Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of January, 2024

Commission file number: 1-10110

 

 

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

(Exact name of Registrant as specified in its charter)

BANK BILBAO VIZCAYA ARGENTARIA, S.A.

(Translation of Registrant’s name into English)

 

 

Calle Azul 4,

28050 Madrid

Spain

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F    X          Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 Yes          No      X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 Yes          No      X

 

 

 


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Main data

 

 BBVA GROUP MAIN DATA (CONSOLIDATED FIGURES)  
      31-12-23          Δ  %          31-12-22          31-12-21  
 Balance sheet (millions of euros) (1)                                                            
 Total assets      775,558          8.9          712,092          662,885  
 Loans and advances to customers (gross)      388,912          5.5          368,588          330,055  
 Deposits from customers      413,487          4.8          394,404          349,761  
 Total customer funds      577,853          6.1          544,576          496,954  
 Total equity      55,265          9.4          50,517          48,760  
 Income statement (millions of euros) (1)                                                            
 Net interest income      23,089          20.7          19,124          14,686  
 Gross income      29,542          19.4          24,743          21,066  
 Operating income      17,233          22.7          14,042          11,536  
 Net attributable profit (loss)      8,019          26.1          6,358          4,653  
 Net attributable profit (loss) excluding non-recurring impacts (1)(2)      8,019          22.3          6,559          5,069  
 The BBVA share and share performance ratios                                                            
 Number of shares outstanding (million)      5,838          (3.2)          6,030          6,668  
 Share price (euros)      8.23          46.0          5.63          5.25  
 Adjusted earning (loss) per share (euros) (1)(2)      1.32          26.8          1.04          0.71  
 Earning (loss) per share (euros) (1)(2)      1.29          32.0          0.98          0.67  
 Book value per share (euros) (1)(2)      8.86          13.9          7.78          6.86  
 Tangible book value per share (euros) (1)(2)      8.46          13.9          7.43          6.52  
 Market capitalization (millions of euros)      48,023          41.4          33,974          35,006  
 Dividend yield (dividend/price; %) (2)(3)      5.7               6.2          2.6  
 Significant ratios (%)                                                            

Adjusted ROE (net attributable profit (loss)/average shareholders’ funds +/- average accumulated other comprehensive income) (1)(2)

     16.2               14.4          11.4  

Adjusted ROTE (net attributable profit (loss)/average shareholders’ funds excluding average intangible assets +/- average accumulated other comprehensive income) (1)(2)

     17.0               15.1          12.0  
 Adjusted ROA (profit (loss) for the period / average total assets - ATA) (1)(2)      1.12               0.99          0.94  
 Adjusted RORWA (profit (loss) for the period / average risk-weighted assets - RWA) (1)(2)      2.38               2.12          2.01  
 Efficiency ratio (1)(2)      41.7               43.2          45.2  
 Cost of risk (1)(2)      1.15               0.91          0.93  
 NPL ratio (1)(2)      3.4               3.4          4.1  
 NPL coverage ratio (2)      77               81          75  
 Capital adequacy ratios (%)                                                            
 CET1 fully-loaded      12.67               12.61          12.75  
 CET1 phased-in (4)      12.67               12.68          12.98  
 Total ratio phased-in (4)      16.58               15.98          17.24  
 Other information                                                            
 Number of active customers (million)      71.5          6.3          67.3          60.8  
 Number of shareholders (5)      742,194          (7.4)          801,216          826,835  
 Number of employees      121,486          5.0          115,675          110,432  
 Number of branches      5,949          (1.5)          6,040          6,083  
 Number of ATMs      30,301          1.7          29,807          29,148  

(1) Balances as of 31-12-2022 restated according to IFRS 17 - Insurance contracts.

(2) For more information, see Alternative Performance Measures at the end of this report.

(3) Calculated by dividing the dividends paid in the last twelve months by the closing price of the period.

(4) Phased-in ratios include the temporary treatment on the impact of IFRS 9, calculated in accordance with Article 473 bis amendments of the Capital Requirements Regulation (CRR), introduced by the Regulation (EU) 2020/873. As of December 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.

(5) See the footnote of the shareholder structure table in the Solvency chapter of this report.


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Contents

 

Highlights

     4  

Macroeconomic environment

     6  

Group

     7  

Results

     7  

Balance sheet and business activity

     13  

Solvency

     15  

Risk management

     18  

Business areas

     24  

Spain

     27  

Mexico

     30  

Turkey

     34  

South America

     38  

Rest of Business

     43  

Corporate Center

     46  

Other information: Corporate & Investment Banking

     47  

Alternative Performance Measures (APMs)

     50  

Disclaimer

     62  


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Highlights

Results and business activity

The BBVA Group generated a net attributable profit of 8,019m between January and December of 2023, boosted by the performance of recurring income of the banking business, mainly the net interest income. This result means an increase of 22.3% compared to the previous year, excluding the net impact arisen from the purchase of offices in Spain in 2022 from the comparison.

These results include the recording for the total annual amount paid for the temporary tax on credit institutions and financial credit institutions for 215m, included in the other operating income and expenses line of the income statement.

Operating expenses increased by 19.7% at Group level at constant exchange rates, largely impacted by the inflation rates observed in the countries in which the Group operates. Thanks to the remarkable growth in gross income (+30.3%), higher than the growth in expenses, the efficiency ratio stood at 41.7% as of December 31, 2023, with an improvement of 370 basis points, in constant terms, compared to the ratio recorded 12 months earlier.

The provisions for impairment on financial assets increased (+33.8% in year-on-year terms and at constant exchange rates), with lower requirements in Turkey, which were offset by higher provisioning needs, mainly in Mexico and South America, in a context of rising interest rates and growth in the most profitable segments, in line with the Group’s strategy.

Loans and advances to customers recorded an increase of 5.7% compared to the end of December 2022, strongly favored by the evolution of retail loans (+7.2% at Group level).

Customer funds increased by 6.1% compared to the end of the previous year, thanks to both the growth in deposits from customers, which increased by 4.8% and to the increase in off-balance sheet funds, which grew by 9.5%.

 

LOANS AND ADVANCES TO CUSTOMERS AND TOTAL

CUSTOMER FUNDS (VARIATION COMPARED  TO 31-12-2022) 

 

 

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Business areas

As for the business areas evolution, excluding the effect of currency fluctuation in those areas where it has an impact, in each of them it is worth mentioning:

 

   

Spain generated a net attributable profit of 2,755m in 2023, 65.3% higher than in the previous year, which included the net impact arisen from the purchase of offices to Merlin (-201 millions of euros). In 2023, the favorable evolution of the net interest income stands out, which continued to boost the gross income growth despite including the total annual amount paid for the temporary tax on credit institutions and financial credit institutions.

 

   

In Mexico, BBVA achieved a cumulative net attributable profit of 5,340m by the end of December 2023, representing an increase of 17.1% compared to the 2022, mainly as a result of the significant growth in net interest income, thanks to the strong boost of the activity and the improvement in the customer spread.

 

   

Turkey generated a net attributable profit of 528m during 2023, which compares positively with the accumulated result reached at the end of December 2022, both periods reflecting the impact of the application of hyperinflation accounting.

 

   

South America generated a cumulative net attributable profit of 613m at the end of the year 2023, which represents a year-on-year increase of +43.2%, driven by the good performance of recurring income (41.4%) and the area’s NTI (net trading income).

 

   

Rest of Business achieved an accumulated net attributable profit of 389m during 2023, 63.7% higher than in the previous year, thanks to a favorable performance of the net interest income, and the NTI.

The Corporate Center recorded 2023a net attributable profit of -1,607m between January and December of 2023, compared with -922m recorded on the same period of the previous year, mainly due to a negative contribution in the NTI line from exchange rate hedges as a result of a better than expected currency performance, in particular, the Mexican peso during the first half of the year.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Lastly, and for a broader understanding of the Group’s activity and results, supplementary information is provided below for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. CIB generated a net attributable profit of 2,253m between January and December of 2023. These results, which do not include the application of hyperinflation accounting, represent an increase of 44.5% on a year-on-year basis and reflect the contribution of the diversification of products and geographical areas, as well as the progress of the Group’s wholesale businesses in its strategy, leveraged on globality and sustainability, with the purpose of being relevant to its clients.

 

NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS)

       

 

NET ATTRIBUTABLE PROFIT BREAKDOWN (1)

(PERCENTAGE. 2023)

 

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General note: 2022 excludes net impact arisen from the purchase of offices in Spain.

    

 

(1) Excludes the Corporate Center.

Solvency

The Group’s CET1 fully-loaded ratio stood at 12.67% as of December 31, 2023, which allows to keep maintaining a large management buffer over the Group’s CET1 requirement (8.78%)1 and above the Group’s established target management range of 11.5-12.0% of CET1.

Shareholder remuneration

Regarding shareholder remuneration, a cash gross distribution in the amount of 0.39 per share on April as final dividend of 2023 and the execution of a new Share Buyback Program of BBVA for an amount of 781m, subject to the corresponding regulatory authorizations and the communication with the program specific terms and conditions before its effective start, are expected to be submitted to the relevant governing bodies for consideration. Thus, the total distribution for the year 2023 will reach 4,010m, a 50% of the net attributable profit, which represents 0.68 gross per share, taking into account the payment in cash of 0.16 gross per share paid in October 2023 as interim dividend of the year.

 

 

 

1 This includes the update of the countercyclical capital buffer calculated on the basis of exposure at end September 2023.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Macroeconomic environment

Economic global growth has slowed down through 2023 and, particularly, during the last months, due to the high inflation, the tightening of monetary conditions and the gradual fading of the positive effects linked to the reopening after the COVID-19 pandemic. The slowdown has been, in general, less harsh than expected, and economic activity remains relatively dynamic, particularly in the Unites States, thanks to the dynamism of the labor markets, expansionary fiscal policies and the gradual fading of supply shocks triggered by the pandemic and the war in Ukraine.

Falling commodity prices compared to the levels seen in 2022 and the improvements in production process bottlenecks have contributed to a significant moderation of inflation. which, in annual terms, reached 3.4% in the United States and 2.9% in the Eurozone in December 2023, far below the levels registered at the end of 2022 (6.5% in the United States and 9.2% in the Eurozone).

In this context, the process of interest rate hikes launched approximately two years ago seems to have reached an end. According to BBVA Research, it is most likely that inflation will keep evolving favorably in the next months, enabling the start of a gradual process of relaxation of monetary conditions around mid-2024, which would take monetary policy interest rates to around 4.50% in the United States and 3.75% (in the case of refinancing operation rates) in the Eurozone by the end of 2024. However, it cannot be ruled out that monetary policy benchmark rates might be reduced more quickly in the future, mainly if inflation evolves surprisingly on the downside. In any case, it is expected that both the U.S. Federal Reserve (“Fed”) and the European Central Bank (“ECB”) will continue taking liquidity reduction measures over 2024.

BBVA Research forecasts that global growth will be approximately 3.0% in 2024 (unchanged from the previous forecast and similar to the forecasted for the GDP growth in 2023) In the United States, strong domestic demand supports a slightly upward revision of growth forecasts for 2023, from 2.3% to 2.4%, but the restrictive monetary conditions are likely to contribute to a growth deceleration in 2024, to 1.5%, without changes from the previous forecast. In China, structural challenges to avoid a fast economic deceleration remain, but a series of stimulus measures have enabled a greater than expected dynamism of activity in the past few months, which supports an upward revision of the growth in 2023 from 4.8% to 5.2%. The GDP growth forecast for 2024 remains unchanged at 4.4%. In the Eurozone, economic activity came to a standstill in the last months, reinforcing the low growth prospects; the forecast of the GDP expansion of the region remains at 0.4% for 2023 and it has been cut from 1.0% to 0.7% for 2024.

In this context of below potential growth and still high interest rates, aggregate demand moderation will probably favor an additional inflation reduction, which, however, would remain somewhat over the inflation targets in the United States and the Eurozone until the end of 2024.

In any case, uncertainty remains high, and a number of factors could lead to more adverse scenarios unfolding. Persistently high inflation and high interest rates, due to eventual supply shocks generated by the current geopolitical turbulence, and particularly by the recent maritime trade disruptions in the Red Sea, or other factors, could trigger a deep and widespread recession, as well as new bouts of financial volatility. Moreover, the slowdown in China could end up being more severe than expected. Finally, current geopolitical turbulence might contribute to higher energy prices and new disruptions in global supply chains.

 

 

 GDP GROWTH ESTIMATES IN 2023 (PERCENTAGE. YEAR-ON-YEAR VARIATION)

 

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Source: BBVA Research estimates.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Group

Unless expressly indicated otherwise, for a better understanding of the changes under the main headings of the Group’s income statement, the rates of change provided below refer to constant exchange rates. When comparing two dates or periods in this report, the impact of changes in the exchange rates against the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange rates remain constant. For this purpose, the average exchange rate of the currency of each geographical area of the most recent period is used for both periods, except for those countries whose economies have been considered hyperinflationary, for which the closing exchange rate of the most recent period is used.

