The bank tax represents an impact of 225 million euros
BBVA obtained attributable profit of 1,846 million euros in the first quarter of 2023, 39.4% more at current exchange rates compared to the same period in 2022, and 40.5% more at constant exchange rates, according to The entity has informed the National Securities Market Commission (CNMV).
The entity explains that the result was boosted by the good performance of recurring income –the interest margin and net commissions–, especially in Mexico and Spain, and the growth of the activity.
These results include the registration for the 2023 financial year of the temporary lien of credit institutions and financial credit establishments for 225 million euros.
The group attracted 2.6 million new clients in the first three months of the year, while credit increased by 9.8% in the interannual rate. In this way, the increase in credit activity explains, together with the improvement in the customer differential, the evolution of the group’s net interest income, which amounted to 5,642 million euros between January and March, 43.3% more with Compared to the same period of the previous year.
Net commission income reached 1,439 million euros, representing an increase of 15.8% year-on-year. The entity has especially highlighted the good evolution of this line in Mexico and Türkiye. Overall, recurring revenue grew by 36.7% year-on-year, up to 7,081 million euros.
For its part, the result of financial operations (ROF) registered a decrease of 18.7% in the same period, up to 438 million euros. The line of other operating income and charges included a negative impact of 225 million euros due to the extraordinary tax on banks in Spain. In short, the gross margin amounted to 6,958 million euros in the quarter, representing a year-on-year increase of 32.7%.
Operating expenses increased by 25.4% throughout the group, largely impacted by the inflation rates observed in the countries where it is present. Despite the foregoing, thanks to the growth in gross margin, higher than that of expenses, the efficiency ratio stood at 43.3% as of March 31, 2023, an improvement of 241 basis points with respect to the ratio registered 12 months earlier, in constant terms.
As a result of all of the above, the net margin amounted to 3,942 million euros, with a year-on-year increase of 38.6%.
Provisions for impairment of financial assets increased by 28.9% in year-on-year terms and at constant exchange rates, with higher provisions mainly in South America and Mexico, in a context of growth in activity. The quarterly cost of risk stood at 1.05%, in line with expectations and with the level of the last quarter of 2022.
The default rate was 3.3% –compared to 3.4% in December and 4.0% in March 2022– and the coverage increased to 82%, compared to 81% registered three months before.
The number of loans and advances to customers registered a growth of 1.4% compared to the end of December 2022, favored by the evolution of loans to individuals, which increased by 2.9%.
Customer funds showed a growth of 2.3% compared to the end of December 2022 thanks to the good performance of off-balance sheet funds –which increased by 7.2%, also linked to a greater customer preference for the same.
BBVA points out that these results have allowed it to boost profitability, with a ROTE of 16.3% and an ROE of 15.5%, the highest figures in the last 10 years, as well as to continue strengthening its capital. The CET1 ‘fully loaded’ ratio as of March 31 stood at 13.13%, above the regulatory requirement of 8.75% and the target range, which ranges from 11.5% to 12%.
As for the liquidity coverage ratio, it stood at 142% at the end of the period. However, given the business model of BBVA subsidiaries (known as MPE), this ratio limits the LCR numerator of subsidiaries other than BBVA, S.A. to 100%. Therefore, the resulting ratio is below that of the individual units. The LCR of the main components reaches BBVA S.A. 161%, in Mexico 188% and in Türkiye 217%). Without taking the restriction into account, the Group’s LCR ratio would reach 184%.
DROP IN PROFIT IN SPAIN DUE TO THE TAX
By business areas, BBVA indicates that, in Spain, credit investment remained stable in year-on-year terms, with a slight growth of 0.1%, and highlights the good performance of the “most profitable” segments, such as companies, consumer and cards. For their part, customer funds increased by 2.2% thanks to time deposits.
The attributable profit in the country reached 541 million euros in the first quarter, 9.5% less than in the same period of the previous year, due to the impact of the 225 million euros of the tax.
The risk indicators remained stable: both the default rate (3.9%) and the cost of risk (0.27%) were in line with the close of the previous year, while the coverage rate fell slightly , up to 59%.
In Mexico, lending activity showed strength during the quarter, with a year-on-year increase of 13.9%, driven by all segments. Customer funds also grew, 6.2% year-on-year, thanks mainly to activity in investment funds.
In this way, BBVA achieved a record attributable result of 1,285 million euros in Mexico at the end of the first quarter, 44.2% more in the year-on-year rate, mainly due to the boost in credit activity and its impact on the growth of the margin of interests.
Turkey generated an attributable result of 277 million euros during the first quarter, compared to a negative result of 76 million euros in the same period of 2022. Both quarters reflect the impact of the application of the hyperinflation accounting rule.
In South America, the attributable result was €184 million, representing an increase of 57.2% year-on-year, mainly due to growth in recurring revenues and ROF, which offset the increase in expenses.
The CEO of BBVA, Onur Genç, has stated that these “solid” results “add value to BBVA’s strength in times of high volatility”, such as those experienced in the first quarter due to the collapse of various US regional banks and the sale of Credit Suisse to UBS.
In relation to its strategic priorities, Genç has highlighted that between January and March the entity channeled 14,000 million in sustainable business, attracted 2.6 million new clients and the loan portfolio grew by 10%. “With this, we amplify the positive impact on society through our main function, which is financing families, the self-employed and companies around the world.”
“For all of the above, due to the financial strength of the bank, its business model and the strategic focus on digitization, innovation and sustainability, at BBVA we continue to look to the future with optimism”, he concluded.
