Alternative Performance Measures (APMs)
BBVA presents its results in accordance with the International Financial Reporting Standards (EU-IFRS). Additionally, the Group also considers that some Alternative Performance Measures (hereinafter APMs) provide useful additional financial information that should be taken into account when evaluating performance. They are considered complementary information and do not replace the financial information drafted according to the EU-IFRS. These APMs are also used when making financial, operational and planning decisions within the Entity. The Group firmly believes that they give a true and fair view of its financial information. These APMs are generally used in the financial sector as indicators for monitoring the assets, liabilities and economic and financial situation of entities.
BBVA Group's APMs are given below. They are presented in accordance with the European Securities and Markets Authority (ESMA) guidelines, published on October 5, 2015 (ESMA/2015/1415en). The guideline mentioned before is aimed at promoting the usefulness and transparency of APMs included in prospectuses or regulated information in order to protect investors in the European Union. In accordance with the indications given in the aforementioned guideline, BBVA Group's APMs:
- Include clear and readable definitions of the APMs.
- Disclose the reconciliations to the most directly reconcilable line item, subtotal or total presented in the financial statements of the corresponding period, separately identifying and explaining the material reconciling items.
- Are standard measures generally used in the financial industry, so their use provides comparability in the analysis of performance between issuers.
- Do not have greater preponderance than measures directly stemming from financial statements.
- Are accompanied by comparatives for previous periods.
- Are consistent over time.
Other considerations
When comparing two dates or periods in this report, the impact of changes in the exchange rates against the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange rates remain constant. This is done for the amounts in the income statement by using the average exchange rate against the euro in the most recent period for each currency13 of the geographical areas in which the Group operates, and applying it to both periods; for amounts in the balance sheet and activity, the closing exchange rates in the most recent period are used.
During the year 2023 and at the end of the first quarter of 2024, there were no corporate operations, non-recurring impacts or other types of adjustments for management purposes that determine an net attributable profit or a profit for the period different to that from the financial statements. For this reason, as there are no differences between the Consolidated Financial Statements and the consolidated management results statement, no reconciliation is presented for the periods disclosed in this report. For the same reason, the Group does not present among its Alternative Performance Measures shown below an adjusted profit for the period nor an adjusted net attributable profit, neither does it present the profitability ratios derived from them: i.e. adjusted ROE, adjusted ROTE, adjusted ROA and adjusted RORWA.
Within the revision and update process of these APMs, it has been determined that the dividend yield measure is not a relevant indicator for monitoring the economic-financial situation of BBVA Group.
ROE
The ROE (return on equity) ratio measures the accounting return obtained on an entity's shareholders' funds plus accumulated other comprehensive income. It is calculated as follows:
| Net attributable profit (loss) |
| Average shareholders' funds + Average accumulated other comprehensive income |
Explanation of the formula: the numerator is the net attributable profit (loss) of the Group's consolidated income statement. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized.
Average shareholders' funds are the weighted moving average of the shareholders' funds at the end of each month of the period analyzed, adjusted to take into account the execution of the "dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results.
Average accumulated other comprehensive income is the moving weighted average of "Accumulated other comprehensive income", which is part of the equity on the Entity's balance sheet and is calculated in the same way as average shareholders’ funds (above).
Relevance of its use: this ratio is very commonly used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds.
| ROE | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | = | Annualized net attributable profit (loss) | 8,848 | 8,019 | 7,488 |
| Denominator (Millions of euros) | + | Average shareholders' funds | 68,130 | 65,907 | 64,967 |
| + | Average accumulated other comprehensive income | (15,695) | (16,437) | (16,811) | |
| = | ROE | 16.9 % | 16.2 % | 15.5 % | |
ROTE
The ROTE (return on tangible equity) ratio measures the accounting return on an entity's shareholders' funds, plus accumulated other comprehensive income, and excluding intangible assets. It is calculated as follows:
| Net attributable profit (loss) |
| Average shareholders' funds + Average accumulated other comprehensive income - Average intangible assets |
Explanation of the formula: the numerator "Net attributable profit (loss)" and the items in the denominator "Average intangible assets" and "Average accumulated other comprehensive income" are the same items and are calculated in the same way as explained for ROE.
