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BBVA Spain in the new growth cycle
Cristina de Parias, Head of Spain and Portugal
SG Premium Review Conference
December 4th, 2014
1
Disclaimer
This document is only provided for information purposes and does not constitute, nor must it be interpreted as, an offer to sell or exchange or acquire,
or an invitation for offers to buy securities issued by any of the aforementioned companies. Any decision to buy or invest in securities in relation to a
specific issue must be made solely and exclusively on the basis of the information set out in the pertinent prospectus filed by the company in relation to
such specific issue. Nobody who becomes aware of the information contained in this report must regard it as definitive, because it is subject to changes
and modifications.
This document contains or may contain forward looking statements (in the usual meaning and within the meaning of the US Private Securities Litigation
Act of 1995) regarding intentions, expectations or projections of BBVA or of its management on the date thereof, that refer to miscellaneous aspects,
including projections about the future earnings of the business. The statements contained herein are based on our current projections, although the said
earnings may be substantially modified in the future by certain risks, uncertainty and other factors relevant that may cause the results or final decisions to
differ from such intentions, projections or estimates. These factors include, without limitation, (1) the market situation, macroeconomic factors,
regulatory, political or government guidelines, (2) domestic and international stock market movements, exchange rates and interest rates, (3) competitive
pressures, (4) technological changes, (5) alterations in the financial situation, creditworthiness or solvency of our customers, debtors or counterparts.
These factors could condition and result in actual events differing from the information and intentions stated, projected or forecast in this document and
other past or future documents. BBVA does not undertake to publicly revise the contents of this or any other document, either if the events are not
exactly as described herein, or if such events lead to changes in the information of this document.
This document may contain summarised information or information that has not been audited, as well as information relative to solvency produced with
criteria that are still subject to definitive CRR regulatory interpretation, and its recipients are invited to consult the documentation and public information
filed by BBVA with stock market supervisory bodies, in particular, the prospectuses and periodical information filed with the Spanish Securities Exchange
Commission (CNMV) and the Annual Report on form 20-F and information on form 6-K that are disclosed to the US Securities and Exchange
Commission.
Distribution of this document in other jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely
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Restrictions.
2
Contents
1
BBVA Group: Strong fundamentals
2 BBVA Spain: Key management priorities
3 Conclusions
3
BBVA, an international retail bank with an attractive
geographical footprint
Breakdown of gross income(1)
9M14
Developed
(%)
Asia
Turkey
South
America
Weight
1%
4%
Y-o-Y chg.
58%
+16.1%
(1) Excluding Corporate Activities.
NOTE: YoY change in constant €.
Y-o-Y chg.
+0.6%
30%
23%
Emerging
Weight
Spain
42%
2%
10%
30%
Rest of
Europe
USA
USA
Mexico
4
Positive P&L dynamics
€ 14 Bn
Core revenues (1) at
record levels
Regionally-adapted cost
strategy
in 9M14
(+11.4% vs 9M13)
Cost Control (Developed): -3.5% vs 9M13
Investment (Emerging): +14.1% vs 9M13
Gross Income: +6.6% vs 9M13
Improving operating
jaws
Operating Expenses: +4.1% vs 9M13
Reduction in loan-loss
and RE provisions
€ 1.2 Bn 2014 quarterly average
vs € 2.4 Bn in 2012
Strong improvement of
recurring profit(2)
NOTE: YoY change in constant €.
(1) NII + fees and commissions. (2) Net income from ongoing operations.
