Banco Bilbao Vizcaya Argentaria, S.A. — FY 2019 Form 20-F
Reporting period: Year ended December 31, 2019; audited consolidated statements prepared under IFRS-IASB. Although the request specifies 2019 Q4, this annual filing reports full-year results and does not provide a clear standalone Q4 income statement.
Financial performance and position
| Metric | FY 2019 / Dec. 31, 2019 | Comparable period |
|---|---|---|
| Gross income | €24.542 billion | €23.747 billion in 2018; +3.3% |
| Net interest income | €18.202 billion | €17.591 billion; +3.5% |
| Net fees and commissions | €5.033 billion | €4.879 billion; +3.2% |
| Net margin before provisions | €12.639 billion | €12.045 billion; +4.9% |
| Operating profit before tax | €6.398 billion | €8.446 billion; −24.2% |
| Profit attributable to parent | €3.512 billion; €0.47 per share | €5.400 billion; €0.75 per share; −35.0% |
| Return on average equity / assets | 6.3% / 0.6% | 10.2% / 0.9% |
| Net interest margin | 2.62% of average total assets; the filing also reports 2.8% of average interest-earning assets | 2.59% / 2.8%, respectively |
| Total assets / total equity | €698.690 billion / €54.925 billion | €676.689 billion / €52.874 billion |
| Customer deposits | €394.924 billion, including deposits across applicable balance-sheet categories | €388.682 billion; +1.6% |
| Loans and advances to customers, net | €395.962 billion | €387.850 billion; +2.1% |
| Credit quality | NPA ratio 3.79%; loan-loss reserve €12.427 billion; coverage ratio 77% | NPA ratio 3.94%; reserve €12.211 billion; coverage 73% |
| Capital and liquidity | Phased-in CET1 11.98%; total capital 15.92%; LCR 129% | 2018 phased-in CET1 11.58%; total capital 15.71% |
| Cash flows | Operating −€8.214 billion; investing +€0.098 billion; financing −€2.702 billion; cash and equivalents fell €11.077 billion | 2018 operating +€9.249 billion; investing +€7.516 billion; financing −€5.092 billion |
BBVA operates across Spain, the United States, Mexico, Turkey, South America and the rest of Eurasia. Mexico generated the largest reported segment profit attributable to the parent (€2.699 billion, 45% of the segment subtotal), followed by Spain (€1.386 billion). The Corporate Center reported a €2.517 billion loss.
Material changes versus 2018
- Revenue growth did not translate into higher bottom-line earnings: parent-attributable profit fell 35%, while operating profit before tax declined 24.2%.
- A €1.318 billion U.S. goodwill impairment, recorded in non-financial asset impairment, was the principal unusual 2019 charge. Management attributed it to lower expected U.S. results amid declining interest rates and slower growth.
- 2018 benefited from the €633 million after-tax gain on the BBVA Chile sale and proceeds associated with the Cerberus real-estate transaction. Their absence materially affects year-over-year comparisons.
- Financial-asset impairment expense rose 4.3% to €4.151 billion. Administration costs declined 1.8%, but depreciation and amortization increased 32.4%, principally due to IFRS 16 lease accounting.
- Credit indicators improved overall, with the NPA ratio declining and coverage increasing. Conditions were weaker in Turkey: its segment NPL ratio rose to 7.0% from 5.3%.
Outlook, commentary and risks
Management reported a fully loaded consolidated CET1 target range of 11.5%–12.0%; it said the target had been achieved in 2019 but gave no assurance it would be maintained. The filing includes BBVA Research forecasts made around early 2020, including global growth of about 3.2% for 2020, but cautions that COVID-19 could affect those estimates. These are forecasts, not a firm earnings guidance commitment.
- Management described a competitive, low- or negative-rate environment, pressure on margins, and growing competition from fintech and BigTech firms. Interest-rate changes can affect both net interest income and borrowers’ repayment capacity.
- Geographic exposures, foreign-exchange movements and inflation remain important risks, particularly in Mexico, Turkey and Argentina. Argentine hyperinflation accounting reduced parent-attributable profit by €224 million in 2019.
- The filing identifies credit, real estate, liquidity and funding, sovereign, regulatory capital, cybersecurity, operational and legal risks. Spain represented 37% of Group risk in financial instruments; Spain, Mexico, the United States and Turkey together represented €116.006 billion of sovereign exposure.
- BBVA was named an investigated party in a Spanish criminal investigation concerning services provided by Cenyt and alleged bribery, disclosure of secrets and corruption. The matter was preliminary, with no formal accusation against the Bank reported in the filing; the outcome and potential financial or reputational effects were unclear.
- Other legal uncertainties include mortgage and IRPH-related claims. The filing said the European Court of Justice ruling on IRPH was pending at the report date and that an adverse, potentially retroactive ruling could have a material effect.
- BBVA reported an LCR of 129% and estimated that the resolution group met its communicated MREL requirements, which were to become binding by January 1, 2021. It also cautioned that regulatory changes or funding stress could raise costs or restrict distributions.
BBVA declared €0.26 per share for 2019, with a 39.9% dividend payout ratio. The filing described a proposed €0.16 final cash dividend, expected to be paid in April 2020, subject to applicable approvals and restrictions.
KPMG issued an unqualified opinion on the consolidated financial statements and reported effective internal control over financial reporting as of December 31, 2019. The auditor identified expected credit losses, fair value measurement of certain difficult-to-value instruments, and the U.S. goodwill impairment analysis as critical audit matters.
Most important facts for investors to verify
- Reconcile the €1.318 billion U.S. goodwill impairment, its valuation assumptions and sensitivity, and the effect of any further deterioration in U.S. expectations.
- Separate recurring 2019 earnings from prior-year disposal gains and other unusual items; review the drivers of the €8.214 billion operating cash outflow.
- Assess credit-loss assumptions and country trends, particularly Turkey’s higher NPL ratio, Mexico’s changing credit classifications, and Argentina’s inflation and currency effects.
- Confirm the fully loaded CET1 position against the stated target, applicable capital and MREL requirements, and the capacity for future dividends.
- Monitor Cenyt and mortgage/IRPH proceedings, including potential outcomes, provisions, timing and reputational exposure; the filing does not provide a clear quantified exposure for these matters.
- Verify completion and final financial effects of the BBVA Paraguay sale, which remained subject to regulatory approval at the report date.