Quarterly evolution of results

The result achieved by the BBVA Group in the fourth quarter of 2023 was 2,058m, 26.1% above the previous quarter with the following trends standing out:

 

   

In the recurring income, stability of net interest income (-0.1%) and good evolution of net fees and commissions (+10.8%).

 

   

Favorable evolution of NTI (+45.0%), with Mexico and South America standing out.

 

   

The results under the “Other operating income and expenses” line improved compared to the previous quarter, despite the contribution to the Deposit Guarantee Fund (FGD, for its acronym in Spanish) in Spain, mainly thanks to the lower hyperinflation adjustment in Turkey, whose quarterly inflation rate decreased considerably.

 

CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)  
    2023         2022  
     4Q     3Q     2Q     1Q         4Q     3Q     2Q     1Q  

Net interest income

      5,246         6,434         5,768         5,642             5,334         5,252         4,595         3,943  

Net fees and commissions

    1,694       1,685       1,470       1,439         1,328       1,385       1,413       1,247  

Net trading income

    753       658       334       438         269       573       516       580  

Other operating income and expenses

    (255)       (820)       (383)       (561)         (443)       (372)       (501)       (374)  

Gross income

    7,438       7,956       7,189       6,958           6,489       6,838       6,022       5,395  

Operating expenses

    (3,068)       (3,303)       (2,922)       (3,016)         (2,875)       (2,803)       (2,618)       (2,406)  

Personnel expenses

    (1,693)       (1,756)       (1,530)       (1,551)         (1,547)       (1,471)       (1,344)       (1,238)  

Other administrative expenses

    (1,025)       (1,169)       (1,054)       (1,127)         (990)       (993)       (935)       (855)  

Depreciation

    (349)       (378)       (337)       (339)         (338)       (338)       (340)       (313)  

Operating income

    4,370       4,654       4,267       3,942           3,614       4,035       3,404       2,989  

Impairment on financial assets not measured at fair value through profit or loss

    (1,225)       (1,210)       (1,025)       (968)         (998)       (940)       (704)       (737)  

Provisions or reversal of provisions

    (163)       (81)       (115)       (14)         (50)       (129)       (64)       (48)  

Other gains (losses)

    (49)       2       50       (16)         (6)       19       (3)       20  

Profit (loss) before tax

    2,932       3,365       3,178       2,944           2,559       2,985       2,634       2,225  

Income tax

    (799)       (1,226)       (1,028)       (950)         (850)       (1,005)       (680)       (903)  

Profit (loss) for the period

    2,133       2,139       2,150       1,994           1,709       1,980       1,954       1,321  

Non-controlling interests

    (75)       (56)       (118)       (148)         (146)       (143)       (120)       3  

Net attributable profit (loss) excluding non-recurring impacts

    2,058       2,083       2,032       1,846         1,563       1,838       1,834       1,325  

Discontinued operations and Other (1)

                                          (201)        

Net attributable profit (loss)

    2,058       2,083       2,032       1,846         1,563       1,838       1,633       1,325  

Adjusted earning (loss) per share (euros) (2)

    0.34       0.34       0.34       0.30         0.25       0.29       0.29       0.21  

Earning (loss) per share (euros) (2)

    0.33       0.33       0.33       0.29         0.24       0.28       0.24       0.19  

General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.

(1) Includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022 for -201m.

(2) Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Year-on-year performance of results

The BBVA Group generated a net attributable profit of 8,019m between January and December of 2023, boosted by the performance of recurring income of the banking business, mainly the net interest income, which grew at a rate of 28.6%. This result means an increase of 35.4% compared to the previous year, excluding the net impact arisen from the purchase of offices in Spain in 2022 from the comparison.

It should to be noted that 2023 results include the recording for the total annual amount paid for the temporary tax on credit institutions and financial credit institutions2 for 215m, included in the other operating income and expenses line of the income statement. The estimated impact corresponding to the year 2024 is 285 million and will be recorded on the first quarter of 2024 in such caption of the consolidated income statement.

 

 

 CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)

 

 
            Δ % at  constant         
      2023      Δ %      exchange rates      2022  

 Net interest income

     23,089              20.7        28.6        19,124  

 Net fees and commissions

     6,288        17.0        21.3        5,372  

 Net trading income

     2,183        12.6        31.8        1,938  

 Other operating income and expenses

     (2,018)        19.4        (4.9)        (1,691)  

 Gross income

     29,542        19.4        30.3        24,743  

 Operating expenses

     (12,308)        15.0        19.7        (10,701)  

  Personnel expenses

     (6,530)        16.6        22.2        (5,601)  

  Other administrative expenses

     (4,375)        16.0        21.3        (3,773)  

  Depreciation

     (1,403)        5.6        5.1        (1,328)  

 Operating income

     17,233        22.7        39.1        14,042  

 Impairment on financial assets not measured at fair value through profit or loss 

     (4,428)        31.1        33.8        (3,379)  

 Provisions or reversal of provisions

     (373)        28.3        64.8        (291)  

 Other gains (losses)

     (13)        n.s.        n.s.        30  

 Profit (loss) before tax

     12,419        19.4        40.0        10,402  

 Income tax

     (4,003)        16.4        33.0        (3,438)  

 Profit (loss) for the period

     8,416        20.8        43.6        6,965  

 Non-controlling interests

     (397)        (2.1)        n.s.        (405)  

 Net attributable profit (loss) excluding non-recurring impacts

     8,019        22.3        35.4        6,559  

 Discontinued operations and Other (1)

                          (201)  

 Net attributable profit (loss)

     8,019        26.1        40.1        6,358  

 Adjusted earning (loss) per share (euros) (2)

     1.32              1.04  

 Earning (loss) per share (euros) (2)

     1.29              0.98  

General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.

(1) Includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022 for -201m.

(2) Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.

The accumulated net interest income as of December 31, 2023 was higher than in the same period of the previous year (+28.6%), with increases in all business areas, with a customer spread improvement in the main areas and higher performing loan volumes. The good evolution in Spain, Mexico and South America is noteworthy.

Positive evolution in the net fees and commissions line, which increased by 21.3% year-on-year due to favorable performance in payment systems and, to a lesser extent, asset management. By business areas, Turkey´s and Mexico´s contribution stands out.

 

 

2 In compliance with Law 38/2022, of December 27, which establishes the obligation to pay a patrimonial benefit of a public and non-taxable nature during the years 2023 and 2024 for credit institutions that operate in Spanish territory whose sum of total interest income and fee and commission income corresponding to the year 2019 is equal to or greater than 800m.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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NET INTEREST INCOME / AVERAGE TOTAL ASSETS

(PERCENTAGE AT CONSTANT EXCHANGE RATES)

     

 

NET INTEREST INCOME PLUS NET FEES AND COMMISSIONS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)

 

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(1) At current exchange rates: +19.9%.

At the end of December 2023, NTI grew by 31.8%, with a positive performance of this line in all business areas, favored by the results of the Global Markets unit, which offset the negative results recorded on the Corporate Center.

The other operating income and expenses line accumulated as of December 31, 2023, a result that compares negatively with last year, mainly due to the higher negative adjustment for hyperinflation in Argentina. This line also includes the contribution to the public protection schemes for bank deposits in Spain, which in 2023 was lower than the previous year’s contribution, and the recording of 215m, corresponding to the total annual amount paid for the temporary tax on credit institutions and financial credit establishments, also in Spain.

 

 

GROSS INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)

 

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(1) At current exchange rates: +19.4%.

On a year-on-year basis, operating expenses increased by 19.7% at the Group level. This increase is largely impacted by the inflation rates observed in the countries in which the Group operates, which, on the one hand, have been affected by the measures implemented by the Group in 2023 to compensate the loss of purchasing power of the workforce and, on the other hand, have had an effect in general expenses.

Thanks to the remarkable growth in gross income (+30.3%), the efficiency ratio stood at 41.7% as of December 31, 2023, with an improvement of 370 basis points compared to the ratio recorded 12 months earlier, highlighting the evolution in Rest of Business and Spain.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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OPERATING EXPENSES (MILLIONS OF EUROS AT CONSTANT
EXCHANGE RATES)

    

 

EFFICIENCY RATIO (PERCENTAGE)

 

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(1) At current exchange rates: +15.0%.     

The impairment on financial assets not measured at fair value through profit or loss (impairment on financial assets) at the end of December 2023 was 33.8% higher than in the same period of the previous year, with lower requirements in Turkey, which were offset by higher provisioning needs, mainly in Mexico and South America, in a context of rising interest rates and growth in the most profitable segments, in line with the Group’s strategy.

 

 

OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT

EXCHANGE RATES)

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(1) At current exchange rates: +22.7%.

 

 IMPAIRMENT ON FINANCIAL ASSETS (MILLIONS OF EUROS

AT CONSTANT EXCHANGE RATES)

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(1) At current exchange rates: +31.1%.
 

 

The provisions or reversal of provisions line (hereinafter, provisions) registered at the end of December 2023 higher provisions compared to the same period of the previous year, mainly originated from Spain and Turkey.

On the other hand, the other gains (losses) line closed December 2023 with a balance of -13m, which compares unfavorably with the positive result of the previous year.

As a result of the above, the BBVA Group generated a net attributable profit of 8,019m between January and December of the year 2023, which compares very positively with the result for the previous year (+35.4%, excluding the net impact arisen from the purchase of offices in Spain in 2022). These solid results are supported by the favorable evolution of the banking business recurring income, which offset higher operating expenses and the increase in provisions for impairment losses on financial assets.

The cumulative net attributable profits, in millions of euros, at the end of December 2023 for the business areas that compose the Group were as follows: 2,755m in Spain, 5,340m in Mexico, 528m in Turkey, 613m in South America and 389m in Rest of Business.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF

EUROS AT CONSTANT EXCHANGE RATES)

       

 

NET ATTRIBUTABLE PROFIT (LOSS) EXCLUDING NON- RECURRING IMPACTS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)

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(1) At current exchange rates: +26.1%     

General note: non-recurring impacts include the net impact arisen from the purchase of offices in Spain in 2Q22.

 

(1) At current exchange rates: +22.3%.

The Group’s excellent performance has also allowed to accelerate value creation, as reflected in the growth of the tangible book value per share and dividends, which at the end of December 2023 was 20.2% higher than in the same period of the previous year.

 

TANGIBLE BOOK VALUE PER SHARE AND DIVIDENDS (EUROS)

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General note: replenishing dividends paid in the period. For more information, see Alternative Performance Measures at the end of this report.

 EARNING (LOSS) PER SHARE (1) (EUROS)

 

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General note: adjusted by additional Tier 1 instrument remuneration. Adjusted EPS excludes, in addition, the net impact arisen from the purchase of offices in Spain in 2Q22. For more information, see Alternative Performance Measures at the end of this report

(1) The accumulated EPS stands at 0.98 and 1.29 in 2022 and 2023, respectively.

 

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Lastly, the Group’s profitability indicators improved in year-on-year terms supported by the favorable performance of results.

 

 

 ROE (1) AND ROTE (1) (PERCENTAGE)

 

 

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 ROA (1) AND RORWA (1) (PERCENTAGE)

 

 

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(1) The ratio of 2021 excludes the results generated by BBVA USA and the rest of the companies in the United States until its sale to PNC on June 1, 2021 and the net cost related to the restructuring process. The ratio of 2022 excludes the net impact arisen from the purchase of offices in Spain.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Balance sheet and business activity

The most relevant aspects related to the evolution of the Group’s balance sheet and business activity as of December 31, 2023 are summarized below:

 

   

Loans and advances to customers recorded an increase of 5.7% compared to the end of December 2022, strongly favored by the evolution of retail loans (+7.2% at Group level), supported by both the good performance of credit cards and consumer loans (+13.7% overall at Group level) in all geographical areas, and mortgage loans, specially in Mexico. On the other hand, business loans (+3.2%) showed a positive dynamic, originating mainly in Mexico and in Rest of Business, and loans to the public sector grew (+11.4%) thanks to the performance of Mexico and Spain.

 

   

Customer funds increased by 6.1% compared to the end of the previous year, thanks to both the growth in deposits from customers, which increased by 4.8% due to the positive evolution of time deposits in all business areas, and to the increase in off-balance sheet funds, which grew by 9.5%, favored by the the evolution of mutual funds and customer portfolios, with the good performance in Mexico and Spain being noteworthy.

