33,604 | (1.1) | 33,985 |
| Other off-balance sheet funds | 2,445 | (20.7) | 3,081 |
| Customer portfolios | 30,064 | (18.5) | 36,901 |
| Total customer funds | 490,653 | (4.0) | 511,285 |
BBVA's fully-loaded CET1 ratio stood at 10.9% at the close of March 2018. This ratio includes the -31 basis points impact of the initial application of IFRS 9. Excluding this effect, the ratio increased by 13 basis points, supported by the recurring organic capital generation. In this context the earnings generated in the quarter amounted to 37 basis points of CET 1. The Group has reiterated its goal of a fully-loaded CET1 capital ratio of 11%.
Risk-weighted assets (RWA) are slightly down 1.3% since the end of 2017, explained mostly by the depreciation of the currencies against the euro, especially the Turkish lira and U.S. dollar. In March 2018, the Group carried out its second synthetic securitization in which The European Investment Fund (EIF, a subsidiary of the European Investment Bank), issued a financial guarantee on an intermediate tranche of a €1,950m portfolio of loans to SMEs. Thanks to this guarantee, BBVA has released €443m of RWA.
(1) It includes the AT2 issuance by Garanti on 2017 and AT2 issuance by Bancomer on the first quarter 2018; pending approval by ECB for the purpose of computability in the Group's ratios.
CET1 fully-loaded CET1 ratio would be 11.5% pro-forma considering the expected positive impact of 57 basis points of impacts from announced corporate transactions pending to be closed (sale of real-estate assets to Cerberus and BBVA Chile).
| CRD IV phased-in | CRD IV fully-loaded | |||
|---|---|---|---|---|
| 31-03-18 (1) | 31-12-17 | 31-03-18 (1) | 31-12-17 | |
| Common Equity Tier 1 (CET 1) | 39,877 | 42,341 | 38,899 | 40,061 |
| Tier 1 | 46,006 | 46,980 | 44,794 | 46,316 |
| Tier 2 (2) | 9,032 | 9,134 | 9,091 | 8,891 |
| Total Capital (Tier 1 + Tier 2) (2) | 55,038 | 56,114 | 53,885 | 55,207 |
| Risk-weighted assets (3) | 358,386 | 361,686 | 356,847 | 361,686 |
| CET1 (%) | 11.1 | 11.7 | 10.9 | 11.1 |
| Tier 1 (%) | 12.8 | 13.0 | 12.6 | 12.8 |
| Tier 2 (%) (2) | 2.5 | 2.5 | 2.5 | 2.5 |
| Total capital ratio (%) (2) | 15.4 | 15.5 | 15.1 | 15.3 |
General note: as of March 31, 2018, the main difference between the phased-in and fully loaded ratios arises from the temporary treatment of the impact of IFRS9 to which the BBVA Group has adhered voluntarily (in accordance with Article 473bis of the CRR).
(1) Preliminary data.
(2) It includes the AT2 issuance by Garanti on 2017 and AT2 issuance by Bancomer on the first quarter 2018; pending approval by ECB for the purpose of computability in the Group's ratios.
(3) It includes update of the calculation on Structural FX RWA, pending confirmation by ECB.
Regarding the issuance of capital, at the Tier 1 level, the Group has begun to compute its USD 1 billion AT1 capital issuance in November 2017, and no longer compute the AT1 USD 1.5 billion issuance that took place in May 2013, which it will be cancelled early as it has already been announced to the market. At the Tier 2 level, BBVA Bancomer issued USD 1 billion in January 2018.
Moreover, the Group completed a new senior non-preferred debt issuance of €1.5 billion, which will be used to meet the requirements of MREL (minimum required eligible liabilities), still pending definition by the supervisor.
As regards shareholder remuneration, on April 10, BBVA paid the final cash dividend against 2017 earnings (already included in the December 2017 capital adequacy ratios), amounting to €0.15 gross per share. This payment has had an impact of 15 basis points on CET 1.
As of 31-Mar-2018, the phased-in CET1 ratio stood at 11.1%, taking into account the impact of the initial implementation of IFRS 9, in this context The European Commission and Parliament have established temporary arrangements that are voluntary for the institutions, adapting the impact of IFRS 9 on capital ratios. BBVA has informed the supervisory body of its adherence to these arrangements. Tier 1 capital stood at 12.8% and Tier 2 at 2.5%, including Garanti's issuance of USD 750 million of AT2 at the close of 2017 and Bancomer's issuance of USD 1.000 billion in the first quarter of 2018, resulting in a total capital ratio of 15.4% (15.2% without take into account the two aforementioned issuances). These levels are above the requirements established by the regulator in its SREP letter and the systemic buffers applicable in 2018 by BBVA Group. Since January 1, 2018, the requirement has been established at 8.438% for the phased-in CET1 ratio and 11.938% for the total capital ratio. The change with respect to 2017 is due to the steady implementation of the capital conservation buffers and the capital buffer applicable to other systemically important banks. The regulatory requirement for 2018 in fully-loaded terms remains unchanged (CET1 of 9.25% and total ratio of 12.75%) compared with the previous year.
Finally, the Group maintained a sound leverage ratio: 6.4% under fully-loaded criteria (6.6% phased-in), which continues to be the highest in its peer group.
BBVA has received several positive ratings so far this year, demonstrating the Group's positive performance and strength. On April 6, S&P raised BBVA's long-term rating to A- from BBB +, with a stable outlook, and on April 12, DBRS raised BBVA's long-term rating to A (high) from A, maintaining the trend at stable. Moody's changed the outlook for BBVA's rating (Baa1) to positive on April 17.
| Rating agency | Long term | Short term | Outlook |
|---|---|---|---|
| DBRS | A (high) | R-1 (middle) | Stable |
| Fitch | A- | F-2 | Stable |
| Moody's (1) | Baa1 | P-2 | Positive |
| Scope Ratings | A+ | S-1+ | Stable |
| Standard & Poor's | A- | A-2 | Stable |
(1) Additionally, Moody's assigns an A3 rating to BBVA's long term deposits.
At the close of the first quarter of 2018 BBVA Group's risk metrics continued to perform well:
Non-performing loans and provisions (Million euros)
| 31-03-18 (2) | 31-12-17 | |
|---|---|---|
| Credit risks | 442,446 | 461,303 |
| Non-performing loans | 19,516 | 20,492 |
| Provisions | 14,180 | 13,319 |
| NPL ratio (%) | 4.4 | 4.6 |
| NPL coverage ratio (%) | 73 | 65 |
| (1) Include gross loans and advances to customers plus guarantees givens. |
(2) Figures without considering the classification of non-current assets held for sale.
Management of liquidity and funding in BBVA aims to finance the recurring growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of finance, always in compliance with current regulatory requirements.
A core principle in BBVA's management of the Group's liquidity and funding is the financial independence of its banking subsidiaries abroad. This principle prevents the propagation of a liquidity crisis among the Group's different areas and ensures that the cost of liquidity is correctly reflected in the price formation process.
The financial soundness of the Group's banks continues to be based on the funding of lending activity, fundamentally through the use of stable customer funds. During the first quarter 2018, liquidity conditions remained comfortable across BBVA Group's global footprint:
On the funding side, the long-term wholesale funding markets in the geographic areas where the Group operates continued to be stable. The performance of short-term funding remained positive, in a highly liquid environment.
The entities in the BBVA group carried out the following operations:
As a result, the liquidity coverage ratio (LCR) in BBVA Group remained comfortably above 100% in the first quarter of 2018, without including any transfers between subsidiaries; in other words, no kind of excess liquidity levels in the subsidiaries abroad is considered in the calculation of the consolidated ratio. As of March 31, 2018, the LCR stood at 126%. Although this requirement is only established at Group level, the minimum level is easily exceeded in all the subsidiaries (Eurozone, 150%; Mexico, 148%; Turkey, 136%; and the United States, 141%).
Foreign-exchange risk management of BBVA's long-term investments, basically stemming from its franchises abroad, aims to preserve the Group's capital adequacy ratios and ensure the stability of its income statement.
The first quarter of 2018 was notable for the appreciation against the euro of the Mexican peso (up 5.0%) and the depreciation of the rest of the main currencies in the geographic areas where the Group operates: the U.S. dollar down 2.7% and the Turkish lira down 7.2%. BBVA has maintained its policy of actively hedging its main investments in emerging countries, covering on average between 30% and 50% of the earnings for the year and around 70% of the excess of CET1 capital ratio (which is not naturally covered by the ratio itself). In accordance with this policy, the sensitivity of the CET1 ratio to a depreciation of 10% of the main emerging currencies (Mexican peso or Turkish lira) against the euro remains at around two negative basis points for each of these currencies. Given the geopolitical context, the coverage level of the expected earnings for 2018 has increased to around 70% in Mexico and 50% in Turkey.
The aim of managing interest-rate risk is to maintain a sustained growth of net interest income in the short and medium-term, irrespective of interest-rate fluctuations, while controlling the impact on the capital adequacy ratio through the valuation of the portfolio of financial assets at fair value with changes reflected in other accumulated comprehensive income.
The Group's banks have fixed-income portfolios to manage the balance-sheet structure. In the first quarter of 2018, the results of this management were satisfactory, with limited risk strategies in all the Group's banks.
Finally, the following is worth noting with respect to the monetary policies pursued by the different central banks in the main geographical areas where BBVA operates:
Consumption of economic risk capital (ERC) at the close of February 2018, in consolidated terms, was €33,443m, equivalent to a decline over the quarter of 2.8% (down 2.3% at constant exchange rates). The reduction was focused on fixed-asset and fixed-income spread risk, in the latter case due to the reduction of exposure to the risk.
Attributable economic risk capital breakdown
Global growth has been stable, in line with the start of 2018, although with greater dynamism in emerging economies and some signs of moderation in developed countries. The economic indicators for the first quarter of the year show global growth to be around a quarterly 1%, similar to the figure recorded during 2017. Economic activity continues to benefit from the good performance of global trade and the solid expansion of industrial output. However, confidence indicators appear to have reached a high, with little room for greater optimism, above all in manufacturing industry. Together with a moderation in retail sales, these factors suggest that recovery in consumption will take more time.