€ 2.3 Bn
in 9M14
(2x 9M13)
5
Strong fundamentals confirmed by the
Comprehensive Assessment
Excess NPA coverage in the
analyzed portfolios in the AQR
Earnings generation
CET1 fully-loaded 2016
Cumulative figure 2014-2016
Adverse scenario (bps)
Adverse scenario (%)
(%)
BBVA
1.8%
Peer 1
9.3%
Peer 1
113
Peer 2
8.6%
BBVA
71
BBVA
8.2%
Peer 2
65
Peer 1
-0.5%
Peer 2
-0.5%
Peer 3
7.8%
Peer 3
Peer 3
-0.8%
Peer 4
7.6%
Peer 4
Peer 5
7.3%
Peer 5
-104
Peer 6
7.1%
Peer 6
-105
Peer 7
7.1%
Peer 7
-130
Peer 8
7.0%
Peer 8
-131
Peer 9
6.9%
Peer 9
-132
Peer 10
6.7%
Peer 10
-180
Peer 11
6.5%
Peer 11
-211
Peer 4
-1.5%
Peer 5
-2.0%
Peer 6
Peer 7
-3.2%
-4.3%
Peer 8 -7.3%
Peer 12
Peers' average
-2.5%
Peers' average
6.0%
7.3%
Peer 12
Peers' average
Peers included: BARC, BNPP, CASA, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG and UCI (UK banks not included in the AQR exercise).
Source: EBA and ECB.
-7
-49
-339
-100
6
Contents
1 BBVA Group: Strong fundamentals
2
BBVA Spain: Key management priorities
3 Conclusions
7
Spain is growing faster than the EMU
Real GDP growth
(%)
2.0%
1.7%
1.3%
1.3%
Strong export growth to continue (>5%
2015), but net exports flattening as
imports grow
Investment in machinery and
equipment continues to grow (>6% in
2014 and 2015)
0.8%
-0.4%
-0.6%
-0.7%
A more expansionary monetary policy
-1.2%
-2.1%
2011
2012
Spain
2013
2014e
2015e
A fiscal reform that will boost domestic
demand (0.2 pp additional contribution)
EMU
Recovery in internal demand is the determining factor
for new loan production growth
Source: BBVA Research.
8
The restructuring of the Spanish banking system
has been accomplished
Well-capitalized and cleaned-up
institutions
A more concentrated industry(1)
Market share by total assets
37 entities
24%
10.9%
Stress test
(adverse scenario)
AQR
44%
27%
4.0% 3.9%
Source: AEB /CECA. Data as of March, 2014. BBVA’s market share in 2014
includes Catalunya Banc (expected closing 1Q15).
(1) Top 3: BBVA, SAN and Caixabanc. Next 3 players: Bankia, POP and SAB.
Source: Bank of Spain, AEB and BCE.
Germany
2014
Italy
2007
Portugal
40%
49%
Ireland
Top 3
entities
6.2% 6.1%
16%
Greece
Next
3 players
3.3%
2.5%
1.6%
Spain
Rest
(%)
France
75 entities
Negative impact on CET1 ratios from the AQR
and stress test under the adverse scenario
Netherlands
(%)
A more rational competition with a common focus on profitability
9
BBVA has gained market share organically and
through acquisitions
Retail customer market share
Current market share
Catalunya Banc
acquisition
+220bps
Unnim
acquisition
+70bps
+40bps
+30bps
+40pbs
16.1%
14.4%
2.6%
15.2%
2.4%
12.2%
11.8%
13.5%
12.8%
Gross loans
Customer funds
11.1%
10.7%
10.4%
BBVA
2011
2012
2013
Source: FRS Inmark (first supplier market share).
2014
Catalunya Banc
Source: Gross loans and customer funds (deposits and mutual and
pension funds) market share data from BoS as of Dec.13. Catalunya Banc
gross loans pro-forma after the sale of the mortgage portfolio to
Blackstone.
To be profitable in this environment, banks need higher market share
10
Catalunya Banc: a profitable and low risk acquisition
Key transaction terms
 Acquisition of a cleaned-up
institution with a strong customer
franchise
Catalunya Banc key data
Data as of December, 2013
BBVA’s market
share in Catalonia
post acquisition(3)
 Doubling market share in Catalonia
(to 26.1% in terms of customers(1))
and improving market share in Spain
Gross Loans(2)
€ 28.2 Bn
24.4%
 Attractive returns with
manageable capital impacts:
Customer
Deposits
€ 25.6 Bn
22.8%(4)
773 branches
27.2%
•
•
€ 300 Mn average annual
contribution to net attributable
profit from 2018 (15% ROIC)
Capital impact of 55 bps (BIS 3
phased-in)
Branches
94% in Catalonia
(2) Gross loans exclude the € 6.4 Bn mortgage portfolio sold to Blackstone.
