Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) — FY 2021 Form 20-F
Reporting period: Year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; quarterly results are not separately summarized in the supplied text. Consolidated financial statements were prepared under IFRS-IASB/EU-IFRS and received an unqualified audit opinion.
Business context
BBVA is a diversified banking and financial-services group with five operating segments: Spain, Mexico, Turkey, South America and Rest of Business. The United States banking business was sold to PNC on June 1, 2021; remaining U.S. wholesale and institutional activities continue. Spain, Mexico and Turkey represented 62.4%, 17.8% and 8.5% of group assets, respectively, at year-end.
Key financial metrics
| Metric (€ millions, except ratios and per-share data) | 2021 | 2020 | Change / context |
|---|---|---|---|
| Gross income | 21,066 | 20,166 | +4.5% |
| Net interest income | 14,686 | 14,592 | +0.6%; +6.1% at constant exchange rates |
| Net fees and commissions | 4,765 | 4,123 | +15.6% net |
| Net margin before provisions | 11,536 | 11,079 | +4.1% |
| Impairment expense on financial assets | 3,034 | 5,179 | Down 41.4% |
| Operating profit before tax, continuing operations | 7,247 | 5,248 | +38.1% |
| Profit attributable to parent | 4,653 | 1,305 | +256.6% |
| Total profit, including discontinued operations | 5,618 | 2,060 | Includes €280m profit from discontinued operations in 2021 versus €1,729m loss in 2020 |
| Net interest margin | 2.16% | 2.01% | As reported |
| Return on average shareholders’ funds | 11.4% | 6.1% | Adjusted measure excludes specified items, including U.S. business results and sale effects |
| Total assets | 662,885 | 733,797 | Down 9.7%, mainly reflecting the U.S. sale and related presentation |
| Total equity | 48,760 | 50,020 | Down 2.5% |
| Customer deposits | 367,441 | 353,026 | +4.1%; includes deposit categories beyond amortized-cost customer deposits |
| Loans and advances to customers, gross | 346,134 | 335,858 | Up 3.1% |
| Loss allowance for credit losses | 11,142 | 12,141 | Allowance equal to 3.19% of loans at amortized cost, versus 3.53% |
| Non-performing asset ratio | 4.09% | 4.11% | Includes impaired customer commitments and guarantees |
| Cash flows from operating activities | (1,242) | 39,349 | Banking working-capital movements materially affect this measure |
| Liquidity Coverage Ratio / Net Stable Funding Ratio | 165% / 135% | Not stated here | Both above the 100% regulatory minimum |
| CET1 ratio, fully loaded / phased-in | 12.75% / 12.98% | Not stated here | Fully loaded ratio increased 102 basis points year over year |
Material changes versus prior periods
- Results improved as credit impairment expense fell and economic activity recovered from the pandemic shock. 2020 had elevated pandemic-related provisions and a €2,084m U.S. goodwill impairment, reported in discontinued operations.
- The U.S. sale generated approximately $11.5bn (€9.6bn) cash consideration and a cumulative after-tax profit of €582m, including the sale result; BBVA reported an approximately 294-basis-point positive impact on fully loaded CET1.
- BBVA recorded €994m of pre-tax restructuring costs in 2021 for the Spanish workforce and branch program: €754m for the collective layoff and €240m for office closures. The agreement covered 2,935 employees and 480 offices; 2,888 employees had agreed to leave by year-end.
- Fee income rose with higher transaction volumes and asset-management activity. The increase was partly offset by higher fee expenses, administration costs and funding costs in Turkey.
- The group updated its Stage 3/default definition to align with EBA guidance. It estimated this added €1,262m to impaired assets; the effect on expected credit losses was not considered significant.
- Year-end balance-sheet comparability is affected by the U.S. disposal and presentation changes. BBVA also recast segment reporting after removing the U.S. segment and creating Rest of Business.
Outlook, commentary and key risks
- Outlook: The filing gives no formal company earnings guidance. BBVA Research expected continued, moderating global growth in 2022 and described risks as significant and tilted to the downside; these are research estimates, not company guidance.
- Macroeconomic and currency exposure: Management cited persistent inflation, supply disruptions, changing interest rates, COVID-19 uncertainty and geopolitical tensions. Turkey was especially volatile: inflation was 36.1% in December 2021 and the lira depreciated 40.2% against the euro over the year.
- Credit and concentration: Spain accounted for 61% of customer loans at year-end; the group also has substantial exposure to Mexico and Turkey. Higher interest rates, the expiry of support measures and borrower stress could increase defaults and provisions.
- Turkey acquisition: BBVA announced a voluntary bid for the remaining 50.15% of Garanti BBVA at TRY 12.20 per share, with a maximum potential payment of approximately €1.69bn, subject to approvals and shareholder take-up. The filing estimated a maximum 32-basis-point reduction in fully loaded CET1 if all shares were tendered.
- Shareholder returns: The board changed its policy to target annual distributions of 40%–50% of consolidated ordinary profit, subject to approvals and restrictions. A €0.08 gross interim dividend was paid in October 2021; a further €0.23 gross per share for 2021 results was proposed for shareholder approval. A buyback framework of up to €3.5bn was authorized; the first tranche was completed in March 2022.
- Legal and operational risks: The group had €623m of provisions for legal and tax proceedings at year-end. Spanish authorities’ criminal investigation into alleged bribery, disclosure of secrets and corruption remained in pre-trial proceedings; no formal accusation against BBVA had been made as of the report date. Cybersecurity, compliance, climate, regulatory, funding and litigation risks are also disclosed.
Most important facts for investors to verify
- Separate recurring continuing-operations earnings from the U.S. disposal, discontinued operations, restructuring costs and other unusual items; confirm the basis of adjusted returns.
- Review the full capital disclosure and reconciliation, including the fully loaded CET1 ratio, the buyback deduction, capital requirements and MREL headroom.
- Assess asset quality and reserve adequacy, including the effects of the revised default definition, expiring borrower-support measures and exposures in Spain, Mexico and Turkey.
- Confirm the status, final consideration and capital impact of the Garanti tender offer, and the timing and approval of proposed dividends and buybacks.
- Reconcile cash-flow figures with the bank’s balance-sheet and funding disclosures; the annual report does not provide a standalone fourth-quarter cash-flow figure.
- Monitor the Spanish criminal investigation and other legal contingencies; reported provisions do not cap possible losses.