Most stock-market indices posted losses in the first half of the year. In Europe, the Stoxx 50 and the Euro Stoxx 50 fell by 6.7% and 4.1% respectively, while in Spain, the Ibex 35 lost 4.4%. The falls were smaller in the United States, where the S&P index lost 1.2% in the last three months.
In Europe, the banking sector also posted losses between December 2017 and March 2018, although it performed relatively better than the general market indices. The European Stoxx Banks index, which includes British banks, lost 5.9%, while the Eurozone bank index, the Euro Stoxx Banks, lost 3.7%. In contrast, in the United States the S&P Regional Banks index gained 2.6% compared to the close of 2017.
The BBVA share closed March at €6.43, a fall of 9.6% over the quarter.
19
| 31-03-18 | 31-12-17 | |
|---|---|---|
| Number of shareholders | 890,146 | 891,453 |
| Number of shares issued | 6,667,886,580 | 6,667,886,580 |
| Daily average number of shares traded | 26,731,574 | 35,820,623 |
| Daily average trading (million euros) | 185 | 252 |
| Maximum price (euros) | 7.73 | 7.93 |
| Minimum price (euros) | 6.21 | 5.92 |
| Closing price (euros) | 6.43 | 7.11 |
| Book value per share (euros) | 6.81 | 6.96 |
| Tangible book value per share (euros) | 5.58 | 5.69 |
| Market capitalization (million euros) | 42,868 | 47,422 |
| Yield (dividend/price; %) (1) | 3.4 | 4.2 |
| (1) Calculated by dividing shareholder remuneration over the last twelve months over the closing price of the period. |
Regarding shareholder remuneration, in accordance with the resolution of the Annual General Meeting held on March 16, 2018, a cash payment of €0.15 gross per share was made on April 10, corresponding to the final dividend for 2017. For 2018, subject to the appropriate approval from the corresponding corporate bodies, BBVA plans to make a cash dividend payment in October 2018 and April 2019, pursuant to its shareholder remuneration policy announced by publication of a Significant Event on February 1, 2017.
As of December 31, 2017, the number of BBVA shares was 6,668 million, and the number of shareholders was 890,146. By type of investor, residents in Spain held 44.2% of the share capital, while the remaining 55.8% was owned by nonresident shareholders.
| Shareholders | ||||
|---|---|---|---|---|
| Number of shares | Number | % | Shares Number |
% |
| Up to 150 | 182,313 | 20.5 | 13,020,118 | 0.2 |
| 151 to 450 | 181,483 | 20.4 | 49,653,847 | 0.7 |
| 451 to 1800 | 280,184 | 31.5 | 273,013,938 | 4.1 |
| 1,801 to 4,500 | 129,109 | 14.5 | 367,903,641 | 5.5 |
| 4,501 to 9,000 | 60,272 | 6.8 | 379,933,611 | 5.7 |
| 9,001 to 45,000 | 50,337 | 5.7 | 876,385,289 | 13.1 |
| More than 45,001 | 6,448 | 0.7 | 4,707,976,136 | 70.6 |
| Total | 890,146 | 100.0 | 6,667,886,580 | 100.0 |
BBVA shares are included on the main stock-market indices, including the Ibex 35, Euro Stoxx 50 and Stoxx 50, with a weighting of 8.4%, 1.9% and 1.2% respectively. They also form part of several sector indices, including the Euro Stoxx Banks, with a weighting of 8.1%, and the Stoxx Banks, with a weighting of 4.1%.
Finally, BBVA maintains a significant presence on a number of international sustainability indices or ESG (environmental, social and governance) indices, which evaluate the performance of companies in this area, as summarized in the table below.
(1) The inclusion of BBVA in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement or promotion of BBVA by MSCI or any of its affiliates. The MSCI indices are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.
BBVA Group has a differential banking model based on seeking out a return adjusted to principles, strict legal compliance, best practices and the creation of long-term value for all stakeholders.
The main actions carried out in the first quarter of 2018 implementing the four pillars of BBVA's responsible banking model are as follows:
…Through transparent, clear and responsible communication and financial education in the solutions that we offer. In this respect, BBVA is developing and collaborating with numerous programs, many of which are designed for young people.
BBVA's Financial Education and Skills Center has completed its first year of operation, consolidating its position as a platform that serves as a global model for financial education. The Call for Expression of Interest was launched this quarter to promote academic research in the field of financial education and inclusion. Training prioritizes the following six specific areas: FinTech, financial health, financial education and the gender gap, behavioral economics, sustainable finance, and new methods for measuring financial literacy.
...Through responsible business policies, a reputational risk model, and a people-centric culture throughout the Organization.
During the quarter, BBVA updated its Commitment to Human Rights, following a process of due diligence that analyzed the Organization in depth. The analysis was based on the UN's Guiding Principles on Business and Human Rights, and also included the creation of a three-year human rights action plan, published together with the new Commitment.
BBVA has also been chosen to form part of the 2018 Bloomberg Gender Equality Index. The index is composed of 104 companies from ten sectors headquartered in 24 countries. It recognizes the achievements of companies with respect to gender-equality policies, both in relation to their employees and their support for social initiatives and products and services that prioritize this commitment. The aim is to provide managers and investors with information on the commitment and performance of companies in the area of gender equality. Garanti Bank, BBVA's subsidiary in Turkey, was the first Turkish Bank included in the index.
...Through financial inclusion, sustainable finance, support for SMEs and responsible investment.
In February 2018, BBVA announced its strategy around climate change and sustainable development. The strategy will help the bank meet the United Nations Sustainable Development Goals and is line with the Paris Agreement on Climate Change. The key elements of the strategy are:
BBVA's Annual General Meeting, held on March 16 in Bilbao was awarded with the Sustainable Event certificate for its clear commitment to environmental, social and economic stability under the UNE-ISO 20121:2013 standard. The certification has been verified by AENOR audit.
...With priority for financial education initiatives for society, entrepreneurship, knowledge and other social causes that are relevant from a local point of view.
In 2017, BBVA Group's allocation to social programs amounted to €103m, accounting for 2.9% of the its net attributable profit for the year. Of this total, 70% supported initiatives that drive development and create opportunities for people, within the priority framework of knowledge, education and culture included in the Group's Community Investment Plan for the period 2016-2018.
During the first quarter, BBVA Foundation promoted a website offering health information given by healthcare professionals working at the hospital. The aim is to respond to the demand from 60% of Spanish people who seek health information on the internet by helping them deal with their concerns using reliable information.
At the close of the quarter, the Bank presented the Conectados project to promote good and responsible use of information and communication technologies (ICT) by young people. This platform aims to raise awareness about the importance of the proper use of these technologies through activities geared to both young children and their families and teachers. Conectados works in three areas: educational actions, via an app and a competition involving more than 6,000 young people between 14 and 16 years old; research designed to discover the impact of ICT on the socialization of adolescents; and raising awareness and offering training for families and teachers.
This section presents and analyzes the most relevant aspects of the Group's different business areas. Specifically, it shows a summary of the income statement and balance sheet, the business activity figures and the most significant ratios in each of them.
In 2018 the reporting structure of BBVA Group's business areas remained basically the same as in 2017. It is worth noting that BBVA announced the signing of two agreements, one for the sale of BBVA Chile to The Bank of Nova Scotia (Scotiabank) and another for the creation of a joint venture to which BBVA's real-estate business in Spain will be transferred for the subsequent sale of 80% of the company created to a subsidiary of Cerberus Capital Management, L.P. (Cerberus). For the purpose of the explanations given in this report, the figures for Non Core Real Estate and South America are shown on a comparable basis with previous periods, even though within the balance sheet of the consolidated Group, the operations underway that are mentioned above have been reclassified as non-current assets and liabilities held for sale. The Group's business areas are summarized below:
In addition to the above, all the areas include a remainder made up basically of other businesses and a supplement that includes deletions and allocations not assigned to the units making up the above areas.
Lastly, the Corporate Center is an aggregate that contains the rest of the items that have not been allocated to the business areas, as it corresponds to the Group's holding function. It includes: the costs of the head offices that have a corporate function; management of structural exchange-rate positions; specific issues of equity instruments to ensure adequate management of the Group's global solvency; portfolios and their corresponding results, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with employees; goodwill and other intangibles.
In addition to this geographical breakdown, supplementary information is provided for all the wholesale businesses carried out by BBVA, i.e. Corporate & Investment Banking (CIB), in the geographical areas where it operates. This aggregate business is considered relevant to better understand the Group because of the characteristics of the customers served, the type of products offered and the risks assumed.
Lastly, as usual, in the case of the Americas, Turkey and CIB areas, the results of applying constant exchange rates are given in addition to the year-on-year variations at current exchange rates.
The information by areas is based on units at the lowest level and/or companies making up the Group, which are assigned to the different areas according to the main geographical area in which they carry out their activity.
Business areas
| BBVA Group |
Banking activity in Spain |
Non Core Real Estate |
The United States |
Mexico Turkey | South America |
Rest of Eurasia |
∑ Business areas |
Corporate Center and other |
||
|---|---|---|---|---|---|---|---|---|---|---|
| 1Q18 | ||||||||||
| Net interest income | 4,288 | 921 | 7 | 524 | 1,317 | 753 | 792 | 43 | 4,356 | (68) |
| Gross income | 6,096 | 1,596 | (3) | 699 | 1,711 | 996 | 1,079 | 126 | 6,202 | (106) |
| Operating income | 3,117 | 773 | (24) | 264 | 1,144 | 642 | 595 | 53 | 3,447 | (330) |
| Profit/(loss) before tax | 2,237 | 616 | (32) | 251 | 788 | 520 | 417 | 69 | 2,630 | (393) |
| Net attributable profit | 1,340 | 437 | (27) | 195 | 571 | 201 | 210 | 47 | 1,636 | (295) |
| 1Q17 | ||||||||||
| Net interest income | 4,322 | 935 | 10 | 526 | 1,297 | 812 | 807 | 46 | 4,433 | (110) |
| Gross income | 6,383 | 1,676 | (21) | 722 | 1,720 | 976 | 1,104 | 135 | 6,313 | 70 |
| Operating income | 3,246 | 818 | (47) | 254 | 1,144 | 588 | 573 | 56 | 3,385 | (139) |
| Profit/(loss) before tax | 2,065 | 523 | (137) | 177 | 736 | 483 | 369 | 58 | 2,210 | (145) |
| Net attributable profit | 1,199 | 372 | (106) | 129 | 541 | 160 | 185 | 40 | 1,321 | (122) |
Gross income(1), operating income(1) and net attributable profit breakdown(1) (Percentage. 1st Quarter)
(1) Excludes the Corporate Center.