(3) Pro-forma market share as of Dec.13. Source: Bank of Spain.
(4) Customer funds market share.
Gaining 1.5 million customers at the turning point of the cycle
(1) Customer market share according to FRS Inmark.
11
BBVA Spain: key management priorities
1
Profitable Growth
2
Risk Management
3
Digital Transformation
+ Engaged Customers
+ Customer Experience
+ Efficiency
12
1
PROFITABLE GROWTH
Core revenues growth
Core revenues evolution
Towards a more profitable Balance Sheet
Net Interest Income + Net Fees and
Commissions
Customer spread evolution
(Banking activity ex-Global Markets, %)
(€ Mn)
Exceeding pre-elimination
of mortgage floors levels
+11%
1.70
1,320
1,263
1,321
1.77
1.57
1.43
1.83
1.93
1.58
1,281
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
1,192
Net Fees and Commissions from Funds(1)
(€ Mn)
+16%
3Q13
4Q13
1Q14
2Q14
3Q14
87
92
93
97
102
3Q13
4Q13
1Q14
2Q14
3Q14
(1) Mutual and pension funds.
13
1
PROFITABLE GROWTH
Signs of recovery in new loan production
Deleveraging is slowing
down
Total gross loans in Spain
(Banking activity + RE)
Full Year
2013
Year to
Sep.14
Significant growth of new
loan production
New loan production
BBVA Spain Banking Activity
(Monthly average, €Mn)
Consumer Loans
66
(Loans under management, %)
86
CIB 11%
+31%
-3.2%
9M13
Outlook dependent on our
loan book mix
Public
Sector
13%
Resid.
Mortgages
45%
9M14
Small Companies
512
442
+16%
-8.0%
Year 2013
Year to Sept
2014
9M13
Medium &
Large Co.
20%
Small Co. Consumer
3%
7%
9M14
BBVA loan balances to remain flattish in 2015 and growing in 2016
14
1
PROFITABLE GROWTH
The reduction in the cost of deposits will continue
to be the main driver of the customer spread
Customer funds evolution
(€ Bn)
Cost of time deposits and
promissory notes
(Stock, %)
+2%
27.6
50bps in
2.2
Sep-14
54.6
1.7
-9%
Aug-14
May-14
Apr-14
Mar-14
Current and Saving Accounts
Feb-14
Mutual Funds
Jan-14
Sep-14
Dec-13
Dec-13
1.4
67.6
Dec-12
74.4
1.6
Jul-14
53.5
+24%
New time
deposits at
2.7
Jun-14
22.3
149.8
Sep-14
150.2
Time Deposits
A more profitable mix
Positive trend to continue in 2015
15
2
RISK MANAGEMENT
Risk indicators continue to evolve favorably
NPAs
Cost of risk
Banking Activity in Spain
Banking Activity in Spain
(€ Bn)
(Cumulative, %)
-6.6%
12.5
1.5
12.5
12.5
1.4
12.3
11.7
1.0
3Q13
4Q13
1Q14
2Q14
3Q14
3Q13
4Q13
1Q14
1.0
0.9
2Q14
3Q14
Cost of risk normalization on track
16
2
RISK MANAGEMENT
Turnaround of the Spanish Real Estate market
Demand growing in 2014,
from very low levels
Prices have bottomed-out
Price evolution
(Residential home prices. YoY %)
12%
Transactions of residential homes
Cumulative transactions to September
(Thousand units)
661
9%
6%
3%
437
0%
+20%
330 345
-3%
-6%
246
-9%
234
211
252
-12%
9M07 9M08 9M09 9M10 9M11 9M12 9M13 9M14
Source: BBVA estimates based on Ministry of Public Works and Transport
data.
Source: BBVA and Public Notary data.
Reduction of unsold stock thanks to a recovery of demand in the
absence of new home building
17
2
RISK MANAGEMENT
Decreasing exposure to Real Estate
RE foreclosed assets sales(2)
Net exposure(1)
(Units)
(€ Bn)
+10.2%
+10,2%
-8.9%
14.6
14,565
9M13
14.2
16,049
9M14
13.8
13.3
RE Net attributable profit
(€ Mn)
- 844
Dec-13
Mar-14
Jun-14
Sep-14
9M13
-29.1%
- 598
9M14
(1) Net exposure according to Bank of Spain's "RE transparency scope" (Circular 5-2011). Includes RE developer loans and RE foreclosed assets.