 

 

 CONSOLIDATED BALANCE SHEET (MILLIONS OF EUROS)

 

 
      31-12-23        Δ %        31-12-22  

 Cash, cash balances at central banks and other demand deposits

     75,416        (5.4)        79,756  

 Financial assets held for trading

     141,042        27.4        110,671  

 Non-trading financial assets mandatorily at fair value through profit or loss

     8,737        26.8        6,888  

 Financial assets designated at fair value through profit or loss

     955        4.6        913  

 Financial assets at fair value through accumulated other comprehensive income

     62,205        (4.8)        65,374  

 Financial assets at amortized cost

     451,732        9.0        414,421  

Loans and advances to central banks and credit institutions

     24,627        20.5        20,431  

Loans and advances to customers

     377,643        5.7        357,351  

Debt securities

     49,462        35.0        36,639  

 Investments in joint ventures and associates

     976        6.6        916  

 Tangible assets

     9,253        5.9        8,737  

 Intangible assets

     2,363        9.6        2,156  

 Other assets

     22,878        2.8        22,259  

 Total assets

     775,558        8.9        712,092  

 Financial liabilities held for trading

     121,715        27.3        95,611  

 Other financial liabilities designated at fair value through profit or loss

     13,299        25.7        10,580  

 Financial liabilities at amortized cost

     557,589        5.4        529,172  

Deposits from central banks and credit institutions

     60,349        (7.5)        65,258  

Deposits from customers

     413,487        4.8        394,404  

Debt certificates

     68,707        24.0        55,429  

Other financial liabilities

     15,046        6.9        14,081  

 Liabilities under insurance and reinsurance contracts

     12,110        19.5        10,131  

 Other liabilities

     15,580        (3.1)        16,081  

 Total liabilities

     720,293        8.9        661,575  

 Non-controlling interests

     3,564        (1.6)        3,623  

 Accumulated other comprehensive income

     (16,254)        (7.9)        (17,642)  

 Shareholders’ funds

     67,955        5.3        64,535  

 Total equity

     55,265        9.4        50,517  

 Total liabilities and equity

     775,558        8.9        712,092  

 Memorandum item:

        

 Guarantees given

     60,019        8.8        55,182  

General note: 2022 figures have been restated according to IFRS 17 - Insurance contracts.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 LOANS AND ADVANCES TO CUSTOMERS (MILLIONS OF EUROS)

 

 

      31-12-23           Δ  %           31-12-22  
 Public sector      23,269                 11.4                 20,884  
 Individuals      168,123                 7.2                 156,838  

Mortgages

     93,358           2.0           91,569  

Consumer

     39,074           8.6           35,965  

Credit cards

     21,609           24.3           17,382  

Other loans

     14,082           18.1           11,921  
 Business      183,076                 3.2                 177,374  
 Non-performing loans      14,444                 7.0                 13,493  

 Loans and advances to customers (gross)

     388,912           5.5           368,588  

 Allowances (1)

     (11,269)           0.3           (11,237)  

 Loans and advances to customers

     377,643           5.7           357,351  

(1) Allowances include valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). As of December 31, 2023 and December 31, 2022 the remaining amount was 142m and 190m, respectively.

 

 

LOANS AND ADVANCES TO CUSTOMERS (BILLIONS OF EUROS)

 

        

CUSTOMER FUNDS (BILLIONS OF EUROS)

 

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(1) At constant exchange rates: +7.9%.

   

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(1) At constant exchange rates: +8.6%.

 

 

 CUSTOMER FUNDS (MILLIONS OF EUROS)

 

 

     
      31-12-23           Δ %           31-12-22  
 Deposits from customers      413,487                 4.8                 394,404  

Current accounts

     317,543           0.5           316,082  

Time deposits

     91,524           21.0           75,646  

Other deposits

     4,420           65.2           2,676  
 Other customer funds      164,367                 9.5                 150,172  

Mutual funds and investment companies and customer portfolios (1)

     131,849           21.0           108,936  

Pension funds

     28,326           (26.7)           38,653  

Other off-balance sheet funds

     4,192           62.4           2,582  

 Total customer funds

     577,853           6.1           544,576  

(1) Includes the customer portfolios in Spain, Mexico, Colombia (preliminary data) and Peru.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Solvency

Capital base

The BBVA Group’s strong results during the quarter, which are in line with those of the third quarter, contributed to the consolidated CET1 fully-loaded ratio to reach 12.67% as of December 31, 2023, which allows to keep maintaining a large management buffer over the Group’s CET1 requirement (8.78%)3 and above the Group’s established target management range of 11.5-12.0% of CET1.

During the fourth quarter of the year, the CET1 ratio decreased by 6 basis points. The strong generation of profit, net of dividends and remuneration of capital instruments, generated a contribution of 25 basis points in the CET1 ratio, which allowed it to partially absorb the growth of risk-weighted assets (RWA) derived from the increase in activity in the quarter (consumption of 36 basis points, including the operational risk update), in line with the Group’s strategy of promoting profitable growth. On the other hand, among the other impacts, it is worth highlighting those associated with market variables, where the negative evolution of some currencies in the quarter stands out (mainly the devaluation of the Argentinian peso), more than offset by the positive evolution of the fixed income portfolios valuation and the compensation in equity of the negative effect on results due to the monetary loss given by the net monetary position in hyperinflationary economies.

The consolidated fully-loaded additional Tier 1 capital (AT1) stood at 1.66% as of December 31, 2023, resulting in a 6 basis points decrease from the previous quarter, mainly due to the RWA increase and the U.S. dollar depreciation.

On the other hand, the consolidated fully-loaded Tier 2 ratio at the end of December 2023 stood at 2.25%, with an increase of 20 basis points in the quarter, mainly due to the issuance of a subordinated bond in Spain for USD 750m. Thus, the total fully-loaded capital ratio stood at 16.58%.

Following the latest SREP (Supervisory Review and Evaluation Process) decision, the ECB has informed to the Group that, with effect from January 1, 2024, it will have to maintain a total capital ratio of 13.25% and a CET1 capital ratio of 9.09% at the consolidated level, which includes the consolidated Pillar 2 requirement of 1.68% (of which at least 1.02% shall be met with CET1), of which 0.18% is determined on the basis of the ECB’s prudential provisioning expectation and shall be met with CET1.

It is worth mentioning that, with effect from January 1, 2023, the application of part of the transitional effects applied by the Group in the determination of the phased-in ratio has ended, so that as of December 31, 2023, this ratio coincides with the fully-loaded ratio.

 

 FULLY-LOADED CAPITAL RATIOS (PERCENTAGE)
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 CAPITAL BASE (MILLIONS OF EUROS)

 

 

    CRD IV phased-in      CRD IV fully-loaded  
     31-12-23 (1) (2)       30-09-23        31-12-22        31-12-23 (1) (2)        30-09-23        31-12-22  

 Common Equity Tier 1 (CET1)

    46,104       45,567        42,738        46,104        45,567        42,484  

 Tier 1

    52,138       51,735        47,931        52,138        51,735        47,677  

 Tier 2

    8,182       7,350        5,930        8,182        7,350        6,023  

 Total capital (Tier 1 + Tier 2)

    60,320       59,085        53,861        60,320        59,085        53,699  

 Risk-weighted assets

    363,916       357,972        337,066        363,916        357,972        336,884  

 CET1 (%)

    12.67       12.73        12.68        12.67        12.73        12.61  

 Tier 1 (%)

    14.33       14.45        14.22        14.33        14.45        14.15  

 Tier 2 (%)

    2.25       2.05        1.76        2.25        2.05        1.79  

 Total capital ratio (%)

    16.58       16.51        15.98        16.58        16.51        15.94  

(1) The difference between the phased-in and fully-loaded ratios arises from the temporary treatment of certain capital items, mainly of the impact of IFRS 9, to which the BBVA Group has adhered voluntarily (in accordance with article 473bis of the CRR and the subsequent amendments introduced by the Regulation (EU) 2020/873). As of December 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.

(2) Preliminary data.

 

 

3 This includes the update of the countercyclical capital buffer calculated on the basis of exposure at end September 2023.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Regarding shareholder remuneration, which includes cash payments and the remuneration resulting from the execution of the share buyback programs that the Group may execute, a cash gross distribution in the amount of 0.39 per share on April as final dividend of 2023 and the execution of a new Share Buyback Program of BBVA for an amount of 781m, subject to the corresponding regulatory authorizations and the communication with the program specific terms and conditions before its effective start, are expected to be submitted to the relevant governing bodies for consideration. Thus, the total distribution for the year 2023 will reach 4,010m, a 50% of the net attributable profit, which represents 0.68 per share, taking into account the payment in cash of 0.16 gross per share paid in October 2023 as interim dividend of the year.

During the year 2023, BBVA has executed two share buyback programs. The first program was announced on February 1, 2023 for a maximum amount of 422m and was part of the ordinary application of the shareholder remuneration policy of the year 2022. On April 21, 2023, BBVA announced the completion of this, having acquired 64,643,559 own shares between March 20 and April 20, 2023, representing approximately 1.07% of BBVA’s share capital as of said date. The shares acquired in the execution of this first share buyback program were redeemed on June 2, 2023. The second program, which is considered extraordinary shareholder remuneration and thus is not included in the ordinary remuneration policy, was announced on July 28, 2023, for a maximum amount of 1,000m. On November 29, 2023, BBVA announced the completion of this, having acquired 127,532,625 own shares between October 2 and November 29, 2023, representing approximately 2.14% of BBVA’s share capital as of said date. The shares acquired in the execution of this second share buyback program were redeemed on December 19, 2023. Thus, the total amount disbursed in both share buyback programs stands at 1,422m.

The most relevant aspects of the share buyback programs are summarized below:

 

 

 EXECUTION OF THE PROGRAMS FOR THE BUYBACK OF SHARES IN 2023

 

 
       Start date          Completion date       
Redemption
date
 
 
    

Number of  

shares

 

 

      

% of share 

capital*

 

 

   
Disbursement
(millions of euros)
 
 

 First program

     March 20        April 21        June 2        64,643,559          1.07       422  

 Second program

     October 2        November 29        December 19        127,532,625          2.14       1,000  

 Total

              192,176,184            1,422  

*As of the date of the program closure.

As a consequence of the share buyback program described above, and once the Group has carried out the aforementioned share capital reductions, BBVA’s share capital as of December 31, 2023, stood at 2,860,590,786.20 divided into 5,837,940,380 shares, at 0.49 par value each.

 

 SHAREHOLDER STRUCTURE (31-12-23)

 

 
     Shareholders               Shares outstanding       
 Number of shares          Number        %          Number        %  

 Up to 500

     315,389        42.5          58,447,373        1.0  

 501 to 5,000

     334,638        45.1          592,992,044        10.2  

 5,001 to 10,000

     49,539        6.7          347,292,314        5.9  

 10,001 to 50,000

     38,423        5.2          733,832,231        12.6  

 50,001 to 100,000

     2,720        0.4          185,938,321        3.2  

 100,001 to 500,000

     1,228        0.2          218,487,412        3.7  

 More than 500,001

     257           0.03          3,700,950,685           63.4  

 Total

     742,194        100          5,837,940,380        100  

Note: in the case of shares kept by investors through a custodian placed outside Spain, only the custodian will be considered as a shareholder, which is who appears registered in the accounting record of book entries, so the number of shareholders stated does not consider those indirect holders.

With regard to MREL4 (Minimum Requirement for own funds and Eligible Liabilities) requirements, as of December 31, 2023, the requirement of own funds and eligible liabilities equals to 21.46% of the total RWA of its resolution group (the “MREL in RWA”), being the subordination requirement of the Group´s total RWA (the “subordination requirement in RWA”) 13.50% at the subconsolidated level56 Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023, the preliminary MREL in RWA ratio and the preliminary subordination requirement in RWA ratio stand at 26.36% and at 21.84%, respectively7, complying with both mentioned requirements.

In addition, BBVA must reach, as of December 31, 2023, an amount of own funds and eligible liabilities in terms of the total exposure considered for calculating the leverage ratio of 7.27% (the “MREL in LR”), of which 5.61% in terms of the total exposure considered for calculating the leverage ratio shall be met with subordinated instruments (the “subordination requirement in LR”). Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023, the preliminary MREL in LR ratio and the preliminary subordination requirement in LR ratio stand at 11.10% and at 9.20%, respectively, complying with both requirements.

 

 

4 BBVA must maintain this requirement from January 1, 2022 onwards.

5 In accordance with the resolution strategy MPE (“Multiple Point of Entry”) of the BBVA Group, established by the SRB, the resolution group is made up of Banco Bilbao Vizcaya Argentaria, S.A. and subsidiaries that belong to the same European resolution group. As of December 31, 2023, the total RWA of the resolution group amounted to 214,757m and the total exposure considered for the purpose of calculating the leverage ratio amounted to 509,996m.