(2) Includes the areas Banking activity in Spain and Non Core Real Estate.
Major balance sheet items and risk-weighted assets by business area (Million euros)
| Business areas | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| BBVA Group |
Banking activity in Spain |
Non Core Real Estate |
The United States |
Mexico Turkey | South America |
Rest of Eurasia |
∑ Business areas |
Corporate Center and other |
AyPNCV variation (1) |
||
| 31-03-18 | |||||||||||
| Loans and advances to customers |
367,986 | 167,524 | 1,391 | 52,721 47,247 49,751 | 48,400 | 13,988 381,022 | - | (13,036) | |||
| Deposits from customers |
360,213 | 169,096 | 10 | 58,431 47,522 43,246 | 45,230 | 5,425 368,959 | - | (8,746) | |||
| Off-balance sheet funds |
100,376 | 63,048 | 4 | - 20,033 | 3,861 | 13,024 | 390 100,360 | 16 | - | ||
| Total assets/liabilities and equity |
685,441 | 322,929 | 9,186 72,280 93,275 74,389 | 71,969 | 16,749 660,777 | 24,664 | - | ||||
| Risk-weighted assets | 356,847 | 103,229 | 9,272 57,262 47,769 60,936 | 55,718 | 14,907 349,094 | 7,753 | - | ||||
| 31-12-17 | |||||||||||
| Loans and advances to customers |
387,621 | 183,172 | 3,521 | 53,718 45,768 51,378 | 48,272 | 14,864 400,693 | - | (13,072) | |||
| Deposits from customers |
376,379 | 177,763 | 13 60,806 49,964 44,691 | 45,666 | 6,700 385,604 | - | (9,225) | ||||
| Off-balance sheet funds |
98,005 | 62,054 | 4 | - 19,472 | 3,902 | 12,197 | 376 | 98,005 | - | - | |
| Total assets/liabilities and equity |
690,059 | 319,417 | 9,714 | 75,775 94,061 78,694 | 74,636 | 17,265 669,562 | 20,497 | - | |||
| Risk-weighted assets (1) Includes non-current assets and liabilities held for sale (AyPNCV for its acronym in Spanish) of the BBVA Chile and real estate operations. |
361,686 | 108,093 | 9,692 58,688 44,941 62,768 | 55,975 | 15,150 355,307 | 6,379 | - |
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| 1Q | 4Q | 3Q | 2Q | 1Q | |
| Official ECB rate | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Euribor 3 months | (0.33) | (0.33) | (0.33) | (0.33) | (0.33) |
| Euribor 1 year | (0.19) | (0.19) | (0.16) | (0.13) | (0.10) |
| USA Federal rates | 1.58 | 1.30 | 1.25 | 1.05 | 0.80 |
| TIIE (Mexico) | 7.84 | 7.42 | 7.37 | 7.04 | 6.41 |
| CBRT (Turkey) | 12.75 | 12.17 | 11.97 | 11.80 | 10.10 |
| Year-end exchange rates | Average exchange rates | ||||
|---|---|---|---|---|---|
| ∆ % on | ∆ % on | ∆ % on | |||
| 31-03-18 | 31-03-17 | 31-12-17 | 1Q18 | 1Q17 | |
| Mexican peso | 22.5251 | (11.1) | 5.0 | 23.0372 | (6.2) |
| U.S. dollar | 1.2321 | (13.2) | (2.7) | 1.2292 | (13.4) |
| Argentine peso | 24.8188 | (33.7) | (9.0) | 24.1908 | (31.0) |
| Chilean peso | 745.71 | (5.0) | (1.0) | 740.19 | (5.7) |
| Colombian peso | 3,424.66 | (10.2) | 4.7 | 3,508.77 | (11.2) |
| Peruvian sol | 3.9776 | (12.7) | (2.4) | 3.9786 | (12.0) |
| Venezuelan bolivar | 62,500.00 | (95.0) | (70.9) | 62,500.00 | (95.0) |
| Turkish lira | 4.8976 | (20.6) | (7.2) | 4.6899 | (16.0) |
Business activity(1) (Year on year change. Data as of 31- 03-2018)
Net interest income/ATAs (Percentage)
(1) Excluding repos.
Breakdown of performing loans under management (1) (31-03-2018)
Operating income (Million euros) Net attributable profit (Million euros)
Breakdown of customer funds under management(1) (31- 03-2018)
(1) Excluding repos. (1) Excluding repos.
The Spanish economy closed 2017 with a solid growth of 3.1%, reflecting what a still strong domestic demand, despite the political uncertainty. Exports and investment continued to show signs of recovery, although consumption moderated slightly. Overall, both internal fundamentals, related to continued improvements in employment and favorable financial conditions, and external fundamentals, associated with the recovery of global trade, are still sound. They will continue to drive growth in the early months of 2018, although a slight moderation is expected for the year as a whole.
Regarding the Spanish banking system and according to data from February 2018 (latest published data) from the Bank of Spain, the total volume of lending to the private sector (household and corporate) continued to decline year-on-year (down 2.4%). However, since August there have been signs of a slight upturn in the total volume of credit in the economy, though the signs are still too weak to confirm that there has been a turning point. Non-performing loans in the sector continued to improve, with their volume down 16.7% year-on-year as of February 2018. As a result, the NPL ratio declined to 7.8% as of February 2018. The system's liquidity position continues to be comfortable: the funding gap (difference between the volume of loans and total deposits) fell to the €105.5 billion, 4.1% of the total balance sheet of the system.
As of 31-Mar-2018, lending (performing loans under management) was down by 2.4% compared to the figure at the end of December 2017, due basically to the reduction in the corporates (down 9.6 %) and in the mortgages (down 1.1%). In contrast, consumer finance remained strong (up 2.2%), influenced by the positive performance of new production, which posted year-on-year growth of 37.7%, according to cumulative figures through March 2018.
In asset quality, there was a reduction in the quarter of the balance of non-performing loans in the area, with the NPL ratio falling over the last three months by 15 basis points to 5.4%. The NPL coverage ratio also increased to 57%.
Customer deposits under management fell by 3.0% compared to the close of December 2017 (down 2.3% in the last twelve months). By products, there was a further decline in time deposits (down 15.1% in the quarter), strongly focused on the segment of wholesale clients. It was again partially offset by the increase in demand deposits (up 1.6% over the last three months) and off-balance-sheet funds, which retained their positive trend, despite the unfavorable performance of the markets, with year-to-date growth of 1.6%. This performance continued to be largely supported by the growth in mutual funds (up 3.2%).
The year-on-year highlights of the income statement in the area were:
As a result, the net attributable profit generated by Banking Activity in Spain in the first quarter of 2018 stood at €437m, a year-on-year increase of 17.3%, strongly influenced by the positive performance of net fees and commissions, operating expenses and loan-loss provisions.
| Financial statements and relevant business indicators (Million euros and percentage) | |||
|---|---|---|---|
| IFRS 9 | IAS 39 | ||
| Income statement | 1Q18 | ∆ % | 1Q17 |
| Net interest income | 921 | (1.6) | 935 |
| Net fees and commissions | 412 | 7.8 | 382 |
| Net trading income | 167 | (26.0) | 225 |
| Other income and expenses | 97 | (27.6) | 134 |
| of which Insurance activities (1) | 108 | 0.5 | 108 |
| Gross income | 1,596 | (4.8) | 1,676 |
| Operating expenses | (823) | (4.2) | (859) |
| Personnel expenses | (473) | (1.4) | (479) |
| Other administrative expenses | (279) | (6.7) | (299) |
| Depreciation | (71) | (12.0) | (81) |
| Operating income | 773 | (5.4) | 818 |
| Impaiment on financial assets not measured at fair value through profit or loss | (70) | (57.4) | (165) |
| Provisions or reversal of provisions and other results | (87) | (32.5) | (129) |
| Profit/(loss) before tax | 616 | 17.7 | 523 |
| Income tax | (178) | 18.4 | (150) |
| Profit/(loss) for the year | 438 | 17.3 | 373 |
| Non-controlling interests | (1) | 20.7 | (1) |
| Net attributable profit | 437 | 17.3 | 372 |
| (1) Includes premiums received net of estimated technical insurance reserves. | |||
| IFRS 9 | IAS 39 | ||
| Balance sheets | 31-03-18 | ∆ % | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits | 19,306 | 43.4 | 13,463 |
| Financial assets designated at fair value | 103,371 | 30.0 | 79,501 |
| of which Loans and advances | 23,453 | n.s. | 1,312 |
| Financial assets at amortized cost | 192,622 | (13.0) | 221,391 |
| of which loans and advances to customers | 167,524 | (8.5) | 183,172 |
| Inter-area positions | 1,897 | 5.0 | 1,806 |
| Tangible assets | 970 | 10.7 | 877 |
| Other assets | 4,764 | 100.2 | 2,380 |
| Total assets/liabilities and equity | 322,929 | 1.1 | 319,417 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 70,607 | 91.8 | 36,817 |
| Deposits from central banks and credit institutions | 42,287 | (32.0) | 62,226 |
| Deposits from customers | 169,096 | (4.9) | 177,763 |
| Debt certificates | 31,680 | (4.9) | 33,301 |
| Inter-area positions | - | - | - |
| Other liabilities | 268 | (31.5) | 391 |
| Economic capital allocated | 8,991 | 0.8 | 8,920 |
| Relevant business indicators | 31-03-18 | ∆ % | 31-12-17 |
| Performing loans and advances to customers under management (1) | 163,290 | (2.4) | 167,291 |
| Non-performing loans and guarantees given | 10,377 | (4.2) | 10,833 |
| Customer deposits under management (1) | 169,592 | (3.0) | 174,822 |
| Off-balance sheet funds (2) | 63,048 | 1.6 | 62,054 |
| Risk-weighted assets | 103,229 | (4.5) | 108,093 |
| Efficiency ratio (%) | 51.5 | 54.9 | |
| NPL ratio (%) | 5.4 | 5.5 | |
| NPL coverage ratio (%) | 57 | 50 | |
| Cost of risk (%) (1) Excluding repos. |
0.17 | 0.32 |
(2) Includes mutual funds, pension funds and other off-balance sheet funds.
