Mexico
Highlights
- The strong momentum in lending activity continues, with greater dynamism in the retail segment
- Outstanding development of gross income
- Good behavior of the efficiency ratio in the quarter and in the year
- Growth in quarterly net attributable profit
BUSINESS ACTIVITY (1)
(VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-23)
(1) Excluding repos.
NET INTEREST INCOME / AVERAGE TOTAL ASSETS
(PERCENTAGE AT CONSTANT EXCHANGE RATE)
OPERATING INCOME
(MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)
(1) At current exchange rate: +12.1%.
NET ATTRIBUTABLE PROFIT (LOSS)
(MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)
(1) At current exchange rate: +5.6%.
| FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE) | ||||
|---|---|---|---|---|
| Income statement | Jan.-Sep.24 | ∆ % | ∆ % (2) | Jan.-Sep.23 (1) |
| Net interest income | 8,762 | 7.3 | 7.3 | 8,164 |
| Net fees and commissions | 1,846 | 13.6 | 13.5 | 1,626 |
| Net trading income | 606 | 57.8 | 57.8 | 384 |
| Other operating income and expenses | 427 | 42.0 | 42.0 | 300 |
| Gross income | 11,641 | 11.1 | 11.1 | 10,475 |
| Operating expenses | (3,482) | 8.9 | 8.9 | (3,197) |
| Personnel expenses | (1,666) | 11.7 | 11.7 | (1,492) |
| Other administrative expenses | (1,450) | 6.7 | 6.7 | (1,359) |
| Depreciation | (365) | 5.6 | 5.5 | (346) |
| Operating income | 8,160 | 12.1 | 12.1 | 7,277 |
| Impairment on financial assets not measured at fair value through profit or loss | (2,356) | 29.0 | 28.9 | (1,827) |
| Provisions or reversal of provisions and other results | (39) | n.s. | n.s. | (1) |
| Profit (loss) before tax | 5,765 | 5.8 | 5.8 | 5,450 |
| Income tax | (1,571) | 6.3 | 6.3 | (1,477) |
| Profit (loss) for the period | 4,194 | 5.6 | 5.6 | 3,972 |
| Non-controlling interests | (1) | 6.5 | 6.5 | (1) |
| Net attributable profit (loss) | 4,193 | 5.6 | 5.6 | 3,971 |
Balance sheets | 30-09-24 | ∆ % | ∆ % (2) | 31-12-23 |
| Cash, cash balances at central banks and other demand deposits | 10,213 | 1.2 | 18.9 | 10,089 |
| Financial assets designated at fair value | 51,753 | (14.3) | 0.6 | 60,379 |
| Of which: Loans and advances | 689 | (86.7) | (84.4) | 5,180 |
| Financial assets at amortized cost | 87,745 | (8.9) | 6.9 | 96,342 |
| Of which: Loans and advances to customers | 82,117 | (6.8) | 9.4 | 88,112 |
| Tangible assets | 2,002 | (16.1) | (1.5) | 2,387 |
| Other assets | 4,828 | 12.5 | 32.1 | 4,293 |
| Total assets/liabilities and equity | 156,541 | (9.8) | 5.9 | 173,489 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 29,312 | 2.9 | 20.8 | 28,492 |
| Deposits from central banks and credit institutions | 8,365 | (4.3) | 12.4 | 8,739 |
| Deposits from customers | 77,943 | (15.8) | (1.1) | 92,564 |
| Debt certificates | 9,922 | 2.1 | 19.9 | 9,719 |
| Other liabilities | 19,736 | (13.3) | 1.8 | 22,756 |
| Regulatory capital allocated | 11,263 | 0.4 | 17.9 | 11,218 |
Relevant business indicators | 30-09-24 | ∆ % | ∆ % (2) | 31-12-23 |
| Performing loans and advances to customers under management (3) | 82,616 | (6.8) | 9.4 | 88,688 |
| Non-performing loans | 2,403 | (2.8) | 14.1 | 2,472 |
| Customer deposits under management (3) | 77,564 | (14.7) | 0.2 | 90,926 |
| Off-balance sheet funds (4) | 55,674 | 4.5 | 22.8 | 53,254 |
| Risk-weighted assets | 87,381 | (4.9) | 11.7 | 91,865 |
| Efficiency ratio (%) | 29.9 | 30.9 | ||
| NPL ratio (%) | 2.7 | 2.6 | ||
| NPL coverage ratio (%) | 121 | 123 | ||
| Cost of risk (%) | 3.43 | 2.96 | ||
(1) Revised balances. For more information, please refer to the “Business Areas” section.
(2) At constant exchange rate.
(3) Excluding repos.
(4) Includes mutual funds, customer portfolios and other off-balance sheet funds.