6 The MREL in RWA and the subordination requirement in RWA do not include the applicable combined capital buffer requirement that, according to the current regulations and the supervising criteria, would be of 3.35%, taking into account the exposures as of September 2023 subject to the calculation of the countercyclical buffer.

7 Own resources and eligible liabilities to meet, both with MREL in RWA and subordination requirement in RWA and with the combined capital buffer requirement applicable.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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With the aim of reinforcing compliance with these requirements, BBVA has made several debt issues during 2023. For more information on made issues, see “Structural risks” section within the “Risk management” chapter.

It should be noted that on June 14, 2023 the Group disclosed the receipt of a new communication from the Bank of Spain regarding its MREL requirement, established by the Single Resolution Board (hereinafter “SRB”). In accordance with this communication, BBVA has to reach, starting January 1, 2024, an MREL in RWA equal to 22.11%, considering the exposures subject to the calculation of the countercyclical buffer8 as of September 2023. Given the own funds and eligible liabilities structure of the resolution group, as of December 31, 2023 the MREL in RWA would already comply with the aforementioned requirement.

Lastly, as of December 31, 2023, the Group’s fully-loaded leverage ratio stood at 6,5%9.

Ratings

During the year 2023, BBVA’s rating has continued to demonstrate its strength and all agencies have maintained their rating in the A category. DBRS in March, Fitch in September and Moody’s in October confirmed the rating of BBVA at A (high), A- and A3, respectively, all three with a stable outlook. Additionally, S&P has maintained BBVA’s ratings unchanged during the year at A, with a stable outlook. The following table shows the credit ratings and outlook assigned by the agencies:

 

 

 RATINGS

 

 

 Rating agency

   Long term (1)   Short term   Outlook      

 DBRS

   A (high)   R-1 (middle)   Stable   

 Fitch

   A-   F-2   Stable   

 Moody’s

   A3   P-2   Stable   

 Standard & Poor’s

   A   A-1   Stable   

(1) Ratings assigned to long term senior preferred debt. Additionally, Moody’s and Fitch assign A2 and A- rating, respectively, to BBVA’s long term deposits.

 

 

 

 

8 BBVA published on September 29, 2023 that it had received a resolution from the Bank of Spain related to the revision of the identification of BBVA as Other Systemically Important Institution (hereinafter referred to as O-SII) and the corresponding capital buffer establishment. According to this resolution the O-SII capital buffer would increase by 25 basis points compared to the previous year applicable buffer, which stands at 100 basis points (1%) by January 1, 2024. This increase is due to the adaptation of the Bank of Spain’s methodology for the determination of the OSII capital buffers in line with the revision of the methodological framework established by the European Central Bank.

9 The Group’s leverage ratio is provisional at the date of release of this report.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Risk management

Credit risk

Throughout the year, the persistent inflation, the Central Bank rates increases and the uncertainty surrounding economic growth have been the main factors that have impacted the markets, affecting to a greater or lesser extent depending on the region to the credit demand reduction and causing a strain on the payment capacity of families and companies.

Uncertainty continues to be high, and the geopolitical turbulence at the time of drafting of this report could contribute to a rebound in energy prices, and therefore, increase the biases towards more negative scenarios, with higher interest rates, persisting inflation and a greater than expected economic slowdown.

By region, the evolution during the year has been uneven. In Spain, although economy continued slowing down during the year 2023, the level of household debt is far from its all-time highs, favored by the dynamism of the labor market. In Mexico, the improvements in the growth outlook due to the dynamism of private consumption and the effect of the relocation of industrial production (nearshoring) is positively impacting the labor market. The uncertainty in Turkey continues, although growth remains solid. Despite changes in economic policy, system quality indicators remain at low levels. Finally, in general, growth has been less dynamic in South America, in a context of high inflation and interest rates, negative effects related to the slowdown in China, as well as adverse climatic factors and social conflicts, affecting the economic situation of families and companies.

Calculation of expected losses due to credit risk

For the estimation of expected losses, the models include individual and collective estimates, taking into account the macroeconomic forecasts in accordance with IFRS 9. Thus, the estimate at the end of the year includes the effect on expected losses of updating macroeconomic forecasts, which take into account the current global environment.

Additionally, the Group may complement the expected losses either by the consideration of additional risk drivers, the incorporation of sectorial particularities or that may affect a set of operations or borrowers, following a formal internal process established for the purpose.

Thus, in Spain, the severity of certain specific operations considered unlikely to pay was reviewed upwards because of different reasons to non-performing loans, with a remaining adjustment as of December 31, 2023 of 227 million, with a 161 million decrease compared with the end of the year 2022 mainly as a result of the annual model review process. In addition, due to the earthquakes that affected an area in the south of Turkey, during the month of February 2023 the classification of the credit exposure recorded in the five most affected cities was reviewed, which led to its reclassification to Stage 2. As of December 31, 2023 the amounts recorded in Stage 2 amounted to 273 million on-balance sheet and 406 million off-balance sheet exposure, with allowances for losses of approximately 25 million at contract level.

On the other hand, as of December 31, 2023, the complementary adjustments pending allocation to specific operations or customers are not significant, after the utilization and/or release of most of the adjustments during 2023. As of December 31, 2022, the complementary adjustments pending allocation to specific operations or customers totaled 302m, of which 163m corresponded to Spain, 92m to Mexico, 25m to Peru, 6m to Rest of Business of the Group, 11m to Colombia and 5m to Chile.

BBVA Group’s credit risk indicators

The evolution of the Group’s main credit risk indicators is summarized below:

 

 

Credit risk increased in the fourth quarter of the year by 0.9% (+2.9% in constant terms), with generalized growth at constant exchange rates in all geographic areas except in Spain, which had a flat evolution.

 

 

Non-performing loans presented an increase of 3.0% at the Group level between September and December 2023 (+4.5% in constant terms), with general increases in all geographical areas except in Turkey, due to the effect of exchange rates, focused on retail portfolios, and in some singular clients in Rest of Business and in Mexico. Compared to the end of the previous year, the balance of non-performing loans increased by 5.8% (+7,7% at constant exchange rates), focused on retail portfolio in South America, Mexico, Spain and, to a lesser extent, Rest of Business, affected by singular customers inflows.

 

 

 NON-PERFORMING LOANS AND PROVISIONS (MILLIONS OF EUROS)

 

        

 

LOGO

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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The NPL ratio rose to 3.4% as of December 31, 2023, which represents an increase of 7 basis points compared to the previous quarter, despite the stable evolution in the last twelve months.

 

 

The NPL coverage ratio ended the quarter at 77%, 221 basis points below the previous quarter and 449 basis points lower than in the end of 2022, as a result of the non-performing loan increase throughout the year with coverage ratios that remain practically stable compared to those of the previous quarter (+0.1%) and of December 2022 (0.0%).

 

 

The cumulative cost of risk as of December 31, 2023 stood at 1.15%, which is above the previous quarter, mainly due to the higher requirements in Spain, affected by the impact of the annual review exercise of models parameters for the losses estimation, and, to a lesser extent, in Colombia and Peru, which continue to be affected by the macroeconomic environment worsening.

 

 

 NPL AND NPL COVERAGE RATIOS AND COST OF RISK (PERCENTAGE)

 

 

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 CREDIT RISK (1) (MILLIONS OF EUROS)

 

              
        31-12-23        30-09-23        30-06-23        31-03-23        31-12-22  

Credit risk

     448,840        444,984        436,174        428,423        423,669  

 Stage 1

     392,528        394,329        386,711        377,908        371,930  

 Stage 2 (2)

     41,006        35,791        34,772        36,373        37,277  

 Stage 3 (non-performing loans)

     15,305        14,864        14,691        14,141        14,463  

Provisions

     11,762        11,751        11,697        11,661        11,764  

 Stage 1

     2,142        2,143        2,107        2,062        2,067  

 Stage 2

     2,170        2,198        2,181        2,243        2,111  

 Stage 3 (non-performing loans)

     7,450        7,410        7,409        7,357        7,586  

NPL ratio (%)

     3.4        3.3        3.4        3.3        3.4  

NPL coverage ratio (%) (3)

     77        79        80        82        81  

(1) Includes gross loans and advances to customers plus guarantees given.

(2) Increase affected by the annual review of the models, mainly in BBVA, S.A.

(3) The NPL coverage ratio includes the valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). If these valuation corrections had not been taken into account, the NPL coverage ratio would have stood at 76% as of December 31, 2023 and 80% as of December 31, 2022.

 

 

 NON-PERFORMING LOANS EVOLUTION (MILLIONS OF EUROS)

 

              
      4Q23 (1)           3Q23           2Q23           1Q23           4Q22  

 Beginning balance

     14,864                 14,691                 14,141                 14,463                 15,162  

 Entries

     3,038           2,898           2,875           2,256           2,332  

 Recoveries

     (1,373)           (1,538)           (1,394)           (1,489)           (1,180)  

 Net variation

     1,665                 1,360                 1,481                 767                 1,152  

 Write-offs

     (983)           (830)           (877)           (1,081)           (928)  

 Exchange rate differences and other

     (241)           (357)           (54)           (8)           (923)  

 Period-end balance

     15,305           14,864           14,691           14,141           14,463  

 Memorandum item:

                          

 Non-performing loans

     14,444           13,947           13,787           13,215           13,493  

 Non performing guarantees given

     862           918           905           926           970  

(1) Preliminary data.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Structural risks

Liquidity and funding

Liquidity and funding management at BBVA promotes the financing of the recurring growth of the banking business at suitable maturities and costs using a wide range of funding sources. BBVA’s business model, risk appetite framework and funding strategy are designed to reach a solid funding structure based on stable customer deposits, mainly retail (granular). As a result of this model, deposits have a high degree of assurance in each geographical area, close to 55% in Spain and Mexico. It is important to note that, given the nature of BBVA’s business, lending is mainly financed through stable customer funds.

One of the key elements in the BBVA Group’s liquidity and funding management is the maintenance of large high-quality liquidity buffers in all geographical areas. In this respect, the Group has maintained during the last 12 months an average volume of high quality liquid assets (HQLA) of 130.77 billion, of which 97% corresponds to maximum quality assets (level 1 in the liquidity coverage ratio, LCR).

Due to its subsidiary-based management model, BBVA is one of the few major European banks that follows the Multiple Point of Entry (MPE) resolution strategy: the parent company sets the liquidity policies, but the subsidiaries are self-sufficient and responsible for managing their own liquidity and funding (taking deposits or accessing the market with their own rating). This strategy limits the spread of a liquidity crisis among the Group’s different areas and ensures the adequate transmission of the cost of liquidity and financing to the price formation process.

The BBVA Group maintains a solid liquidity position in every geographical area in which it operates, with ratios well above the minimum required:

 

 

The LCR requires banks to maintain a volume of high-quality liquid assets sufficient to withstand liquidity stress for 30 days. BBVA Group’s consolidated LCR remained comfortably above 100% during 2022 and stood at 149% as of December 31, 2023. It should be noted that, given the MPE nature of BBVA, this ratio limits the numerator of the LCR for subsidiaries other than BBVA S.A. to 100% of its net outflows. Therefore, the resulting ratio is below that of the individual units (the LCR of the main components reaches 178% in BBVA, S.A., 192% in Mexico and 212% in Turkey). Without considering this restriction, the Group’s LCR ratio would reach 193%.

 

 

The net stable funding ratio (NSFR) requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. The BBVA Group’s NSFR ratio stood at 131% as of December 31, 2023.

The breakdown of these ratios in the main geographical areas in which the Group operates is shown below:

 

 

 LCR AND NSFR RATIOS (PERCENTAGE. 31-12-23)

 

     
      BBVA, S.A.    Mexico    Turkey    South America

 LCR

   178%    192%    212%    All countries >100

 NSFR

   120%    140%    178%    All countries >100

In addition to the above, the most relevant aspects related to the main geographical areas are the following:

 

 

BBVA, S.A. has maintained a strong position with a large high-quality liquidity buffer, having repaid almost the entire TLTRO III program. During 2023, commercial activity has provided liquidity to the balance sheet mainly due to the good evolution of customer deposits in the last quarter of the year, with growth greater than that of lending activity. This performance is partially by the end of year seasonal component. On the other hand, in December 2022 the Bank started the repayment of the TLTRO III program for an amount of 12 billion, plus an additional repayment of 12 billion between February and March 2023 and another one of 11 billion in June 2023, which together represent more than the 90% of the original amount, maintaining at all times the regulatory liquidity metrics well above the established minimums.