The close of 2017 was positive for the real-estate market:
Finally, construction activity is still responding to the strength of demand. According to the Ministry of Public Works, nearly 81,000 new housing construction permits were approved in 2017 for housing starts, up 26.2% on 2016. The figure for January 2018 was also positive, with approved permits up by 7.4% year-on-year.
(1) Compared to Bank of Spain's Transparency scope (Circular 5/2011 dated November 30), real-estate developer loans do not include €2.1Bn (March 2018) mainly related to developer performing loans transferred to the Banking Activity in Spain area.
Coverage of real-estate exposure (Million of euros as of 31-03-18)
| Gross Value | Provisions | Net exposure | % Coverage | |
|---|---|---|---|---|
| Real-estate developer loans (1) | 2,853 | 1,510 | 1,343 | 53 |
| Performing | 461 | 74 | 387 | 16 |
| Finished properties | 315 | 47 | 269 | 15 |
| Construction in progress | 66 | 9 | 57 | 14 |
| Land | 72 | 17 | 55 | 24 |
| Without collateral and other | 8 | 1 | 7 | 18 |
| NPL | 2,392 | 1,436 | 956 | 60 |
| Finished properties | 1,091 | 570 | 521 | 52 |
| Construction in progress | 113 | 54 | 59 | 48 |
| Land | 1,006 | 668 | 337 | 66 |
| Without collateral and other | 182 | 143 | 39 | 79 |
| Foreclosed assets | 11,541 | 7,073 | 4,468 | 61 |
| Finished properties | 7,036 | 3,635 | 3,401 | 52 |
| Construction in progress | 541 | 365 | 176 | 67 |
| Land | 3,964 | 3,073 | 891 | 78 |
| Other real-estate assets (2) | 958 | 648 | 310 | 68 |
| Real-estate exposure | 15,352 | 9,231 | 6,121 | 60 |
(1) Compared to Bank of Spain's Transparency scope (Circular 5/2011 dated November 30), real-estate developer loans do not include €2.1 Bn (March 2018) mainly related to developer performing loans transferred to the Banking activity in Spain unit. (2) Other real-estate assets not originated from foreclosures.
BBVA is moving forward with the process of closing the sale announced in the fourth quarter of 2017. Under the deal, most of BBVA's real-estate business in Spain will be transferred to a company, 80% of whose shares will then be sold to Cerberus in the second half of 2018. Thus, during this period, BBVA continues to manage real-estate assets subject to the agreement according to normal business and control procedures.
Overall, as of 31-Mar-2018, net exposure was €6,121m, a decline of 4.6% since December 2017.
Total real-estate exposure, including loans to developers, foreclosures and other assets, had a coverage ratio of 60% at the close of March 2018. The coverage ratio of foreclosed assets was 61%.
Non-performing balances fell again, thanks to a decline of new additions to NPL over the quarter. The NPL coverage ratio closed at 60%.
In addition, during the quarter, BBVA placed a public share offering of a total of 11,619,724 shares of its subsidiary Metrovacesa, accounting for 26.9% of its stake (7.7% of total capital). After the sale, BBVA's participation in Metrovacesa reduced from 28.51% to 20.85%.
This business area posted a cumulative loss of €27m, which compares with a loss of €106m in the same period the previous year.
Financial statements (Million euros)
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Income statement | 1Q18 | ∆ % | 1Q17 |
| Net interest income | 7 | (27.9) | 10 |
| Net fees and commissions | 0 | (71.3) | 2 |
| Net trading income | 1 | n.s. | (0) |
| Other income and expenses | (11) | (65.2) | (32) |
| Gross income | (3) | (84.6) | (21) |
| Operating expenses | (20) | (21.1) | (26) |
| Personnel expenses | (13) | 1.9 | (12) |
| Other administrative expenses | (6) | (13.9) | (7) |
| Depreciation | (2) | (72.2) | (7) |
| Operating income | (24) | (49.6) | (47) |
| Impaiment on financial assets not measured at fair value through profit or loss | (55) | n.s. | (4) |
| Provisions or reversal of provisions and other results | 47 | n.s. | (86) |
| Profit/(loss) before tax | (32) | (76.9) | (137) |
| Income tax | 5 | (83.8) | 31 |
| Profit/(loss) for the year | (27) | (74.9) | (106) |
| Non-controlling interests | - | - | - |
| Net attributable profit | (27) | (75.0) | (106) |
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Balance sheet | 31-03-18 | ∆ % | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits | 10 | (14.0) | 12 |
| Financial assets designated at fair value | 1,649 | n.s. | 9 |
| of which Loans and advances | 1,663 | n.s. | - |
| Financial assets at amortized cost | 1,396 | (60.3) | 3,521 |
| of which loans and advances to customers | 1,391 | (60.5) | 3,521 |
| Inter-area positions | - | - | - |
| Tangible assets | 6 | n.s. | - |
| Other assets | 6,124 | (0.8) | 6,172 |
| Total assets/liabilities and equity | 9,186 | (5.4) | 9,714 |
| Financial liabilities held for trading and designated at fair value through profit or loss | - | - | - |
| Deposits from central banks and credit institutions | 102 | n.s. | - |
| Deposits from customers | 10 | (19.3) | 13 |
| Debt certificates | 750 | (4.5) | 785 |
| Inter-area positions | 5,323 | (7.8) | 5,775 |
| Other liabilities | - | - | - |
| Economic capital allocated | 3,001 | (4.5) | 3,141 |
| Memorandum item: | |||
| Risk-weighted assets | 9,272 | (4.3) | 9,692 |
Business activity (1) (Year on year change at constant exchange rate. Data as of 31-03-2018)
(1) Excluding repos.
Operating income
(Million euros at constant exchange rate)
(1) At current exchange rate: 4.0%. (1) At current Exchange rate: 50.9%.
Breakdown of performing loans under management (1) (31-03-2018)
Net interest income/ATAs (Percentage. Constant exchange rate)
Net attributable profit (Million euros at constant exchange rate)
Breakdown of customer funds under management (1) (31-03-2018)
According to the latest available information from the Bureau of Economic Analysis (BEA), U.S. GDP grew by 2.3% in 2017, driven by investment and, above all, by strong private consumption. Increased consumer confidence had a positive impact on the figures for business activity and foreign trade at the start of 2018, adding to the positive short-term effects of a more expansive fiscal policy.
Stronger domestic demand and the depreciation of the dollar worldwide have driven prices and wages up, although inflation still remains under control. Against this backdrop, the Federal Reserve (Fed) has continued with the process of normalizing monetary policy, with further hikes in the base rate to 1.75%. The trend of gradual normalization is expected to continue in 2018. Despite the fact that economic fundamentals early in the year could suggest the dollar should show gains, recent increased uncertainty and financial volatility, which may be associated with fears of a higher fiscal deficit and recent protectionist measures, continue to depreciate the value of the U.S. currency.
The general situation of the country's banking system is still very positive. According to the latest available data from the Fed through February 2018, the total volume of bank credit in the system increased by 3.7% over the last twelve months, with growth in all the main portfolios. At the same time, deposits fell slightly year-on-year by 1.3%. Lastly, non-performing loans remained under control, with an NPL ratio of 1.8% at the end of the fourth quarter of 2017, practically the same figure as in the previous quarter.
All the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate, unless expressly stated otherwise. These rates, together with changes at current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
Lending activity in the area (performing loans under management) it remains stable (-0.2% in the quarter, + 1.6% yearon-year). By portfolio, higher interest rates led to a decline in mortgages and loans to developers (construction real estate). In contrast, consumer loans , which have higher margins and are therefore more profitable, increased by 7.4% since the end of the previous year (+13.6% year-on-year).
With respect to asset quality, risk indicators in the area continued to be solid. The NPL ratio remained at 1.2%. The coverage ratio closed the quarter at 98% (104% as of 31-Dec-2017).
With regard to the Customer deposits under management, they showed a decrease of 1.1% in comparison to the figure of December 2017, although they experienced a year-on-year increase of 5.7%, thanks to deposit-gathering campaigns launched in 2017.
The United States generated a cumulative net attributable profit through March 2018 of €195m, up 74.1% on the same period last year, due mainly to the increase in net interest income, lower provisions and lower tax expenses as a result of a reduction in the effective tax rate following the tax reform approved in the last quarter of 2017. Also worth noting are the following:
Impairment losses on financial assets fell by 67.9% in the last twelve months and 52.7% over the quarter, due to the lower provisioning requirements in retail portfolios affected by hurricanes in 2017. As a result, the cumulative cost of risk through 31-Mar-2018 declined to 0.16%.