(2) Sales volume includes also the sales of units owned by developers.
18
3
DIGITAL TRANSFORMATION
Digital transformation
1
5
2
4
3
19
3
DIGITAL TRANSFORMATION
BBVA continues to lead the transformation of the
branch network …
BBVA anticipated the adjustment
of the sector
Transformation
of the branch network
Reduction in the number of branches(1)
 Optimization of the number of larger
Retail Banking Centers
2007-20090
0
2009-2012
0
2012–Sep.14
 Simpler dependent convenience
branches
-2%
 Personalized remote customer care
-7%
-9%
-11%
-14%
BBVA
-14%
Spanish system
New retail model: launching larger
Retail Banking Centers with a network
of dependent branches
Sales proactivity(2) of remote advisors
+ 70%
1.0x
Branch advisors
1.7x
Remote advisors
(1) Source: Bank of Spain. BBVA includes the closing of 358 Branches coming from Unnim (out of 561 branches in 2012). (2) Proactivity in terms of number of
interactions with customers
20
3
DIGITAL TRANSFORMATION
… towards a more profitable network with a clear
focus on efficiency
Ongoing business
Catalunya Banc integration:
significant synergy potential
Banking activity in Spain
Market Share in Catalonia
(Operating expenses, € Mn)
2,278
-6%
84
(%)
2,137
79
1,409
-8%
1,293
785
-2%
765
9M13
General expenses
9M14
Personnel expenses
Depreciation
 Reducing the cost base in Spain by 5% in
2014
 Additional annual cost savings of €160180Mn in 2015
15.8%
13.5% 13.7%
12.4%
10.4%
8.6%
Branches
Gross Loans
BBVA
Customer Funds
Catalunya Banc
 Estimated cost synergies up to 40% of
Catalunya Banc cost base, fully achievable
in 2018
 Synergies NPV > €1.2 Bn (90% from costs)
Market Share Source: Company data as of June 2014 and Bank of Spain data as of March 2014. Gross Loans and Customer funds data from Bank of Spain as of
December 2013, Catalunya Banc gross loans pro-forma after the sale of the mortgage portfolio to Blackstone.
21
3
DIGITAL TRANSFORMATION
Digital transformation generating additional value
Transactions by type
of relationship
Credit Card Consumer
Financing
Average number of annual transactions per customer
Number of transactions
Core Clients
in Spain
Branch
ATM
Web
321
(% share)
25%
Only
branch
X12
19
Mobile
6,000
26
28%
8,000
Non-digital Digital
customer customer
+ ATM 12 61
4,000
33%
+ Web
34
(Inquiries) 17
Web
87
2,000
12%
+ Web
(Transact.) 20 39
Branch
ATM
254
NOTE: Non-digital customers are those that only use branches and ATMs.
Aug-14
Jul-14
Jun-14
May-14
Apr-14
340
Mar-14
+ Web
(Financial 24 42
Products)
Feb-14
2%
Jan-14
0
22
Contents
1 BBVA Group: Strong fundamentals
2 BBVA Spain: Key management priorities
3
Conclusions
23
Conclusions
Macro
Spanish
Banking
Sector
BBVA Spain
 Spain will continue to grow faster than the EMU. Internal
demand growing by 2% in 2015.
 In the real estate market, prices have bottomed-out and demand is
recovering.
 Restructuring has led to a more concentrated industry and a
more rational competitive environment.
 Taking advantage of this, BBVA has gained market share
organically, and acquisitions have enhanced our leadership.
 Core revenues growth: reduction of deposits costs as the main
driver of customer spread and signs of recovery in new loan
production.
 Cost of risk normalization on track.
 Leading the digital transformation process towards a more
profitable and efficient network.
24
BBVA Spain in the new growth cycle
Cristina de Parias, Head of Spain and Portugal
SG Premium Review Conference
December 4th, 2014
25
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