BBVA(BBVA)2024-01-30 21:18Financial Data and Key Metrics - Net attributable profit reached a record high of EUR8.019 billion in 2023, a 22% increase compared to 2022 [5] - Earnings per share increased by 27% year-over-year, driven by share buyback programs [5] - Return on tangible equity (ROTE) stood at 17%, with tangible book value per share plus dividends growing by 20.2% [5] - CET1 ratio remained comfortably above the target at 12.67% [20] - Total shareholder distribution for 2023 amounted to EUR4 billion, equivalent to EUR0.68 per share [22] Business Line Performance - Loan portfolio grew by 7.6% in 2023, with 11 million new customers acquired [3] - Digital sales accounted for 79% of total unit sales, a record high [4] - Mobile customers surpassed 52 million, with a 74% penetration rate [8] - Sustainable business volumes reached EUR70 billion in 2023, with a total of EUR206 billion since 2018 [10] - Spain's loan origination grew by 10% year-on-year, with NII accelerating by 48.9% [24] - Mexico's loan portfolio grew by 11% year-on-year, with core revenues increasing by 20% [27][28] Market Performance - Market share gains were achieved in all countries, particularly in consumer credit cards and private businesses [9] - Spain's customer spread improved to 3.42%, while Mexico's customer spread stood at 11.67% [16] - Core revenue growth in Spain and Mexico was 32% and 12% year-over-year, respectively [17] - Turkey's net profit reached EUR528 million in 2023, despite a challenging environment [33] - South America's net profit exceeded EUR600 million, driven by NII growth and higher fees [35] Strategic Direction and Industry Competition - The company continues to focus on digital transformation, with 65% of new customers acquired through digital channels [7] - Sustainability remains a key focus, with the company maintaining its top-ranked position in the Dow Jones Sustainability Index for the fourth consecutive year [10] - The company is targeting Net Zero by 2050, with a 19% reduction in emissions in the top six sectors since 2022 [11] - In Mexico, the company expects double-digit loan growth in 2024, supported by nearshoring and a strong labor market [27][31] Management Commentary on Operating Environment and Future Outlook - Management highlighted the importance of delivering profitable growth and creating value for stakeholders [37] - For 2024, the company expects net attributable profit to continue growing, with ROTE in the high-teens and efficiency ratio below 42% [38] - In Spain, NII is expected to grow at mid-single-digit rates, with cost of risk projected at 40 basis points [26] - In Mexico, NII is expected to grow at high single-digit rates, with cost of risk increasing to 325 basis points [31] - Turkey is expected to contribute similarly to 2023, with cost of risk increasing to 110 basis points [34] Other Important Information - The company announced a new share buyback program of EUR781 million, equivalent to 1.6% of BBVA's market cap [23] - Since 2021, total shareholder distribution has reached EUR13.2 billion, including EUR5 billion from 2023 results [23] - The company is on track to meet its long-term targets, with all metrics exceeding original goals [23] Q&A Session Summary Question: NII Sensitivity and Loan Growth Outlook in Spain - NII sensitivity to a 100 basis points change in rates is now plus/minus 5%, down from 20% a year ago [42] - Loan growth in Spain is expected to be flattish, with growth in consumer portfolios and medium-sized enterprises [44] - Deposit costs are expected to increase, with a beta of 25% to 30% in 2024 [47] Question: NII Trends and Fees in Mexico - NII sensitivity in Mexico has been reduced to 2.3% from 3.7% a year ago [50] - Fees in Mexico are driven by payment services, with 59% of fee income coming from this segment [52] Question: Excess Capital and Cost of Risk in Mexico - The company is committed to returning excess capital to shareholders, with a CET1 target of 12% [55] - Cost of risk in Mexico is expected to increase to 325 basis points, driven by growth in retail portfolios [57] Question: Inorganic Growth Opportunities and Competition in Mexico - The company remains focused on organic growth, with no significant inorganic opportunities currently [64] - Competition from neo-banks in Mexico is declining, with BBVA maintaining its market share [65] Question: Regulatory Capital Headwinds - Basel IV is expected to have a limited impact on BBVA, with a fully loaded CET1 impact of less than 40 basis points [68] Question: Core Revenue Growth and Cost Management - Core revenue growth in Spain and Mexico is expected to remain healthy, with NII growing at mid-single-digit and high single-digit rates, respectively [72] - Expense growth in Spain and Mexico is expected to slow down, with efficiency ratios improving [76] Question: NII Sensitivity and Payout Policy - The company expects to maintain a 50% payout policy, split between 40% in cash dividends and 10% in share buybacks [111] Question: Argentina's Profit Outlook and Turkey's Normalization - Argentina's profit is expected to be 20% to 30% lower in 2024, driven by currency devaluation and inflation [115] - Turkey is expected to normalize in two to three years, with inflation projected at 45% in 2024 [118] Question: Structural Hedging and Capital Generation - The ALCO portfolio in Spain is expected to remain stable, with a duration of 3.4% including hedges [95] - Organic capital generation is expected to be around 60 basis points per year, excluding regulatory impacts and model updates [127] Question: Unrealized Losses and Asset Quality - Unrealized losses in the hold-to-maturity portfolio are around EUR400 million, mainly in Turkey [130] - Stage 2 increases in Q4 were driven by mortgage portfolio restructuring in Spain [130] Question: Long-Term Loan Growth Potential in Mexico - Loan growth in Mexico is expected to remain strong, supported by low banking debt to GDP and nearshoring trends [139]