Financial statements and relevant business indicators (Million euros and percentage)
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Income statement | 1Q18 | ∆ % | ∆ % (1) | 1Q17 |
| Net interest income | 524 | (0.4) | 15.0 | 526 |
| Net fees and commissions | 148 | (15.4) | (2.4) | 175 |
| Net trading income | 24 | (26.0) | (14.6) | 33 |
| Other income and expenses | 3 | n.s. | n.s. | (12) |
| Gross income | 699 | (3.2) | 11.8 | 722 |
| Operating expenses | (435) | (7.1) | 7.3 | (468) |
| Personnel expenses | (252) | (6.5) | 8.0 | (269) |
| Other administrative expenses | (141) | (6.3) | 8.2 | (150) |
| Depreciation | (42) | (12.9) | 0.6 | (48) |
| Operating income | 264 | 4.0 | 20.0 | 254 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(20) | (72.2) | (67.9) | (73) |
| Provisions or reversal of provisions and other results | 8 | n.s. | n.s. | (4) |
| Profit/(loss) before tax | 251 | 42.3 | 64.3 | 177 |
| Income tax | (56) | 18.9 | 37.3 | (47) |
| Profit/(loss) for the year | 195 | 50.9 | 74.1 | 129 |
| Non-controlling interests | - | - | - | - |
| Net attributable profit | 195 | 50.9 | 74.1 | 129 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits |
4,890 | (31.5) | (29.6) | 7,138 |
| Financial assets designated at fair value | 10,012 | (9.5) | (7.1) | 11,068 |
| of which Loans and advances | 62 | 10.8 | 13.9 | 56 |
| Financial assets at amortized cost | 54,468 | (0.4) | 2.3 | 54,705 |
| of which loans and advances to customers | 52,721 | (1.9) | 0.8 | 53,718 |
| Inter-area positions | - | - | - | - |
| Tangible assets | 633 | (3.8) | (1.2) | 658 |
| Other assets | 2,276 | 3.1 | 6.0 | 2,207 |
| Total assets/liabilities and equity | 72,280 | (4.6) | (2.0) | 75,775 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
172 | 23.4 | 26.8 | 139 |
| Deposits from central banks and credit institutions | 3,060 | (14.5) | (12.2) | 3,580 |
| Deposits from customers | 58,431 | (3.9) | (1.3) | 60,806 |
| Debt certificates | 1,940 | (3.8) | (1.2) | 2,017 |
| Inter-area positions | 1,116 | 0.6 | 3.4 | 1,110 |
| Other liabilities | 4,929 | (9.2) | (6.8) | 5,431 |
| Economic capital allocated | 2,631 | (2.3) | 0.4 | 2,693 |
| Relevant business indicators | 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) |
52,501 | (2.8) | (0.2) | 54,036 |
| Non-performing loans and guarantees given | 654 | (6.1) | (3.6) | 696 |
| Customer deposits under management (2) | 58,522 | (3.8) | (1.1) | 60,806 |
| Off-balance sheet funds (3) | - | - | - | - |
| Risk-weighted assets | 57,262 | (2.4) | 0.2 | 58,688 |
| Efficiency ratio (%) | 62.2 | 64.4 | ||
| NPL ratio (%) | 1.2 | 1.2 | ||
| NPL coverage ratio (%) | 98 | 104 | ||
| Cost of risk (%) (1) Figures at constant exchange rate. |
0.16 | 0.43 |
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
Business activity (1) (Year on year change at constant exchange rate. Data as of 31-03-2018)
(1) Excluding repos.
Operating income
(Million euros at constant exchange rate)
(1) At current exchange rate: 0.0%. (1) At current exchange rate: 5.5%.
Breakdown of performing loans under management (1) (31-03-2018)
Net interest income/ATAs (Percentage. Constant exchange rate)
Net attributable profit (Million euros at constant exchange rate)
Breakdown of customer funds under management (1) (31-03-2018)
37
The activity of Mexico closed 2017 with an average growth of 2.0%. After the negative effect of natural disasters in the third quarter, there was a recovery in the fourth. On the demand side, exports of manufactured goods and, above all, consumption were the most dynamic components. They are expected to continue to be so during this year, despite the uncertainty regarding the results of the elections, and about the NAFTA negotiations.
Inflation slowed during the initial months of 2018, following the strong increase registered in 2017. This behavior explains the recently contained depreciation of the peso against the euro, which eases the pressure on prices and suggest that further interest-rate hikes by Banxico will not be necessary.
For yet another quarter, the Mexican banking system showed excellent levels of solvency and asset quality. According to the latest available information from the National Banking Commission and Securities (CNBV) in February 2018, activity remained as strong as in previous quarters, with annual growth in the volume of deposits and lending at 9.6% and 10.6%, respectively. Finally, the NPL ratio was stable (2.2%) and there was a slight reduction in the NPL coverage ratio (151%).
All the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate, unless expressly stated otherwise. These rates, together with changes at current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
Lending (performing loans under management) remained flat in the area during the first quarter of 2018 (up 0.5% from December 2017), showing a year-on-year rise of 4.8%. BBVA in Mexico continued to maintain its leadership position in the country, with a market share of 22.6% in performing loans, according to local figures from the CNBV at the close of February 2018.
With respect to its composition, according to data for the close of the first quarter of 2018, the relative weight of the wholesale and retail businesses remains unchanged, at approximately 50% each. The wholesale portfolio reported a year-on-year increase of 2.7%, but a decline of 3.5% in the quarter, as a result of the high level of uncertainty in the country regarding the results of the upcoming elections. The retail portfolio grew by 2.7% in the quarter (up 7.7% yearon-year), strongly supported by auto loans, which rose by 1.2% between January and March 2018 (up 5.5% year-onyear). Lastly, credit cards increased by 5.2% year-on-year.
This trend has been accompanied by an improvement in asset quality indicators. The NPL and NPL coverage ratios closed the quarter at 2.1% and 153% respectively. The growth in the NPL coverage ratio was basically due to the increase in provisions, as a result of the effects of the initial implementation of IFRS 9.
Total customer funds (customer deposits under management, mutual funds and other off-balance-sheet funds) showed a quarterly decline of 2.6%, but a rise of 7.6% year-on-year, mostly explained by time deposits (down 0.6% over the quarter, but up 18.8% year-on-year), as demand deposits maintained their positive trend, with growth of 4.1% over the year. BBVA in Mexico has a profitable funding mix, with low-cost deposits accounting for around 70% of total customer deposits under management. Lastly, mutual funds increased by 1.9% between January and March 2018 (up 11.1% yearon-year).
The highlights of the income statement for Mexico for the first quarter of 2018 are summarized below:
Operating expenses continued to grow at a controlled pace (up 4.8% year-on-year) and below the area's gross income growth of 6.0%. As a result, the efficiency ratio has continued to improve and stood at 33.1% at the close of the first quarter of the year.
Good risk management has been reflected in the 0.6% decline in impairment losses on financial assets. As a result the cumulative cost of risk in the area closed at 3.18% from 3.24% as of December 2017.
Overall, BBVA in Mexico posted a net attributable profit in the first quarter of €571m, a year-on-year increase of 12.5%.
Financial statements and relevant business indicators (Million euros and percentage)
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Income statement | 1Q18 | ∆ % | ∆ % (1) | 1Q17 |
| Net interest income | 1,317 | 1.6 | 8.2 | 1,297 |
| Net fees and commissions | 281 | (0.3) | 6.3 | 282 |
| Net trading income | 67 | (7.1) | (1.0) | 73 |
| Other income and expenses | 45 | (34.9) | (30.6) | 69 |
| Gross income | 1,711 | (0.6) | 6.0 | 1,720 |
| Operating expenses | (567) | (1.7) | 4.8 | (576) |
| Personnel expenses | (246) | (0.2) | 6.4 | (247) |
| Other administrative expenses | (260) | (2.6) | 3.8 | (267) |
| Depreciation | (60) | (3.7) | 2.7 | (63) |
| Operating income | 1,144 | 0.0 | 6.6 | 1,144 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(377) | (6.7) | (0.6) | (404) |
| Provisions or reversal of provisions and other results | 21 | n.s. | n.s. | (4) |
| Profit/(loss) before tax | 788 | 7.0 | 14.1 | 736 |
| Income tax | (216) | 11.2 | 18.5 | (194) |
| Profit/(loss) for the year | 572 | 5.5 | 12.5 | 542 |
| Non-controlling interests | (0) | 3.1 | 9.9 | (0) |
| Net attributable profit | 571 | 5.5 | 12.5 | 541 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | ∆ %(1) | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits |
7,749 | (12.3) | (16.5) | 8,833 |
| Financial assets designated at fair value | 27,930 | (2.4) | (7.1) | 28,627 |
| of which Loans and advances | 768 | (50.7) | (53.1) | 1,558 |
| Financial assets at amortized cost | 53,233 | 11.6 | 6.3 | 47,691 |
| of which loans and advances to customers | 47,247 | 3.2 | (1.7) | 45,768 |
| Tangible assets | 1,791 | 2.4 | (2.5) | 1,749 |
| Other assets | 2,572 | (64.1) | (65.8) | 7,160 |
| Total assets/liabilities and equity | 93,275 | (0.8) | (5.6) | 94,061 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
19,167 | 103.8 | 94.0 | 9,405 |
| Deposits from central banks and credit institutions | 1,448 | (75.3) | (76.4) | 5,853 |
| Deposits from customers | 47,522 | (4.9) | (9.5) | 49,964 |
| Debt certificates | 7,903 | 8.1 | 2.9 | 7,312 |
| Other liabilities | 13,648 | (22.6) | (26.3) | 17,627 |
| Economic capital allocated | 3,588 | (8.0) | (12.4) | 3,901 |
| Relevant business indicators | 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) |
47,243 | 4.5 | (0.5) | 45,196 |
| Non-performing loans and guarantees given | 1,095 | (2.6) | (7.3) | 1,124 |
| Customer deposits under management (2) | 46,024 | 2.1 | (2.8) | 45,093 |
| Off-balance sheet funds (3) | 20,033 | 2.9 | (2.1) | 19,472 |
| Risk-weighted assets | 47,769 | 6.3 | 1.2 | 44,941 |
| Efficiency ratio (%) | 33.1 | 34.4 | ||
| NPL ratio (%) | 2.1 | 2.3 | ||
| NPL coverage ratio (%) | 153 | 123 | ||
| Cost of risk (%) (1) Figures at constant exchange rate. |
3.18 | 3.24 |
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
Business activity (1) (Year on year change at constant exchange rate. Data as of 31-03-2018)
(1) Excluding repos.
(Million euros at constant exchange rate)
Breakdown of performing loans under management (1) (31-03-2018)
Net interest income/ATAs (Percentage. Constant exchange rate)
(1) At current exchange rate: 9.2%. (1) At current exchange rate: 25.7%
Breakdown of customer funds under management (1) (31-03-2018)
According to the latest information from the Turkish Statistical Institute, the Turkey's year-on-year economic growth was 7.3% in the fourth quarter of 2017, strongly supported by the high contribution from internal demand, led mainly by private consumption. In contrast, net exports continued to fall. Economic activity is expected to remain solid in the first half of 2018. Among the factors contributing to this will be the extension through 2018 of the Credit Guarantee Fund (CGF) program. However, this environment will be clearly conditioned by the political environment due to the advance election announcement (on 24th of June 2018, which was previously scheduled on the 3rd of November 2019).
Although inflation closed the month of March 2018 in double digits (10.2%), the figure was a reduction with respect to that of December 2017 (11.9%), thanks to the positive base effects. However, the prospects of inflation declining further are limited by the new depreciation pressure on the Turkish lira against the euro.