Macro and industry trends
Economic activity has lost dynamism in the last quarters, contributing to a downward revision of growth forecasts. Specifically, BBVA Research expects GDP to grow by 1.2% in 2024 and 1.0% in 2025, 130 and 140 basis points below previous forecasts, respectively. Uncertainty over recently approved constitutional reforms and the impact of probable fiscal consolidation following the recent increase in the public deficit also contribute to the more moderate growth forecasts. Annual inflation reached the 4.6% in September and is expected to moderate to levels between 3.0% and 4.0% in the future. In this context, policy rates, which were cut to 10.50% in September, are expected to continue to decrease, converging to around 7.5% by the end of 2025.
With respect to the banking system, at the end of August 2024, the volume of outstanding credit to the non-financial private sector increased by 13.1% in year-on-year terms, with a greater boost from the consumer portfolio (+18.7%), followed by mortgages (+7.7%) and loans to businesses (+12.8%). Growth in total (demand and time) deposits remains slightly below credit growth (+9.8% year-on-year as of August), with higher growth in time deposits (+12.5%) than in demand deposits (+8.4%). On the other hand, the industry's non-performing loans slightly improved at around 2.24% in August 2024 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 in the first nine months of 2024 were:
- Lending activity (performing loans under management) continued to show a strong growth, which stood at 9.4% between January and the end of September 2024, with a more dynamic growth in the retail portfolio, more profitable for BBVA Mexico, which grew at a rate of 10.1%, where, with local activity figures, consumer loans (+14.4%) and loans to SMEs (+16.2%) stand out. Meanwhile, the wholesale portfolio, which includes large companies and public sector, grew by 8.6% over the same period, with the performance of the corporate banking segment standing out.
- Customer funds under management increased 8.5% in the first nine months of 2024, as a result of the growth of mutual funds and other off-balance sheet funds, which increased at a rate of 22.8% in the first nine months of 2024, thanks to the commercial boost.
The most relevant aspects related to the area's activity in the third quarter of 2024 were:
- Lending activity (performing loans under management) grew by 2.9% in the third quarter of 2024, with similar dynamics to those mentioned in the first nine months of 2024: with greater dynamism in the retail portfolio, which grew at a rate of 3.4%, according to local activity data the performance in consumer loans (+4.5%, driven by the product "Nómina y Personales BBVA"), and in loans to SMEs (+6.3%) outstanding. As a result, the weight of the retail portfolio increased in the quarter to 52.7% at the end of September 2024.
- With regard to the asset quality indicators, the NPL ratio stood at 2.7% at the end of September 2024, which represents a increase of 10 basis points compared to the end of June, mainly due to the performance of the retail portfolio. On the other hand, the NPL coverage ratio increased to 121% at the end of September 2024.
- Customer deposits under management were 3.6%,higher than at the end of June 2024 due to the evolution of off-balance sheet funds (+5.7% in the quarter). For its part, customer deposits increased by 2.2% supported by the growth in time deposits (+11.7%).
Results
BBVA Mexico achieved a cumulative net attributable profit of €4,193m by the end of September 2024, representing an increase of 5.6% compared to the same period of the previous year, mainly due to the strength of the recurring income from the banking business and with all lines that contribute to the gross income showing great dynamism.
The most relevant aspects of the year-on-year changes in the income statement as of the end of September 2024 are summarized below:
- Net interest income increased by 7.3%, as a result of the growth in lending activity and portfolio repricing.
- Net fees and commissions, boosted by greater transactions, continued to increase at double digit (+13.5%), with favorable evolution in almost all commissions types, highlighting credit cards, those derived from mutual funds management and from wholesale activity.
- The contribution from NTI increased (+57.8%) mainly as a result of the performance of Global Markets.
- The other operating income and expenses line grew by 42.0%, driven by the favorable evolution of the insurance business.
- Operating expenses increased (+8.9%), mainly due to higher personnel expenses associated with the increase in the headcount over the course of 2023, and, to a lesser extent, the increase of general expenses, particularly technology expenditures.
- Loan-loss provisions increased (+28.9%), affected by the higher provisioning needs in the retail portfolio, mainly in consumer and credit cards, due to the growth of these profitable segments and the worsening of the macroeconomic scenario compared to that initially forecast at the beginning of 2024. Consequently, the cumulative cost of risk at the end of September 2024 stood at 3.43%, which represents a growth of 9 basis points compared to the one registered at the end of June 2024.
In the quarter, and excluding the effect of exchange rate fluctuations, BBVA Mexico generated net attributable profit of €1,451m, which represents a 6.4% increase with respect to the previous quarter as a result of the favorable evolution of all the lines that make up the gross income (especially the contribution of net interest income), which comfortably offset the higher level of loan loss provisions affected by higher requirements as a result of the updated macroeconomic scenario.