 

 

BBVA Mexico shows a solid liquidity situation, which has contributed to an efficient management of the cost of funds in an environment of rising interest rates. During the year, however, commercial activity has drained liquidity due to a sustained loan growth that has been greater than the fund growth. However, the change in the trend of the evolution of deposits stands out, which had kept a negative performance during the year due to transfers to off-balance sheet funds and which in the last quarter of the year show a significant increase mainly thanks to the seasonal inflows at the end of the year,

 

 

In Turkey, during 2023, the lending gap in local currency has been reduced, due to a greater growth in deposits than in loans, while the lending gap in foreign currency has increased due to higher reductions in deposits. Garanti BBVA continues to maintain a stable liquidity position with comfortable ratios. On the other hand, the Central Bank of Turkey has promoted a gradual change of FX protected scheme to standard deposits in Turkish lira, specially in the second half of the year, as an additional step on dedollarization process of the economy.

 

 

In South America, the liquidity situation remains adequate throughout the region. In Argentina, liquidity in the system continues to increase, as well as in BBVA due to a higher growth in deposits than in loans in local currency and no significant variations in foreign currency. In BBVA Colombia, the credit gap declined due to a higher volume of deposits together with a slowdown in lending growth. BBVA Peru maintains solid liquidity levels, showing a reduction in the credit gap throughout the year thanks to a growth in deposits higher than in lending activity, affected by the expiration of loans covered by COVID-19 programs.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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The main wholesale financing transactions carried out by the BBVA Group during 2023 are listed below:

 

Issuer   Type of issue   

Date of

issue

 

  

Nominal

(millions)

 

  

Currency

 

  

Coupon

 

 

Early

redemption

 

  

Maturity date

 

BBVA, S.A.

 

Senior non-preferred

 

   Jan-23

 

   1,000

 

   EUR

 

    4.625%

 

  Jan-30

 

   Jan-31

 

  Covered bonds    Jan-23    1,500    EUR     3.125%      Jul-27
  Senior preferred    May-23    1,000    EUR     4.125%   May-25    May-26
  Tier 2    Jun-23    750    EUR     5.570%   Jun-Sep 28    Sep-33
  AT1    Jun-23    1,000    EUR     8.375%   Dec-28    Perpetual
  Tier 2    Aug-23    300    GBP     8.250%   Aug-Nov 28    Nov-33
  AT1    Sep-23    1,000    USD     9.375%   Sep-29    Perpetual
  Tier 2    Nov-23    750    USD     7.883%   Nov-33    Nov-34

BBVA in Mexico

 

Senior (Tranche 1) - Green bond

 

   Feb-23    8,689    MXN    TIIE day 1 + 32

basis points

 

     Feb-27
  Senior (Tranche 2)    Feb-23    6,131    MXN     9.540%      Feb-30
  Tier 2    Jun-23    1,000    USD     8.450%   Jun-33    Jun-38
  Senior (Tranche 1)    Nov-23    9,900    MXN    TIIE day 1 + 32
basis points

 

     Apr-27
  Senior (Tranche 2)    Nov-23    3,600    MXN    10.240%      Nov-30

Additionally, in June 2023, BBVA, S.A. completed a securitization of a portfolio of car loans for an amount of 804m.

In January 2024, BBVA, S.A. has carried out a public senior bond issue for 1,250m with a maturity of 10 years and a coupon of 3,875%. Moreover, BBVA, S.A. has announced its irrevocable decision to amortize an issue of Tier 2 subordinated bonds issued in February 2019, for an amount of 750m, on February 22, 2024. On the other hand, BBVA Mexico has issued Tier 2 bonds for USD 900m with a maturity of 15 years and early repayment option in 10 years with a coupon of 8,125%.

In Turkey, Garanti BBVA renewed in June a syndicated loan associated to environmental, social and corporate governance (ESG) criteria, consisting of two separate tranches of USD199m and 218.5m, both maturing in one year. In December, Garanti BBVA announced the renovation of the 100% of the maturity of a syndicated loan of USD 259.5m and 142.5m with a maturity of 367 days, also linked to ESG criteria. The total loan cost was SOFR + 3.50% for the tranche in USD and Euribor + 3.25% for the tranche in euros.

BBVA Colombia announced the launch of the first blue bond in Colombia, together with the International Finance Corporation (IFC), for an amount of USD 50m in its first tranche. Later, in October, the second tranche of the operation was disbursed for an amount of USD 67m.

Foreign exchange

Foreign exchange risk management aims to reduce both the sensitivity of the capital ratios and the net attributable profit variability to currency fluctuations.

The performance of the Group’s main currencies during 2023 has been very uneven. Due to its relevance for the Group, it should be noted the strength of the Mexican peso, which has appreciated 11.4% against the euro. The other currency which stands out was the Colombian peso (+21.5%). On the other hand, the depreciation of both the Turkish lira (-38.9%), mainly concentrated in June after the elections, and the Argentinian peso (-78.9%) intensified in the last quarter of the year after the measures enacted by the new government , stands out. In both cases, the currencies have been pressured by the negative dynamism of inflation. The rest of currencies evolved moderately during the year: the Peruvian sol (+-1.1%), the U.S. dollar (+-3.5%) and the Chilean peso (-6.2%).

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 EXCHANGE RATES (EXPRESSED IN CURRENCY/EURO)

        

 

     Year-end exchange rates      Average exchange rates  
     

31-12-23

    

Δ % on

 

  31-12-22

    

Δ % on

 

  30-09-23

    

 

  2023

    

Δ % on

  2022

 

 U.S. dollar

     1.1050        (3.5)        (4.1)        1.0815        (2.6)  

 Mexican peso

     18.7231        11.4        (1.2)        19.1866        10.4  

 Turkish lira (1)

     32.6531        (38.9)        (11.0)                

 Peruvian sol

     4.1042        (1.1)        (2.6)        4.0404        (0.2)  

 Argentine peso (1)

     892.81        (78.9)        (58.5)                

 Chilean peso

     977.47        (6.2)        (1.7)        908.35        1.0  

 Colombian peso

     4,223.37        21.5        2.5        4,679.22        (4.5)  

(1) According to IAS 21 “The effects of changes in foreign exchange rates”, the year-end exchange rate is used for the conversion of the Turkey and Argentina income statement.

In relation to the hedging of the capital ratios, BBVA covers, in aggregate, 70% of its subsidiaries’ capital excess. The sensitivity of the Group’s CET1 fully-loaded ratio to 10% depreciations in major currencies is estimated at: +17 basis points for the U.S. dollar, -9 basis points for the Mexican peso and -4 basis points for the Turkish lira10. With regard to the hedging of results, BBVA hedges between 40% and 50% of the aggregate net attributable profit it expects to generate in the next 12 months. For each currency, the final amount hedged depends on its expected future evolution, the costs and the relevance of the incomes related to the Group’s results as a whole.

Interest rate

Interest rate risk management seeks to limit the impact that BBVA may suffer, both in terms of net interest income (short-term) and economic value (long-term), from adverse movements in the interest rate curves in the various currencies in which the Group operates. BBVA carries out this work through an internal procedure, pursuant to the guidelines established by the European Banking Authority (EBA), with the aim of analyzing the potential impact that could derive from a range of scenarios on the Group’s different balance sheets.

The model is based on assumptions intended to realistically mimic the behavior of the balance sheet. The assumptions regarding the behavior of accounts with no explicit maturity and prepayment estimates are specially relevant. These assumptions are reviewed and adapted at least once a year, to take into account any changes in observed behavior.

At the aggregate level, BBVA continues to have a positive sensitivity toward interest rate increases in the net interest income.

The first quarters of 2023 were characterized by a persistent high level of inflation, which, together with the strong growth indicators, served as reason for both the ECB and the Fed to consolidate their hawkish messages of high interest rates for a longer time. This positioning from monetary authorities contributed the sovereign curves to certain rises. However, in the last quarter of the year, decreasing inflation data and expectations converging towards central bank objectives, together with the weakening of some macroeconomic indicators, suggest that the rate hike cycle has come to an end in Europe and in the United States and have led the market to discount rate drops by mid-2024. This has triggered a fall in sovereign bond profitability and has caused a positive performance in most debt portfolios of the Group. Other peripheral rate curve spreads remain supported. In Mexico, the rate hike cycle is considered to be over, while in most countries of South America, interest rate cuts have started taking place. On the contrary, the Central Bank of Turkey has continued the tightening of its monetary policy launched in June with significant rate hikes.

By area, the main features are:

 

 

Spain has a balance sheet characterized by a lending portfolio with high proportion of variable-rate loans (mortgages and corporate lending) and liabilities composed mainly by customer demand deposits. The ALCO portfolio acts as a management lever and hedge for the balance sheet, mitigating its sensitivity to interest rate fluctuations. In an environment of high rates, currently close to their market-predicted terminal rates, the interest rate risk profile of the balance sheet has been reduced during the year.

 

 

On the other hand, the ECB left rates unchanged in the last quarter of the year, bringing the benchmark interest rate to 4.5%, the marginal deposit facility rate at 4.0% and the marginal loan facility rate at 4.75% as of December 31, 2023. The market expects there to be a first rate drop in the first half of 2024 and, in this environment, the Euribor 6 and 12 month reference rates fell in the fourth quarter of 2023, starting to reflect these expectations, while shorter term benchmark rates remained broadly stable. All in all, the customer spread benefited in 2023 from asset repricing and the containment in the cost of deposits, yet at a slower pace during the last quarter of the year.

 

 

Mexico continues to show a balance between fixed and variable interest rates balances, which results in a limited sensitivity to interest rates fluctuations. In terms of assets that are most sensitive to interest rate changes, the commercial portfolio stood out, while consumer loans and mortgages are mostly at a fixed rate. With regard to customer funds, the high proportion of non-interest bearing deposits, which are insensitive to interest rate movements, should be highlighted. The ALCO portfolio is invested primarily in fixed-rate sovereign bonds with limited maturities. The monetary policy rate stood at 11.25%, 75 basis points above the end-of-year level of 2022, but has remained stable since March 2023. Regarding customer spread, there has been an improvement during 2023, favored by both the containment of the cost of deposits and the positive evolution of the loan yield.

 

10 This sensitivity does not include the cost of capital hedges, which are currently estimated at 3 basis points per quarter for Mexican peso and 3 basis points per quarter for Turkish lira.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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In Turkey, the sensitivity of deposits is offset by the ALCO portfolio and loans (fixed rate and relatively short-term). The sensitivity of the net interest income remains very limited thanks to the different efforts carried out by the Bank. The CBRT has recently increased monetary policy rates, taking interest rates from 8.5% to 42.5% by the end of 2023. In terms of customer spread, it has worsened due to the evolution of the deposit costs linked to regulatory requirements, despite the high profitability of loans.

 

 

In South America, the interest rate risk profile remains low as most countries in the area have a fixed/variable composition and maturities that are very similar for assets and liabilities, with limited net interest income sensitivity. In addition, the balance sheets

 

with several currencies, interest rate risk is managed for each of the currencies, showing a very low level of exposure. Regarding benchmark rates, the cut cycle has begun in the region. In Peru it stood at 6.75% as of December 2023, 75 basis points below its 2022 closing level, with an additional cut of 25 basis points in January 2024. The customer spread in Peru had a positive performance in the year due to the positive evolution of loan performance and the containment of deposit costs. In Colombia, after not changing the monetary policy since April 2023, in December 2023 the central bank cut rates by 25 basis points, leaving the official rate at 13.00%. Thus, customer spread in Colombia continued the improvement trend initiated in the second quarter of the year. In Argentina, after the primary elections in August, a significant rate hike of 2,100 basis points was implemented reaching 118%, and kept increasing further up to 133%, but was reduced to 100% after the last central bank meeting in December 2023.

 

 INTEREST RATES (PERCENTAGE)

     

 

      31-12-23      30-09-23      30-06-23      31-03-23      31-12-22      30-09-22      30-06-22      31-03-22  

 Official ECB rate

     4.50        4.50        4.00        3.50        2.50        1.25        0.00        0.00  

 Euribor 3 months (1)

     3.94        3.88        3.54        2.91        2.06        1.01        (0.24)        (0.50)  

 Euribor 1 year (1)

     3.68        4.15        4.01        3.65        3.02        2.23        0.85        (0.24)  

 USA Federal rates

     5.50        5.50        5.25        5.00        4.50        3.25        1.75        0.50  

 TIIE (Mexico)

     11.25        11.25        11.25        11.25        10.50        9.25        7.75        6.50  

 CBRT (Turkey)

     42.50        30.00        15.00        8.50        9.00        12.00        14.00        14.00  

(1) Calculated as the month average.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Business areas

This section presents the most relevant aspects of the Group’s different business areas. Specifically, for each one of them, it shows a summary of the income statements and balance sheets, the business activity figures and the most significant ratios.

The structure of the business areas reported by the BBVA Group as of December 31, 2023, is the same as the one presented at the end of 2022.