Given the inflation expectations, the CBRT will maintain its tight monetary policy. After the increases registered in 2017, the average CBRT funding rate stands at 12.75%.
Regarding the Turkish financial sector, with data as of the end of the first quarter of 2018, the year-on-year growth rate in total lending (adjusted by the effect of the Turkish lira's depreciation) moderated to 17.3%, after the acceleration throughout 2017, thanks to the credit access facilities promoted by the CGF program mentioned before. The sector's NPL ratio continued to improve, ending the month of March at 2.8%. Lastly, customer deposits maintained a year-onyear increase similar to that of previous periods, of 12.4% (also adjusted by the effect of the Turkish lira's depreciation), supported by the positive trend of Turkish lira deposits. Foreign-currency deposits again recorded a decrease.
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate. These rates, together with changes at current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
The growth of lending activity (performing loans under management) in the area amounted to 3.5% in the quarter, which is equivalent to a 11.8% increase in year-on-year terms due to loans in Turkish lira. Furthermore, advances in foreign currency remained stable during the first quarter of 2018. By segments, Garanti continued to perform favorably in business banking loans throughout the quarter and gained market share among its private peers. Although the impact of the extension to 2018 of the mentioned CGF program will be more limited than in 2017, Garanti began to take advantage of it during the first quarter of 2018. Garanti outperformed the sector in consumer general purpose loans and auto loans on the back of a favorable business cooperation with automobile companies. In mortgages, Garanti also gained market share among Turkish private banks. Lastly, there was a contraction in Garanti´s total credit card market share due to a shrinkage in consumer credit card balances.
In terms of asset quality, NPL ratio closed at 3.7%, well below the sector in local terms and NPL coverage ratio stands at 86%.
Customer deposits (58% of total liabilities in the area as of 31-3-2018) remained the main source of funding for the balance sheet in Turkey and grew by 4.3% in the quarter. Both, Turkish lira deposits and foreign currency deposits showed progress. In this line, demand deposits performed well, and continued to be one of the supports for the growth of net interest income (since they have almost zero cost), with a weight of 31% of total customer deposits.
Turkey generated a cumulative net attributable profit of €201m in the first quarter of 2018, which represents a 49.7% rise in year-on-year terms. The most significant aspects of the year-on-year changes in the income statement were as follows:
Income from fees and commissions grew by 39.9%. This significant increase is mainly driven by the good performance in payment systems, project finance arrangement fees and money transfer.
Positive contribution of NTI (in the first quarter of 2017 were negative), due to increased gains from the sale of securities and trading with derivatives and currencies.
Financial statements and relevant business indicators (Million euros and percentage)
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Income statement | 1Q18 | ∆ % | ∆ %(1) | 1Q17 |
| Net interest income | 753 | (7.3) | 10.4 | 812 |
| Net fees and commissions | 201 | 17.5 | 39.9 | 171 |
| Net trading income | 20 | n.s. | n.s. | (15) |
| Other income and expenses | 23 | 164.5 | 215.0 | 9 |
| Gross income | 996 | 2.0 | 21.5 | 976 |
| Operating expenses | (354) | (8.8) | 8.6 | (389) |
| Personnel expenses | (177) | (12.8) | 3.8 | (203) |
| Other administrative expenses | (137) | (1.7) | 17.0 | (139) |
| Depreciation | (40) | (12.5) | 4.2 | (46) |
| Operating income | 642 | 9.2 | 30.1 | 588 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(151) | 24.7 | 48.5 | (121) |
| Provisions or reversal of provisions and other results | 29 | 79.9 | 114.2 | 16 |
| Profit/(loss) before tax | 520 | 7.7 | 28.2 | 483 |
| Income tax | (114) | 7.0 | 27.5 | (106) |
| Profit/(loss) for the year | 407 | 7.8 | 28.4 | 377 |
| Non-controlling interests | (206) | (5.3) | 12.8 | (217) |
| Net attributable profit | 201 | 25.7 | 49.7 | 160 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | ∆ %(1) | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits |
2,942 | (27.1) | (21.5) | 4,036 |
| Financial assets designated at fair value | 5,993 | (6.6) | 0.6 | 6,419 |
| of which Loans and advances | - | - | - | - |
| Financial assets at amortized cost | 62,420 | (4.1) | 3.3 | 65,083 |
| of which loans and advances to customers | 49,751 | (3.2) | 4.3 | 51,378 |
| Tangible assets | 1,252 | (6.9) | 0.3 | 1,344 |
| Other assets | 1,781 | (1.7) | 5.9 | 1,811 |
| Total assets/liabilities and equity | 74,389 | (5.5) | 1.8 | 78,694 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
1,602 | 147.4 | 166.5 | 648 |
| Deposits from central banks and credit institutions | 9,021 | (19.4) | (13.2) | 11,195 |
| Deposits from customers | 43,246 | (3.2) | 4.2 | 44,691 |
| Debt certificates | 6,941 | (16.8) | (10.4) | 8,346 |
| Other liabilities | 11,002 | (2.8) | 4.7 | 11,321 |
| Economic capital allocated | 2,576 | 3.3 | 11.3 | 2,493 |
| Relevant business indicators | 31-03-18 | ∆ % | ∆ %(1) | 31-12-17 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) |
49,408 | (3.9) | 3.5 | 51,438 |
| Non-performing loans and guarantees given | 2,380 | (6.8) | 0.4 | 2,553 |
| Customer deposits under management (2) | 43,143 | (3.1) | 4.3 | 44,539 |
| Off-balance sheet funds (3) | 3,861 | (1.1) | 6.6 | 3,902 |
| Risk-weighted assets | 60,936 | (2.9) | 4.6 | 62,768 |
| Efficiency ratio (%) | 35.6 | 36.5 | ||
| NPL ratio (%) | 3.7 | 3.9 | ||
| NPL coverage ratio (%) | 86 | 85 | ||
| Cost of risk (%) (1) Figures at constant exchange rate. |
1.17 | 0.82 |
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
Business activity (1) (Year on year change at constant exchange rates. Data as of 31-03-2018)
Net interest income/ATAs (Percentage. Constant exchange rate)
(1) Excluding repos.
Operating income
(Million euros at constant exchange rates)
(1) At current exchange rate: 3.8%. (1) At current exchange rate: 13.8%
Breakdown of performing loans under management (1) (31-03-2018)
(Million euros at constant exchange rate)
Breakdown of customer funds under management (1) (31-03-2018)
(1) Excluding repos. (1) Excluding repos.
In 2017, the economies of South America consolidated their economic recovery. This is mainly the result of the following factors: i) increases in the prices of most commodities exported by the region and ii) the reduction of tensions in the financial markets. The above, together with reduced political uncertainty, is resulting in an expansion of investment and a strengthening of consumption. In addition, consumer confidence is steadily improving, as inflation falls, although the weak labor market may continue to be a liability.
With respect to the performance of the currencies, exchange rates have been relatively stable in recent months, which has combined with continued weak domestic demand to moderate inflation in most countries. In this context, monetary policy will remain expansive in most of the countries in the region, except in Argentina.
Regarding the banking systems within BBVA's regional footprint, the macroeconomic backdrop and reduced levels of banking penetration in these countries in aggregate terms (obviously with differences between countries) led to strong results in terms of the main indicators of profitability and solvency, while non-performing loans remained under control. In addition, there has been sustained growth in lending and deposits.
All the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate, unless expressly stated otherwise. These rates, together with changes at the current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
Lending (performing loans under management) in South America grew by 1.6% over the quarter and closed 11.7% higher than the volume of 31-Mar-2017. By country, the most significant increase was in Argentina (up 6.9% in the quarter and up 73.9% year-on-year).
Regarding asset quality portfolio, there was a slight increase in the NPL ratio, which closed the quarter at 3.6%, while the NPL coverage ratio fell slightly to 93%.
Customer funds have increased by 1.5% so far this year (up 7.9% year-on-year), supported by off-balance-sheet funds (up 9.5% in the quarter). By country, there was a positive trend in Argentina (up 12.4%) and Colombia (2.3%).
In the first quarter of 2018, South America generated a net attributable profit of €210m, which represents year-on-year growth of 33.4% (up 13.8% at current exchange rates). The key aspects of the income statement in this area were:
By country, revenues performed very well in Argentina, with a year-on-year growth in gross income of 47.5%. This increase was based both on the performance of recurring revenue (boosted by higher volumes of business) and in the positive performance of NTI (mainly due to exchange rates). Operating expenses grew below the rate of gross income, and impairment losses on financial assets also grew below the figure for lending. As a result, there was a significant yearon-year increase in net attributable profit (up 76.5%). In Chile, net interest income performed well (driven by the positive trend in lending and good management of customer spreads) while net fees and commissions and NTI declined. The above, together with controlled growth in expenses and the cost of risk, generated a net attributable profit that was 6.0% lower than the same period of the previous year. In Colombia, the increase in earnings was based on the good performance of net interest income (due to a positive performance in activity and customer spreads) and an increase in fees and commissions, which boosted gross income (up 13.4%), above the rate of growth of operating expenses (up 5.8%). Together with the reduction of impairment losses on financial assets, this led to a year-on-year increase of 91.6% in the net attributed profit. In Peru, net attributable profit fell by 4.4%, as the good performance of NTI and moderate growth in recurring revenue were largely offset by the increase in loan-loss provisions.
| Financial statements and relevant business indicators (Million euros and percentage) | ||||
|---|---|---|---|---|
| IFRS 9 | IAS 39 | |||
| Income statement | 1Q18 | ∆ % | ∆ % (1) | 1Q17 |
| Net interest income | 792 | (1.9) | 14.7 | 807 |
| Net fees and commissions | 163 | (7.5) | 10.6 | 176 |
| Net trading income | 112 | (2.7) | 15.1 | 115 |
| Other income and expenses | 12 | 123.5 | n.s. | 5 |
| Gross income | 1,079 | (2.3) | 15.4 | 1,104 |
| Operating expenses | (484) | (8.9) | 9.4 | (531) |
| Personnel expenses | (247) | (10.8) | 7.6 | (276) |
| Other administrative expenses | (207) | (8.0) | 10.5 | (225) |
| Depreciation | (30) | 1.2 | 17.8 | (30) |
| Operating income | 595 | 3.8 | 20.7 | 573 |
| Impaiment on financial assets not measured at fair value through profit or loss |
(167) | (10.2) | 2.2 | (186) |
| Provisions or reversal of provisions and other results | (11) | (38.3) | (27.6) | (18) |
| Profit/(loss) before tax | 417 | 12.9 | 32.6 | 369 |
| Income tax | (128) | 16.5 | 37.8 | (110) |
| Profit/(loss) for the year | 289 | 11.4 | 30.4 | 260 |
| Non-controlling interests | (79) | 5.5 | 23.1 | (75) |
| Net attributable profit | 210 | 13.8 | 33.4 | 185 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | ∆ %(1) | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits |
7,921 | (12.4) | (10.5) | 9,039 |
| Financial assets designated at fair value | 10,176 | (12.5) | (11.8) | 11,627 |
| of which Loans and advances | 361 | n.s. | n.s. | 3 |
| Financial assets at amortized cost | 51,934 | 1.4 | 2.5 | 51,207 |
| of which loans and advances to customers | 48,400 | 0.3 | 1.3 | 48,272 |
| Tangible assets | 688 | (5.2) | (2.1) | 725 |
| Other assets | 1,251 | (38.6) | -38.0 | 2,038 |
| Total assets/liabilities and equity | 71,969 | (3.6) | (2.4) | 74,636 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
2,575 | (8.8) | (8.4) | 2,823 |
| Deposits from central banks and credit institutions | 5,257 | (30.4) | (29.9) | 7,552 |
| Deposits from customers | 45,230 | (1.0) | 0.2 | 45,666 |
| Debt certificates | 7,412 | 2.8 | 3.8 | 7,209 |
| Other liabilities | 8,572 | 0.8 | 3.2 | 8,505 |
| Economic capital allocated | 2,923 | 1.5 | 2.4 | 2,881 |
| Relevant business indicators | 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (2) |
48,355 | 0.6 | 1.6 | 48,068 |
| Non-performing loans and guarantees given | 1,998 | 6.0 | 5.7 | 1,884 |
| Customer deposits under management (3) | 45,234 | (1.6) | (0.5) | 45,970 |
| Off-balance sheet funds (4) | 13,018 | 6.7 | 9.4 | 12,197 |
| Risk-weighted assets | 55,718 | (0.5) | 1.1 | 55,975 |
| Efficiency ratio (%) | 44.8 | 45.1 | ||
| NPL ratio (%) | 3.6 | 3.4 | ||
| NPL coverage ratio (%) | 93 | 89 | ||
| Cost of risk (%) | 1.37 | 1.32 | ||
| (1) Figures at constant exchange rates. |
(2) Excluding repos.
(3) Excluding repos and including specific marketable debt securities. (4) Includes mutual funds, pension funds and other off-balance sheet funds.
| IFRS 9 | IAS 39 | IFRS 9 | IAS 39 | |||||
|---|---|---|---|---|---|---|---|---|
| Operating income | Net attributable profit | |||||||
| Country | 1Q18 | ∆ % | ∆ % (1) | 1Q17 | 1Q18 | ∆ % | ∆ % (1) | 1Q17 |
| Argentina | 130 | 28.3 | 85.9 | 101 | 52 | 21.8 | 76.5 | 43 |
| Chile | 107 | (4.1) | 1.6 | 112 | 45 | (11.3) | (6.0) | 51 |
| Colombia | 161 | 5.0 | 18.3 | 154 | 64 | 70.1 | 91.6 | 37 |
| Peru | 164 | (9.3) | 3.2 | 181 | 36 | (15.9) | (4.4) | 43 |
| Other countries (2) | 32 | 27.8 | 46.9 | 25 | 13 | 23.4 | 47.4 | 11 |
| Total | 595 | 3.8 | 20.7 | 573 | 210 | 13.8 | 33.4 | 185 |
(1) Figures at constant exchange rates.
(2) Venezuela, Paraguay, Uruguay and Bolivia. Additionally, it includes eliminations and other charges.
| Argentina Chile |
Colombia | Peru | ||||||
|---|---|---|---|---|---|---|---|---|
| 31-03-18 | 31-12-17 | 31-03-18 | 31-12-17 | 31-03-18 | 31-12-17 | 31-03-18 | 31-12-17 | |
| Performing loans and advances to customers under management (1, 2) |
5,562 | 5,201 | 14,577 | 14,447 | 12,509 | 12,451 | 12,575 | 12,643 |
| Non-performing loans and guarantees given |
46 | 41 | 442 | 416 | 744 | 704 | 649 | 629 |
| Customer deposits under management (1, 3) |
6,436 | 6,158 | 9,047 | 9,575 | 13,039 | 12,798 | 11,755 | 11,907 |
| Off-balance sheet funds (1, 4) | 1,765 | 1,140 | 1,501 | 1,282 | 1,257 | 1,170 | 1,618 | 1,543 |
| Risk-weighted assets | 8,679 | 9,364 | 14,730 | 14,431 | 12,921 | 12,299 | 14,634 | 14,879 |
| Efficiency ratio (%) | 53.7 | 56.1 | 45.0 | 45.2 | 36.4 | 36.0 | 37.1 | 35.6 |
| NPL ratio (%) | 0.8 | 0.8 | 2.7 | 2.6 | 5.6 | 5.3 | 4.0 | 3.8 |
| NPL coverage ratio (%) | 202 | 198 | 62 | 60 | 97 | 88 | 102 | 100 |
| Cost of risk (%) | 1.09 | 0.61 | 0.90 | 0.76 | 1.83 | 2.59 | 1.62 | 1.14 |
(1) Figures at constant exchange rates.
(2) Excluding repos.
(3) Excluding repos and including specific marketable debt securities.
(4) Includes mutual funds, pension funds and other off-balance sheet funds.
Growth in the Eurozone appears to continue to be relatively stable and sound. Economic activity is mainly based on strong global trade and recovery in the investment. However, the recent sectoral confidence figures show a moderation of the optimism, which has been shifting to industrial activity and retail sales. Despite this, the foundations of private consumption remains sound. The labor market continues to improve and supports consumer optimism, in a context of growing, but still low inflation. In this situation, the ECB began a gradual reduction in asset purchases at the start of 2018, although it remains cautious. This has been reinforced by a somewhat stronger euro and the recent materialization of global risks associated with protectionism.
This business area basically includes the Group's retail and wholesale business in Europe (excluding Spain) and Asia.
The area's loan book (performing loans under management) fell by 1.5% at the close of the first quarter of 2018. The figures varied by geographic area: There was a decline in the Rest of Europe (down 2.3%) and a slight rise in Asia (up 2.0%).
With respect to the trajectory of the main credit risk indicators, the NPL ratio closed March at 2.1% (2.4% as of December 2017) and the NPL coverage ratio closed at 88% (74% as of 31-Dec-2017).
Customer deposits under management were still strongly influenced by the environment of negative interest rates. Data as of March 2018 showed a quarterly declined of 19.0% (down 20.7% in Europe but up 7.1% in Asia).
Regarding earnings, gross income declined by 7.3% year-on-year. Rest of Europe fell by 7.9% and Asia by 2.8%. Operating expenses continued to fall (down 9.0% year-on-year), due to tight control of personnel and discretionary costs. Lastly, there was an increase in impairment losses on financial assets. As a result, this geographic area contributed a cumulative net attributable profit in the first quarter of 2018 of €47 million, up 19.1% on the same period of 2017.
Financial statements and relevant business indicators (Million euros and percentage)
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Income statement | 1Q18 | ∆ % | 1Q17 |
| Net interest income | 43 | (7.0) | 46 |
| Net fees and commissions | 39 | (5.1) | 41 |
| Net trading income | 44 | (9.5) | 48 |
| Other income and expenses | 1 | (2.0) | 1 |
| Gross income | 126 | (7.3) | 135 |
| Operating expenses | (72) | (9.0) | (80) |
| Personnel expenses | (35) | (17.4) | (43) |
| Other administrative expenses | (36) | 5.8 | (34) |
| Depreciation | (2) | (52.8) | (3) |
| Operating income | 53 | (4.9) | 56 |
| Impaiment on financial assets not measured at fair value through profit or loss |
17 | 127.2 | 7 |
| Provisions or reversal of provisions and other results | (1) | (86.1) | (5) |
| Profit/(loss) before tax | 69 | 18.7 | 58 |
| Income tax | (22) | 17.8 | (19) |
| Profit/(loss) for the year | 47 | 19.1 | 40 |
|---|---|---|---|
| Non-controlling interests | - | - | - |
| Net attributable profit | 47 | 19.1 | 40 |
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits | 705 | (19.6) | 877 |
| Financial assets designated at fair value | 535 | (46.0) | 991 |
| of which Loans and advances | - | - | - |
| Financial assets at amortized cost | 15,129 | 0.8 | 15,009 |
| of which loans and advances to customers | 13,988 | (5.9) | 14,864 |
| Inter-area positions | - | - | - |
| Tangible assets | 37 | 2.5 | 36 |
| Other assets | 344 | (2.2) | 352 |
| Total assets/liabilities and equity | 16,749 | (3.0) | 17,265 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
43 | (4.8) | 45 |
| Deposits from central banks and credit institutions | 2,899 | 22.6 | 2,364 |
| Deposits from customers | 5,425 | (19.0) | 6,700 |
| Debt certificates | 221 | (37.7) | 354 |
| Inter-area positions | 6,410 | 13.6 | 5,643 |
| Other liabilities | 868 | (30.3) | 1,246 |
| Economic capital allocated | 884 | (3.2) | 913 |
| Relevant business indicators | 31-03-18 | ∆ % | 31-12-17 |
|---|---|---|---|
| Performing loans and advances to customers under management (1) | 15,126 | (1.5) | 15,362 |
| Non-performing loans and guarantees given | 462 | (16.9) | 556 |
| Customer deposits under management (1) | 5,425 | (19.0) | 6,700 |
| Off-balance sheet funds (2) | 390 | 3.9 | 376 |
| Risk-weighted assets | 14,907 | (1.6) | 15,150 |
| Efficiency ratio (%) | 57.7 | 65.9 | |
| NPL ratio (%) | 2.1 | 2.4 | |
| NPL coverage ratio (%) | 88 | 74 | |
| Cost of risk (%) | (0.35) | (0.16) | |
| (1) Excluding repos. |
(2) Includes mutual funds, pension funds and other off-balance sheet funds.