The composition of BBVA Group’s business areas is summarized below:

 

 

Spain mainly includes the banking, insurance and asset management activities that the Group carries out in this country.

 

 

Mexico includes banking, insurance and asset management activities in this country, as well as the activity that BBVA Mexico carries out through its agency in Houston.

 

 

Turkey reports the activity of the group Garanti BBVA that is mainly carried out in this country and, to a lesser extent, in Romania and the Netherlands.

 

 

South America includes banking, financial, insurance and asset management activities conducted, mainly, in Argentina, Chile, Colombia, Peru, Uruguay and Venezuela.

 

 

Rest of Business mainly incorporates the wholesale activity carried out in Europe (excluding Spain), the United States, and BBVA’s branches in Asia.

The Corporate Center contains the centralized functions of the Group, including: the costs of the head offices with a corporate function; structural exchange rate positions management; portfolios whose management is not linked to customer relations, such as financial and industrial holdings; stakes in Funds & Investment Vehicles in tech companies; certain tax assets and liabilities; funds due to commitments to employees; goodwill and other intangible assets as well as portfolios and assets’ funding. Finally, in the description of this aggregate, it is worth mentioning that the Corporate Center’s tax expense includes for each period the difference between the effective tax rate in the period of each business area and the expected tax rate of the Group for the year as a whole.

In addition to these geographical breakdowns, supplementary information is provided for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. This business is relevant to have a broader understanding of the Group’s activity and results due to the important features of the type of customers served, products offered and risks assumed.

The information by business areas is based on units at the lowest level and/or companies that make up the Group, which are assigned to the different areas according to the main region or company group in which they carry out their activity.

Regarding the shareholders’ funds allocation, in the business areas, a capital allocation system based on the consumed regulatory capital is used.

Finally, it should be noted that, as usual, in the case of the different business areas, that is, Mexico, Turkey, South America and Rest of Business, and, additionally, CIB, in addition to the year-on-year variations applying current exchange rates, the variations at constant exchange rates are also disclosed.

 

GROSS INCOME (1), OPERATING INCOME (1) AND NET ATTRIBUTABLE PROFIT (1) BREAKDOWN (PERCENTAGE. 2023)

 

LOGO

(1) Excludes the Corporate Center.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 MAIN INCOME STATEMENT LINE ITEMS BY BUSINESS AREA (MILLIONS OF EUROS)

 

            Business areas                
      BBVA
Group
     Spain      Mexico      Turkey      South
America
     Rest of
Business
     Σ  Business
areas
     Corporate
Center
 

 2023

                       

 Net interest income

     23,089        5,620        11,054        1,869        4,394        539        23,476        (386)  

 Gross income

     29,542        7,888        14,267        2,981        4,331        1,103        30,571        (1,029)  

 Operating income

     17,233        4,743        9,883        1,581        2,397        507        19,111        (1,878)  

 Profit (loss) before tax

     12,419        3,947        7,359        1,325        1,206        479        14,317        (1,898)  

 Net attributable profit (loss) excluding non-recurring impacts

     8,019        2,755        5,340        528        613        389        9,626        (1,607)  

 Net attributable profit (loss)

     8,019        2,755        5,340        528        613        389        9,626        (1,607)  

 2022 (1)

                       

 Net interest income

     19,124        3,774        8,378        2,611        4,138        332        19,233        (109)  

 Gross income

     24,743        6,112        10,734        3,172        4,265        790        25,072        (329)  

 Operating income

     14,042        3,210        7,336        2,111        2,290        276        15,223        (1,181)  

 Profit (loss) before tax

     10,402        2,610        5,620        1,636        1,434        277        11,577        (1,175)  

 Net attributable profit (loss) excluding non-recurring impacts (2)

     6,559        1,868        4,131        505        738        240        7,482        (922)  

 Net attributable profit (loss)

     6,358        1,667        4,131        505        738        240        7,280        (922)  

(1) Balances restated according to IFRS 17 - Insurance contracts.

(2) Non-recurring impacts includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022.

 

 MAIN BALANCE-SHEET ITEMS AND RISK-WEIGHTED ASSETS BY BUSINESS AREA (MILLIONS OF EUROS)

 

            Business areas                       
      BBVA
Group
     Spain      Mexico      Turkey      South
America
     Rest of
Business
     Σ  Business
areas
     Corporate
Center
     Deletions  

 31-12-23

                          

 Loans and advances to customers

     377,643        173,169        88,112        37,416        41,213        39,322        379,231        230        (1,819)  

 Deposits from customers

     413,487        216,198        92,564        50,651        42,567        13,056        415,037        181        (1,732)  

 Off-balance sheet funds

     164,367        97,253        53,254        7,768        5,525        566        164,366        1         

 Total assets/liabilities and equity

     775,558        457,624        173,489        68,329        64,779        64,274        828,495        23,074        (76,011)  

 RWAs

     363,916        121,779        91,865        54,506        49,117        36,410        353,678        10,238         

 31-12-22 (1)

                          

 Loans and advances to customers

     357,351        173,971        71,231        37,443        38,437        37,375        358,456        278        (1,383)  

 Deposits from customers

     394,404        221,019        77,750        46,339        40,042        9,827        394,978        187        (760)  

 Off-balance sheet funds

     150,172        86,759        38,196        6,936        17,760        520        150,170        2         

 Total assets/liabilities and equity

     712,092        427,116        142,557        66,036        61,951        49,952        747,613        22,719        (58,239)  

 RWAs

     337,066        114,474        71,738        56,275        46,834        35,064        324,385        12,682         

(1) Balances restated according to IFRS 17 - Insurance contracts.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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   26  

 

 NUMBER OF EMPLOYEES

        NUMBER OF BRANCHES
LOGO      LOGO

    

NUMBER OF ATMS

    
LOGO     

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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   27  

 

Spain

Highlights

 

   

Growth in consumer loans, SMEs and public sector during the year

 

   

Favorable evolution of core revenues

 

   

Very relevant improvement of the efficiency ratio during the year

 

   

Cost of risk remains at low levels

 

 

BUSINESS ACTIVITY (1) (VARIATION COMPARED TO 31-12-22)

       

 

NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE)

 

LOGO     

 

LOGO

(1) Excluding repos.

 

 

OPERATING INCOME (MILLIONS OF EUROS)

 

       

NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS)

 

LOGO      LOGO

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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   28  

 

 FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

 

 Income statement    2023         Δ  %        2022 (1)  

 Net interest income

     5,620        48.9        3,774  

 Net fees and commissions

     2,164        0.4        2,156  

 Net trading income

     409        3.4        396  

 Other operating income and expenses

     (305)        42.5        (214)  

 Of which: Insurance activities

     360        1.3        355  

 Gross income

     7,888        29.1        6,112  

 Operating expenses

     (3,145)        8.4        (2,901)  

 Personnel expenses

     (1,778)        10.6        (1,608)  

 Other administrative expenses

     (984)        10.6        (889)  

 Depreciation

     (383)        (5.1)        (404)  

 Operating income

     4,743        47.7        3,210  

 Impairment on financial assets not measured at fair value through profit or loss

     (651)        24.5        (522)  

 Provisions or reversal of provisions and other results

     (145)        86.6        (78)  

 Profit (loss) before tax

     3,947        51.2        2,610  

 Income tax

     (1,190)        61.1        (739)  

 Profit (loss) for the period

     2,757        47.3        1,872  

 Non-controlling interests

     (2)        (31.9)        (3)  

 Net attributable profit (loss) excluding non-recurring impacts

     2,755        47.5        1,868  

 Net impact arisen from the purchase of offices in Spain

                   (201)  

 Net attributable profit (loss)

     2,755        65.3        1,667  
 Balance sheets    31-12-23      Δ %      31-12-22  (1)  

 Cash, cash balances at central banks and other demand deposits

     44,653        (9.2)        49,185  

 Financial assets designated at fair value

     146,136        15.6        126,413  

 Of which: Loans and advances

     70,265        67.6        41,926  

 Financial assets at amortized cost

     216,334        5.8        204,528  

 Of which: Loans and advances to customers

     173,169        (0.5)        173,971  

 Inter-area positions

     42,919        10.3        38,924  

 Tangible assets

     2,884        (3.5)        2,990  

 Other assets

     4,697        (7.5)        5,076  

 Total assets/liabilities and equity

     457,624        7.1        427,116  

 Financial liabilities held for trading and designated at fair value through profit or loss

     112,738        33.2        84,619  

 Deposits from central banks and credit institutions

     43,694        (15.5)        51,702  

 Deposits from customers

     216,198        (2.2)        221,019  

 Debt certificates

     51,472        26.2        40,782  

 Inter-area positions

                    

 Other liabilities

     18,629        17.4        15,870  

 Regulatory capital allocated

     14,892        13.5        13,124  
 Relevant business indicators    31-12-23      Δ %      31-12-22  

 Performing loans and advances to customers under management (2)

     169,712        (0.9)        171,209  

 Non-performing loans

     8,189        3.8        7,891  

 Customer deposits under management (2)

     214,968        (2.3)        220,140  

 Off-balance sheet funds (3)

     97,253        12.1        86,759  

 Risk-weighted assets

     121,779        6.4        114,474  

 Efficiency ratio (%)

     39.9                 47.5  

 NPL ratio (%)

     4.1                 3.9  

 NPL coverage ratio (%)

     55                 61  

 Cost of risk (%)

     0.37                 0.28  

(1) Balances restated according to IFRS 17 - Insurance contracts.

(2) Excluding repos.

(3) Includes mutual funds, customer portfolios and pension funds.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Macro and industry trends

According to the latest estimate from BBVA Research, GDP growth would converge to around 2.4% in 2023 (unchanged from the previous forecast) and 1.5% in 2024 (30 basis points lower than previously expected). Despite the relative resilience of activity, largely related to the dynamism of the services sector and the labor market, as well as the effect of the European recovery funds, growth is expected to continue to moderate in the next months, in line with the slowdown in growth in the Eurozone, in a context of higher uncertainty about internal policies. Annual inflation, which fell from particularly high values in 2022 to 3.1% in December 2023, is expected to remain close to this level during 2024.

As for the banking system, data at the end of October 2023 showed that the volume of credit to the private sector declined by 3.7% year-on-year. At the November close, household and non-financial corporate loan portfolios fell by 2.3% and 5.6% year-on-year, respectively. Customer deposits fell by 1.2% year-on-year as of the end of November 2023, due to a 6.2% reduction in demand deposits. This was not offset by the growth in time deposits (+81,1% year-on-year). The NPL ratio stood at 3.6% in October 2023, 16 basis points below the figure of the same month of the previous year. Furthermore, the system maintains comfortable solvency and liquidity levels.

Activity

The most relevant aspects related to the area’s activity during 2023 were:

 

 

Lending balances registered a slight decrease of 0.9% mainly due to the evolution of mortgage loans (-2.2%) and the deleveraging by large corporations (-5.4%). This evolution was partially offset by the performance of loans to the public sector (+7.8%), consumer loans (+5.9%, including credit cards) and loans to SMEs (+3.6%).

 

 

Total customer funds grew in the year (+1.7%). Lower demand deposit balances (-5.1%) were partially offset mainly by off-balance sheet funds growth (mutual and pension funds and managed portfolios, +12.1% overall), which increased mainly as a result of net contributions during the year and the effect of the market evolution.

The most relevant aspects related to the area’s activity during the fourth quarter of 2023 were:

 

 

Lending activity remained stable compared to the previous quarter (-0.3%) mainly due to the reduction in loans to large corporations (-3.0%), partially offset by the consumer loans (+1.6%, including credit cards), loans to the public sector (+1.3%) and to SMEs (+1.2%). On the other hand, mortgage loans remained flat during the quarter.

 

 

Regarding credit quality, the NPL ratio increased by 13 basis points compared to the previous quarter and stands at 4.1%. The increase during the quarter is concentrated in the retail portfolio, although with fewer entries than in previous quarters, mitigated by a decrease in the wholesale portfolio. The NPL coverage ratio remains stable during the quarter at 55%.

 

 

Total customer funds increased in the last quarter of the year (+2.5%), with a growth of both customer deposits (+1.6%), favored by the time deposits increase, and specially the off-balance sheet funds (+4.5%) , mainly due to the impact of the market evolution.

Results

Spain generated a net attributable profit of 2,755m in 2023, 65.3% higher than in the previous year, which included the net impact arisen from the purchase of offices to Merlin (-201 millions of euros). In 2023, the favorable evolution of the net interest income stands out, which continued to boost the gross income growth and comfortably offset the increase in expenses.

The most relevant aspects of the year-on-year changes in the area’s income statement at the end of December 2023 were:

 

 

Net interest income grew by 48.9% favored by the improvement in customer spreads derived from the successive interest rate hikes carried out by the ECB between July 2022 and September 2023 as well as and the cost of deposits, which remains contained.