The Corporate Center basically includes the costs of the head offices that have a corporate function; management of structural exchange-rate positions; specific issues of equity instruments to ensure adequate management of the Group's global solvency; portfolios and their corresponding earnings, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with employees; goodwill and other intangibles. The highlights of this income statement for the first quarter of 2018 are summarized below:
As a result, the Corporate Center had a net attributable loss of €295m, compared with a loss in 2017 of €122 m.
Financial statements (Million euros and percentage)
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Income statement | 1Q18 | ∆ % | 1Q17 |
| Net interest income | (68) | (39) | (110) |
| Net fees and commissions | (7) | 47.5 | (5) |
| Net trading income | (24) | n.s. | 213 |
| Other income and expenses | (7) | (75.5) | (27) |
| Gross income | (106) | n.s. | 70 |
| Operating expenses | (224) | 7.3 | (209) |
| Personnel expenses | (123) | 4.7 | (118) |
| Other administrative expenses | (41) | 168.4 | (15) |
| Depreciation | (60) | (21.4) | (76) |
| Operating income | (330) | 137.6 | (139) |
| Impaiment on financial assets not measured at fair value through profit or loss |
(0) | n.s. | 1 |
| Provisions or reversal of provisions and other results | (63) | n.s. | (7) |
| Profit/(loss) before tax | (393) | 171.1 | (145) |
| Income tax | 98 | n.s. | 22 |
| Profit/(loss) for the year | (295) | 139.4 | (123) |
| Non-controlling interests | (0) | n.s. | 1 |
| Net attributable profit | (295) | 141.3 | (122) |
| IFRS 9 | IAS 39 | ||
|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits | 315 | n.s. | 5 |
| Financial assets designated at fair value | 3,346 | 33.1 | 2,514 |
| Financial assets at amortized cost | - | - | - |
| of which loans and advances to customers | - | - | - |
| Inter-area positions | (1,897) | 26.4 | (1,501) |
| Tangible assets | 1,661 | (12.3) | 1,893 |
| Other assets | 21,239 | 20.8 | 17,585 |
| Total assets/liabilities and equity | 24,664 | 20.3 | 20,497 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
- | - | - |
| Deposits from central banks and credit institutions | - | - | - |
| Deposits from customers | - | - | - |
| Debt certificates | 8,491 | (3.2) | 8,772 |
| Inter-area positions | (12,535) | (23.5) | (16,384) |
| Other liabilities | - | - | 443 |
| Economic capital allocated | (24,593) | (1.4) | (24,941) |
| Shareholders' funds | 53,301 | 1.3 | 52,606 |
Business activity (1) (Year on year change at constant exchange rates. Data as of 31-03-2018)
(1) Excluding repos.
Operating income (Million euros at constant exchange rates)
(1) At current exchange rate: -15.6%. (1) At current exchange rate: -13.1%.
Breakdown of performing loans under management (1) (31-03-2018)
(1) Excluding repos.
Gross income/ATAs
(Percentage. Constant exchange rates)
Net attributable profit (Million euros at constant exchange rates)
Breakdown of customer funds under management (1) (31-03-2018)
(1) Excluding repos.
The first quarter of the year was marked by an upturn in implied stock-market volatility. This situation led to synchronized falls in equity markets, but contagion to other risk assets was limited. Volatility has slowed since then, but it has not reversed. This could indicate that the low volatility environment of recent years is now a thing of the past.
In this context, the Federal Reserve (Fed) and the European Central Bank (ECB) have continued to make very cautious progress in normalizing their monetary policy, prompting slight upticks in sovereign debt yields in the United States, and to a lesser extent, in Europe. In contrast risk premiums have narrowed in the European periphery and emerging countries. In the case of Spain, the spread in 10-year yields with Germany moderated to levels below 70 basis points after the rating agencies Fitch and S&P upgraded Spanish debt by one notch to A-.
The euro appreciated against the dollar, which was hampered by doubts arising from the new trade policy and fiscal expansion in the United States. In general, emerging currencies appreciated against the dollar, except for the Argentine peso and the Turkish lira. All of them, however, except for the Mexican and Colombian peso, depreciated against the euro.
All the comments below on rates of change, for both activity and earnings, will be given at constant exchange rate, unless expressly stated otherwise. These rates, together with changes at the current exchange rate, can be seen in the attached tables of financial statements and relevant business indicators.
The market context remains unchanged, with margins squeezed and excess liquidity. Lending (performing loans under management) has remained flat since March 2017 (up 0.1%). However, there has been a decrease of 2.2% year-to-date. Performance has varied by geographic area: outstanding growth in the Rest of Europe, Asia, Mexico, Argentina and Chile, and a decline in Spain, the United States, Colombia and Peru. With respect to asset quality, the NPL ratio stood at 0.6% at the close of March 2018, while the NPL coverage ratio stood at 93%. The cost of risk was -0.04%.
Customer funds also declined in the quarter by 10.5%, with gains in Spain and Turkey that were not offset by the reduction observed in the United States, Mexico, South America and the Rest of Eurasia.
From the point of view of the mergers & acquisitions (M&A) business, activity in Spain and Portugal continued in line with the positive trends which began in 2017, driving figures close to their highest levels in the last five years. Despite a slight slowdown with respect to the first quarter of the previous year, the market is expected to continue to grow due to the availability of liquidity, good financing conditions and the economic growth in Spain.
In the Equity Capital Markets (ECM) UNIT, BBVA acted as global coordinator in the Metrovacesa IPO, the only operation one completed in Spain in the first quarter of the year. The Group was also Agent Bank for the Repsol scrip dividend.
Lastly, BBVA continued to demonstrate its leadership in the area of green loans, with 11 deals carried out in the last twelve months, making it the most active financial institution in this field in the world. These 11 deals amounted to a total of €8.9 billion in a market of some €15.5 billion (approximately 57% of the total).
CIB registered a net attributable profit in the quarter of €309m, up 54.2% on the previous quarter and down 7.0% on the first quarter of 2017. The highlights of the year-on-year changes in the income statement in this area are summarized below:
Financial statements and relevant business indicators (Million euros and percentage)
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Income statement | 1Q18 | ∆ % | ∆ % (1) | 1Q17 |
| Net interest income | 331 | (4.9) | 3.5 | 348 |
| Net fees and commissions | 180 | (15.7) | (8.5) | 214 |
| Net trading income | 270 | (12.4) | (6.4) | 308 |
| Other income and expenses | (8) | n.s. | n.s. | 18 |
| Gross income | 773 | (12.9) | (6.2) | 888 |
| Operating expenses | (258) | (7.0) | (1.3) | (278) |
| Personnel expenses | (121) | (9.8) | (5.2) | (135) |
| Other administrative expenses | (110) | (6.9) | 1.0 | (118) |
| Depreciation | (27) | 6.6 | 8.5 | (26) |
| Operating income | 515 | (15.6) | (8.5) | 610 |
| Impaiment on financial assets not measured at fair value through profit or loss |
10 | n.s. | n.s. | (10) |
| Provisions or reversal of provisions and other results | (26) | 66.1 | 68.9 | (15) |
| Profit/(loss) before tax | 500 | (14.6) | (7.6) | 585 |
| Income tax | (133) | (14.1) | (7.8) | (155) |
| Profit/(loss) for the year | 366 | (14.8) | (7.6) | 430 |
| Non-controlling interests | (58) | (23.0) | (10.2) | (75) |
| Net attributable profit | 309 | (13.1) | (7.0) | 355 |
| IFRS 9 | IAS 39 | |||
|---|---|---|---|---|
| Balance sheets | 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 |
| Cash, cash balances at central banks and other demand deposits | 3,403 | (19.0) | (16.4) | 4,200 |
| Financial assets designated at fair value | 101,640 | 39.5 | 38.3 | 72,878 |
| of which Loans and advances | 24,265 | n.s. | n.s. | 648 |
| Financial assets at amortized cost | 63,090 | (32.8) | (32.4) | 93,948 |
| of which loans and advances to customers | 55,238 | (18.2) | (17.6) | 67,529 |
| Inter-area positions | - | - | - | - |
| Tangible assets | 32 | (7.1) | (7.2) | 35 |
| Other assets | 3,221 | 37.5 | 38.2 | 2,342 |
| Total assets/liabilities and equity | 171,386 | (1.2) | (1.1) | 173,403 |
| Financial liabilities held for trading and designated at fair value through profit or loss |
90,116 | 83.7 | 83.3 | 49,060 |
| Deposits from central banks and credit institutions | 14,597 | (67.9) | (68.2) | 45,427 |
| Deposits from customers | 39,159 | (19.7) | (19.2) | 48,792 |
| Debt certificates | 898 | 71.7 | 72.1 | 523 |
| Inter-area positions | 17,596 | (18.9) | (17.7) | 21,687 |
| Other liabilities | 5,309 | 35.9 | 34.4 | 3,908 |
| Economic capital allocated | 3,711 | (7.4) | (7.0) | 4,007 |
| (1) Figures at constant exchange rates. |
| Relevant business indicators | IFRS 9 | IAS 39 | ||
|---|---|---|---|---|
| 31-03-18 | ∆ % | ∆ % (1) | 31-12-17 | |
| Performing loans and advances to customers under management (2) | 55,184 | (2.0) | (1.1) | 56,315 |
| Non-performing loans and guarantees given | 543 | (7.0) | (6.8) | 584 |
| Customer deposits under management (2) | 39,035 | (11.5) | (10.8) | 44,095 |
| Off-balance sheet funds (3) | 1,366 | 0.6 | 1.1 | 1,357 |
| Efficiency ratio (%) | 33.4 | 34.1 | ||
| NPL ratio (%) | 0.6 | 0.7 | ||
| NPL coverage ratio (%) | 93 | 112 | ||
| Cost of risk (%) | (0.04) | 0.24 | ||
| (1) Figures at constant exchange rates. |
(1) Figures at constant exchange rates.
(2) Excluding repos. (3) Includes mutual funds, pension funds and other off-balance sheet funds.
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