 

 

Net fees and commissions were in line with those of the previous year (+0.4%), favored by the contribution of the income linked to asset management, which offset the lower contribution of banking services fees.

 

 

Increase in the year-on-year NTI contribution (+3.4%) driven by the favorable evolution of Global Markets.

 

 

Other operating income and expenses compare negatively with the same period of the previous year, due to the 215m recorded on this line, corresponding to the total annual amount paid for the temporary tax on credit institutions and financial credit establishments. This was partially offset by a lower contribution to the public schemes of bank deposits guarantee, this is, to the Single Resolution Fund and to the Deposits Guarantee Fund (hereinafter FUR and FGD, both for their acronym in Spanish, respectively), which was lower than in the previous year overall. Lastly, the performance of the insurance business, also considered under this line item, improved compared to 2022.

 

 

Operating expenses continued to increase (+8.4%), although well below the growth of gross income (+29.1%), which allowed a very significant improvement of the efficiency ratio by 760 basis points in the last year. The increase in expenses is due to both higher fixed remuneration to personnel, with additional measures that improve those of the sectoral wage increase agreement for 2023, and higher general expenses, affected by the inflation, especially higher IT expenses.

 

 

Impairment on financial assets increased by 24.5% due to higher loan-loss provisions, mainly in the retail portfolio, which were affected by a higher rate environment, and together with some positive non-recurring items recorded on 2022. As a result of the above, the cumulative cost of risk at the end of December 2023 increased to 0.37%, which is 6 basis points above the cumulative figure at the end of the third quarter.

In the fourth quarter of 2023, Spain generated a net attributable profit of 645m, which represents a decline of 26.7% compared to the previous quarter, mainly due to the contribution to the FGD during the last three months of 2023. On the other hand, the net income evolution continued to be favorable in the quarter once again (+3.8%), and the income from commissions increased supported by asset management commissions. All this was offset by the increase in operating expenses as a result of the increase of variable remuneration to employees, in line with the performance of the area in 2023, as well as loan-loss provisions, including higher requirements derived from the annual review exercise of models parameters for the losses estimation, as well as higher provisions.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Mexico

Highlights

 Growth of all the segments in the loan portfolio, with greater dynamism of the retail segment

 Double digit year-on-year growth in all the income statement margins

 Favorable evolution of the efficiency ratio

 Quarterly net attributable profit continues at high levels

 

 

BUSINESS ACTIVITY (1) (VARIATION AT CONSTANT

EXCHANGE RATE COMPARED TO 31-12-22)

        

NET INTEREST INCOME / AVERAGE TOTAL ASSETS

(PERCENTAGE AT CONSTANT EXCHANGE RATE)

LOGO

 

(1) Excluding repos.

    

LOGO

 

 

OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT

EXCHANGE RATE)

     NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)

LOGO

 

(1) At current exchange rate: +34.7%.

 

   

 

  

LOGO

 

(1) At current exchange rate: +29.3%.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

 

 Income statement    2023         Δ %         Δ % (1)        2022 (2)  

 Net interest income

     11,054        31.9        19.5        8,378  

 Net fees and commissions

     2,226        37.0        24.0        1,625  

 Net trading income

     572        30.3        18.0        439  

 Other operating income and expenses

     415        42.8        29.3        291  

 Gross income

     14,267        32.9        20.4        10,734  

 Operating expenses

     (4,384)        29.1        16.9        (3,397)  

 Personnel expenses

     (2,100)        34.2        21.5        (1,565)  

 Other administrative expenses

     (1,816)        26.6        14.6        (1,434)  

 Depreciation

     (469)        17.9        6.8        (398)  

 Operating income

     9,883        34.7        22.0        7,336  

 Impairment on financial assets not measured at fair value through profit or loss

     (2,499)        47.6        33.7        (1,693)  

 Provisions or reversal of provisions and other results

     (25)        5.0        (4.9)        (24)  

 Profit (loss) before tax

     7,359        31.0        18.6        5,620  

 Income tax

     (2,018)        35.6        22.8        (1,488)  

 Profit (loss) for the period

     5,341        29.3        17.1        4,132  

 Non-controlling interests

     (1)        29.9        17.7        (1)  

 Net attributable profit (loss)

     5,340        29.3        17.1        4,131  
 Balance sheets    31-12-23      Δ %      Δ % (1)      31-12-22 (2)  

 Cash, cash balances at central banks and other demand deposits

     10,089        (23.7)        (31.5)        13,228  

 Financial assets designated at fair value

     60,379        29.6        16.4        46,575  

 Of which: Loans and advances

     5,180        243.8        208.6        1,507  

 Financial assets at amortized cost

     96,342        24.8        12.0        77,191  

 Of which: Loans and advances to customers

     88,112        23.7        11.0        71,231  

 Tangible assets

     2,387        21.2        8.8        1,969  

 Other assets

     4,293        19.5        7.3        3,593  

 Total assets/liabilities and equity

     173,489        21.7        9.3        142,557  

 Financial liabilities held for trading and designated at fair value through profit or loss

     28,492        10.3        (1.0)        25,840  

 Deposits from central banks and credit institutions

     8,739        98.5        78.2        4,402  

 Deposits from customers

     92,564        19.1        6.9        77,750  

 Debt certificates

     9,719        25.3        12.5        7,758  

 Other liabilities

     22,756        34.0        20.3        16,976  

 Regulatory capital allocated

     11,218        14.1        2.4        9,831  
 Relevant business indicators    31-12-23      Δ  %      Δ % (1)      31-12-22  

 Performing loans and advances to customers under management (3)

     88,688        23.5        10.9        71,788  

 Non-performing loans

     2,472        27.5        14.5        1,939  

 Customer deposits under management (3)

     90,926        17.9        5.8        77,117  

 Off-balance sheet funds (4)

     53,254        39.4        25.2        38,196  

 Risk-weighted assets

     91,865        28.1        15.0        71,738  

 Efficiency ratio (%)

     30.7                          31.7  

 NPL ratio (%)

     2.6                          2.5  

 NPL coverage ratio (%)

     123                          129  

 Cost of risk (%)

     2.96                          2.49  

(1) At constant exchange rate.

(2) Balances restated according to IFRS 17 - Insurance contracts.

(3) Excluding repos.

(4) Includes mutual funds, customer portfolios and other off-balance sheet funds.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Macro and industry trends

The economy has expanded at a relatively high rate, faster than anticipated, during 2023 and, especially during the second half of the year due to the dynamism of private consumption, the resilience of the manufacturing sector, the effects on private investment of the prospects for nearshoring of industrial production outside of China and the impact of higher public spending on the construction sector, in a growth environment in the United States. According to BBVA Research, GDP could grow around 3.4% in 2023 and 2.9% in 2024 (respectively,20 and 30 basis points above the previous forecasts). Annual inflation eased through 2023, reaching 4.7% in December, and it will probably continue to gradually moderate in the coming quarters, remaining around 3.8% on average in 2024. Policy rates, which stood at 11.25% at the end of 2023, are expected to begin to be cut from the first quarter of 2024, reaching around 9.0% by the end of the year.

With respect to the banking system, at the end of November 2023, the volume of outstanding credit to the non-financial private sector increased by 10.1% in year-on-year terms, with a greater boost from the consumer portfolio (+17,7%), followed by mortgages (+9,2%) and businesses (+7,3%). Growth in total deposits remains at similar levels to those of total credit, with a year-on-year growth of 10.0% at the end of November 2023, with greater dynamism in time deposits (+18,6% year-on-year) than in demand deposits (+6,1 year-on-year). The industry’s non-performing loans remained stable at around 2.45% and capital ratios are at comfortable levels.

Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rate. These rates, together with changes at current exchange rates, can be found in the attached tables of financial statements and relevant business indicators.

Activity

The most relevant aspects related to the area’s activity during 2023 were:

 

 

Lending activity (performing loans under management) grew by 10.9% between January and December 2023. By portfolios, the wholesale portfolio, which includes large companies and public sector, grew by 6.7%, highlighting the dynamism of the business segment (+5.4%), with a positive performance of the public sector segment during the year. On the other hand, the retail portfolio grew at a rate of 14.4%, which supports the trend observed since the beginning of the year. Within this segment, consumer loans grew by 15.8%, credit cards by 21.2%, loans to SMEs by 19.0%, and mortgage loans by 8.7%. The loan portfolio continued to show a favorable diversification, of which 47.6% of the total correspond to the wholesale portfolio and the remaining 52.4% to the retail portfolio.

 

 

Customer deposits under management maintained a positive evolution between January and December of 2023 (+5.8%) despite a high rates environment and the liability cost containment policy implemented by BBVA in Mexico. The growth of off-balance sheet funds was very relevant, particularly in mutual funds, which increased at a rate of 23.7% between January and December 2023.

The most relevant aspects related to the area’s activity in the fourth quarter of 2023 were:

 

 

Lending activity (performing loans under management) recorded a quarterly variation of +2.7%, with growth in both the wholesale and retail portfolios (+2.1% and +3.2%, respectively). During the quarter, the dynamism of the retail segment stands out as a result of the strong private consumption, which is supported by the increase in real wages and favored by the end of year campaign that promoted consumption (“Buen Fin”). In the wholesale portfolio, the public sector segment stood out, which increased by 5.5%.

 

 

With regard to the asset quality indicators, the NPL ratio continues to be at comfortable levels and stood at 2.6% at the end of December 2023, which represents a growth of 5 basis points compared to the previous quarter and 10 basis points compared to the end of the year 2022, focused on the retail portfolio and, in the last quarter, affected by the entry of some wholesale borrowers. On the other hand, the NPL coverage ratio decreased to 123% at the end of December 2023, including the impact of the annual review of the model parameters for the losses estimation and, to a lesser extent, the effect of the partial release of additional adjustments not assigned to particular clients or operations due to the performance observed in the portfolios associated with them.

 

 

Customer deposits under management increased compared to the previous quarter (+8.0%), due to higher balances of demand deposits (+10.2%). On the other hand, off-balance sheet funds continued to grow, although at a more moderate rate than in the previous quarter (+2.2%).

Results

In Mexico, BBVA achieved a cumulative net attributable profit of 5,340m by the end of December 2023, representing an increase of 17.1% compared to the previous year, mainly as a result of the significant growth in net interest income, thanks to the strong boost of the activity and the improvement in the customer spread.

The most relevant aspects of the year-on-year changes in the income statement at the end of December 2023 are summarized below:

 

 

Net interest income recorded a significant growth (+19.5%), as a result of strong dynamism of lending activity and a price management efficiency (keeping the cost of deposits contained). Thus, customer spreads associated with a higher bias towards retail portfolio have been successfully maintained.

 

 

Net fees and commissions, boosted by greater transactional banking, continued to increase at double digit (+24.0%), with growth in almost all commissions types, highlighting credit cards, those derived from mutual funds management and from wholesale activity.

 

 

The contribution from NTI increased (+18.0%) mainly as a result of the good performance of Global Markets, with a significant contribution from the foreign currency operations, which offset the bond swap operation associated with balance-sheet management registered in the third quarter of 2023.

 

 

The other operating income and expenses line grew by 29.3%, driven by the evolution of the insurance business.

 

 

Operating expenses increased (+16.9%), with higher personnel expenses due to salary adjustments and an increase in the workforce in a context of strong activity growth, and an increase of general expenses linked to inflation, particularly marketing and technology. Despite the above, the efficiency ratio continued to evolve favorably, with a significant improvement of 92 basis points compared to twelve months earlier.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Loan-loss provisions increased (+33.7%), mainly due to the higher provisioning needs of the retail portfolio, mainly in consumer and credit cards, partially affected by the strong increase of these segments. On the other hand, the cumulative cost of risk at the end of December 2023 stood at 2.96%, which is practically stable compared to the one registered at the end of September 2023 (+1 basis points).

In the quarter, and excluding the exchange rate effects, BBVA Mexico generated net attributable profit of 1,332m, slightly under the one of the previous quarter (+0.1%). The NTI evolution stands out due to both the bond swap operation included in the third quarter and the Global Markets results in the fourth quarter. On the lower part of the income statement, higher operating expenses were registered, mainly linked to the increase of employee variable compensation and higher general expenses associated with business growth.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Turkey

Highlights

 The dedollarization of the balance sheet continues in the quarter

 Progressive improvement of the NPL ratio in the year

 The cost of risk remains at low levels during 2023

 Net attributable profit growth in the quarter

 

BUSINESS ACTIVITY (1) (VARIATION AT CONSTANT

EXCHANGE RATE COMPARED TO 31-12-22)

        

NET INTEREST INCOME / AVERAGE TOTAL ASSETS

(PERCENTAGE AT CONSTANT EXCHANGE RATE)

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(1) Excluding repos.

    

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OPERATING INCOME (MILLIONS OF EUROS AT CURRENT

EXCHANGE RATE)

        

NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS

AT CURRENT EXCHANGE RATE)

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(1) Excluding repos.

    

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Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

 

 Income statement    2023      Δ %      Δ % (1)      2022 (2)  

Net interest income

     1,869        (28.4)        8.0        2,611  

Net fees and commissions

     998        65.9        149.7        602  

Net trading income

     937        26.4        89.3        741  

Other operating income and expenses

     (824)        5.3        (40.5)        (782)  

Gross income

     2,981        (6.0)        140.3        3,172  

Operating expenses

     (1,400)        31.9        93.1        (1,061)  

Personnel expenses

     (775)        30.7        96.4        (593)  

Other administrative expenses

     (475)        40.0        110.0        (340)  

Depreciation

     (150)        16.4        43.7        (129)  

Operating income

     1,581        (25.1)        206.9        2,111  

Impairment on financial assets not measured at fair value through profit or loss

     (118)        (69.4)        (53.9)        (387)  

Provisions or reversal of provisions and other results

     (137)        55.4        138.2        (88)  

Profit (loss) before tax

     1,325        (19.0)        n.s.        1,636  

Income tax

     (702)        (36.3)        (6.9)        (1,103)  

Profit (loss) for the period

     623        17.0        n.s.        533  

Non-controlling interests

 

    

 

(95)

 

 

 

    

 

243.9

 

 

 

    

 

n.s.

 

 

 

    

 

(28)

 

 

 

Net attributable profit (loss)

     528        4.6        n.s.        505  
 Balance sheets    31-12-23      Δ %      Δ %  (1)      31-12-22 (2)  

Cash, cash balances at central banks and other demand deposits

     9,700            60.0           161.7        6,061  

Financial assets designated at fair value

     3,692        (29.0)        16.1        5,203  

Of which: Loans and advances

     2        (43.1)        (6.9)        3  

Financial assets at amortized cost

     51,543        (0.2)        63.3        51,621  

Of which: Loans and advances to customers

     37,416        (0.1)        63.4        37,443  

Tangible assets

     1,496        23.4        86.0        1,213  

Other assets

     1,899        (2.0)        56.5        1,938  

Total assets/liabilities and equity

     68,329        3.5        68.9        66,036  

Financial liabilities held for trading and designated at fair value through profit or loss

     1,878        (12.1)        43.7        2,138  

Deposits from central banks and credit institutions

     2,306        (19.7)        31.3        2,872  

Deposits from customers

     50,651        9.3        78.8        46,339  

Debt certificates

     2,737        (15.4)        38.3        3,236  

Other liabilities

     4,319        (8.9)        45.1        4,741  

Regulatory capital allocated

     6,438        (4.1)        56.4        6,711  
 Relevant business indicators    31-12-23      Δ %      Δ %  (1)      31-12-22  

Performing loans and advances to customers under management (3)

     37,339        0.4        64.2        37,191  

Non-performing loans

     1,965        (24.3)        23.7        2,597  

Customer deposits under management (3)

     49,321        8.2        76.9        45,592  

Off-balance sheet funds (4)

     7,768        12.0        83.2        6,936  

Risk-weighted assets

     54,506        (3.1)        57.9        56,275  

Efficiency ratio (%)

     47.0                          33.5  

NPL ratio (%)

     3.8                          5.1  

NPL coverage ratio (%)

     97                          90  

Cost of risk (%)

     0.25                          0.94  

(1) At constant exchange rate.

(2) Balances restated according to IFRS 17 - Insurance contracts.

(3) Excluding repos.

(4) Includes mutual funds and pension funds.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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Macro and industry trends

Since the general elections held in May 2023, there are increasing signs of normalization in economic policy in general, and monetary policy in particular, which point to a gradual reversal of the current macroeconomic distortions. Thus, benchmark interest rates were increased from 8.5% at the beginning of 2023 to 42.5% in December 2023, and they may continue to rise further in the coming months in order to curb inflation, which reached 64.8% in December on a year-on-year basis, and allowing for a greater stabilization of the Turkish lira. Economic growth is expected to moderate to 4.5% in 2023 and 3.5% in 2024 (unchanged from the previous forecasts), supported by a still dovish fiscal policy. Given the high uncertainty, it is likely that the pace of GDP growth will slow down. Eventually, pressures on inflation will ease, although it will remain at relatively high levels,

As for the Turkish banking system, the effect of inflation remains strong. Total lending in the system increased 54.7% on a year-on-year basis at the end of November 2023, at similar levels to the previous months. The credit stock continued to be driven by the increase of consumer finance and credit cards (+79,3% year-on-year) while credit to businesses grew slightly less (+49,6% year-on-year). Total deposits maintain their strength and increased at the end of November by 67.0% on a year-on-year basis. Turkish lira deposits continued to grow in the same month (+96,7%), while U.S. dollar deposits grew much more slowly (+36,5%). Dollarization decreased to 42% in November 2023 versus 50.6% a year earlier, boosted by regulatory measures put in place during the last months by the central bank. The system’s NPL ratio continued to fall in recent months and in November 2023 was 1.63% (69 basis points lower than in the same month of 2022). Capital indicators remained at more than comfortable levels on the same date.

Unless expressly stated otherwise, all comments below on rates of changes for both activity and results, will be presented at constant exchange rates. These rates, together with changes at current exchange rates, can be observed in the attached tables of the financial statements and relevant business indicators. For the conversion of these figures, the end of period exchange rate as of December 31, 2023 is used, reflecting the considerable depreciation by the Turkish lira in the last year, in particular during the second quarter of 2023, with a negative impact in the accumulated results at the end of December 2023. Likewise, the Balance sheet, the Risk-Weighted Asset (RWA) and the equity are affected.

Activity

The most relevant aspects related to the area’s11 activity in 2023 were:

 

 

Lending activity (performing loans under management) increased between January and December 2023, mainly driven by the growth in Turkish lira loans (+54.6%). This growth was mainly supported by the performance of credit cards business loans and, to a lesser extent, of consumer loans. Foreign currency loans (in U.S. dollars) increased by 7.4%, favored by the increase in activity with customers focused on foreign trade (with natural hedging of exchange rate risk).

 

 

Customer deposits (74% of the area’s total liabilities as of December 31, 2023) remained the main source of funding for the balance sheet and increased by 76.9%. The positive performance of Turkish lira time deposits (+122.2%), which represent 82% of total customer deposits in local currency, is noteworthy. Balances deposited in foreign currency (in U.S. dollars) continued their downward path and decreased by 12.3%, with transfers from foreign currency time deposits to Turkish lira time deposits observed under a foreign exchange protection scheme. Thus, as of December 31, 2023, Turkish lira deposits accounted for 62% of total customer deposits in the area. For its part, off-balance sheet funds grew significantly by 83.2%.

The most relevant aspects related to the area’s activity in the fourth quarter of 2023 were:

 

 

Lending activity (performing loans under management) increased by 11.9%, mainly driven by the growth in Turkish lira loans (+8.9%) and, to a lesser extent, by the growth of foreign currency loans (+2.7%).

 

 

In terms of asset quality, the NPL ratio decreased 3 basis points from that at the end of September 2023 to 3.8% and 129 basis points below the figure at the end of 2022 mainly as a result of the positive dynamics in the wholesale portfolio, with the recoveries and repayments, which continued in the quarter and have set the tone for the whole 2023. The NPL coverage ratio recorded a decrease of 320 basis points in the quarter to 97% as of December 31, 2023 (+664 basis points compared to the end of 2022), in part affected by the annual review exercise of the models parameters for the losses estimation and by the fewer requirements in wholesale with credit quality improvements.

 

 

Customer deposits increased by 11.4%, mainly thanks to the performance of Turkish lira time deposits (+14.7%). Additionally, off-balance sheet funds grew by 10.6%. On the other hand, balances deposited in foreign currency (in U.S. dollars) registered a decrease of 1.3% originated in time deposits.

Results

Turkey generated a net attributable profit of 528m during 2023, which compares positively with the accumulated result reached at the end of December 2022, both periods reflecting the impact of the application of hyperinflation accounting.

As mentioned above, the year-on-year comparison of the accumulated income statement at the end of December 2023 at current exchange rate is affected by the strong depreciation of the Turkish lira in the last year (-38.9%). Excluding this effect, the highlights of the results for the year at constant exchange rate are summarized below:

 

 

Net interest income recorded a year-on-year growth of 8.0%, mainly due to the growth in Turkish lira loans, as well as higher income from the securities portfolio in Turkish lira. This is partially offset by the decline in the Turkish lira spread.

 

 

Net fees and commissions increased by 149.7%, favored by the performance in payment systems fees, brokerage activity, guarantees and asset management.

 

11 The variation rates of loans in Turkish lira and loans in foreign currency (U.S. dollars) only refer to Garanti Bank. Thus they exclude the subsidiaries of Garanti BBVA, mainly in Romania and Netherlands.

 

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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NTI showed an excellent evolution (+89.3%) thanks to the increase in the results of the Global Markets unit, favored by foreign exchange operations and portfolio sales.

 

 

The other operating income and expenses line showed a balance of -824m, which compares favorably with the previous year. This line includes, among others, the loss in the value of the net monetary position due to the country’s inflation rate, which stood below the loss recorded on 2022, partially offset by the income derived from inflation-linked bonds (CPI linkers). It is also worth highlighting the improved performance of the results of Garanti BBVA’s subsidiaries, specially from renting and insurance, also included in this line.

 

 

Operating expenses increased by 93.1%, with growth both in personnel, as a result of salary improvements to compensate for the loss of purchasing power of the workforce, and in general expenses, where higher expenses in technology stand out, as well as the institutional donation made by the BBVA Group to help those affected by the earthquake that struck an area in the south of the country in February 2023.

 

 

Impairment on financial assets decreased by 53.9%, mainly due to improvements in credit quality and the repayments in the wholesale segments, which led to a significant improvement in the accumulated cost of risk as of December 31, 2023 to 0.25% from the 0.94% at the end of December of the previous year.

 

 

The provisions and other results line closed December 2023 with a higher loss than in the same period of the previous year, mainly due to the update of the provisions for commitments with personnel and also as a result of higher provisions for contingent risks and commitments, linked to the earthquake and to the increase of the coverage of some specific clients.

 

 

Lastly, the accumulated tax expense at the end of 2023 reflects both the positive impact of the revaluation, for tax purposes, of Garanti BBVA’s non-cash assets that has generated a credit in corporate income tax rate, due to the higher tax base of the assets, and the increase of the corporate tax rate in Turkey from 25% to 30%, with retrospective application from January 1, 2023, which has negatively impacted the financial statements since the third quarter.

In the fourth quarter of 2023, the net attributable profit stood at 161m, which compares positively with the loss registered in the previous quarter, mainly due to the higher inflation rate in the previous quarter, as well as to the tax rate increase mentioned above.

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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South America

Highlights

 Growth in lending activity focused on the retail segments

 Excellent evolution of the net interest income and of the NTI

 Improvement in the efficiency of the area

 Higher adjustment for hyperinflation in Argentina and the Argentine peso devaluation in the fourth quarter

 BUSINESS ACTIVITY (1) (VARIATION AT CONSTANT

 EXCHANGE RATES COMPARED TO 31-12-22)

 

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(1) Excluding repos.

 

 NET INTEREST INCOME / AVERAGE TOTAL ASSETS

 (PERCENTAGE AT CONSTANT EXCHANGE RATES)

 

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 OPERATING INCOME (MILLIONS OF EUROS AT CURRENT

 EXCHANGE RATES)

 

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(1) At constant exchange rates: +63.8%.

 NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT

 CURRENT EXCHANGE RATES)

 

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(1) At constant exchange rates: +43.2%.

 

 

(2) The variation in customer funds under management is affected by the transfer of the pension funds managed by the Pension Fund Administrator that the BBVA Group maintains in Bolivia

 

Translation of this report originally issued in Spanish. In the event of a discrepancy, the Spanish-language version prevails.


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 FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)  
 Income statement     2023      Δ %      Δ %  (1)       2022 (2)  

Net interest income

     4,394        6.2        47.5        4,138  

Net fees and commissions

     700        (10.1)        12.3        778  

Net trading income

     633        41.7        73.5        447  

Other operating income and expenses

     (1,395)        27.2        45.8        (1,097)  

Gross income

     4,331        1.5        43.9        4,265  

Operating expenses

     (1,934)        (2.1)        25.0        (1,976)  

Personnel expenses

     (904)        (4.4)        25.1        (946)  

Other administrative expenses

     (864)        0.6        29.7        (859)  

Depreciation

     (165)      &