Average intangible assets are the intangible assets on the Group's consolidated balance sheet, including goodwill and other intangible assets. The average balance is calculated in the same way as explained for shareholders funds in ROE.
Relevance of its use: this metric is generally used not only in the banking sector but also in other sectors to measure the return obtained on shareholders' funds, not including intangible assets.
| ROTE | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | = | Annualized net attributable profit (loss) | 8,848 | 8,019 | 7,488 |
| Denominator (Millions of euros) | + | Average shareholders' funds | 68,130 | 65,907 | 64,967 |
| + | Average accumulated other comprehensive income | (15,695) | (16,437) | (16,811) | |
| - | Average intangible assets | 2,357 | 2,254 | 2,170 | |
| = | ROTE | 17.7 % | 17.0 % | 16.3 % | |
ROA
The ROA (return on assets) ratio measures the accounting return obtained on an entity's assets. It is calculated as follows:
| Profit (loss) for the period |
| Average total assets |
Explanation of the formula: the numerator is the profit (loss) for the period of the Group's consolidated income statement. If the metric is presented on a date before the close of the fiscal year, the numerator must be annualized.
Average total assets are taken from the Group’s consolidated balance sheet. The average balance is calculated as explained for average shareholders' funds in the ROE.
Relevance of its use: this ratio is generally used not only in the banking sector but also in other sectors to measure the return obtained on assets.
| ROA | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | Annualized profit (loss) for the period | 9,277 | 8,416 | 8,088 | |
| Denominator (Millions of euros) | Average total assets | 781,568 | 748,459 | 726,032 | |
| = | ROA | 1.19 % | 1.12 % | 1.11 % | |
RORWA
The RORWA (return on risk-weighted assets) ratio measures the accounting return obtained on average risk-weighted assets. It is calculated as follows:
| Profit (loss) for the period |
| Average risk-weighted assets |
Explanation of the formula: the numerator "Profit (loss) for the period" is the same and is calculated in the same way as explained for ROA.
Average risk-weighted assets (RWA) are the moving weighted average of the RWA at the end of each month of the period under analysis.
Relevance of its use: this ratio is generally used in the banking sector to measure the return obtained on RWA.
| RORWA | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | Annualized profit (loss) for the period | 9,277 | 8,416 | 8,088 | |
| Denominator (Millions of euros) | Average RWA | 371,411 | 353,139 | 342,154 | |
| = | RORWA | 2.50 % | 2.38 % | 2.36 % | |
Earning (loss) per share
The earning (loss) per share is calculated in accordance to the criteria established in the IAS 33 “Earnings per share”.
| EARNING (LOSS) PER SHARE | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| (Millions of euros) | + | Net attributable profit (loss) | 2,200 | 8,019 | 1,846 |
| (Millions of euros) | - | Remuneration related to the Additional Tier 1 securities (CoCos) | 87 | 345 | 74 |
| Numerator (millions of euros) | = | Net attributable profit (loss) ex.CoCos remuneration | 2,113 | 7,675 | 1,772 |
| Denominator (millions) | + | Average number of shares outstanding | 5,838 | 5,988 | 6,030 |
| - | Average treasury shares of the period | 13 | 5 | 9 | |
| - | Share buyback program (average) (1) | 10 | 28 | 2 | |
| = | Earning (loss) per share (euros) | 0.36 | 1.29 | 0.29 | |
(1) The period January-March 2024 includes the average number of shares acquired until March 31, 2024, in execution of the share buyback program initiated on March 1, 2024. In the period January-December 2023 the average number of shares is included taking into account the two redemptions made corresponding to the programs announced in that year.
Additionally, for management purposes, the adjusted earning (loss) per share is presented. As observed in the relevant tables, there is no difference between the numerator and denominator of the Earning (loss) per share and the Adjusted Earning (loss) per share.
| ADJUSTED EARNING (LOSS) PER SHARE | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | + | Net attributable profit (loss) ex. CoCos remuneration | 2,113 | 7,675 | 1,772 |
| Denominator (millions) | + | Number of shares outstanding | 5,838 | 5,838 | 5,838 |
| - | Average treasury shares of the period | 13 | 5 | 9 | |
| - | Shares buyback program (1) | 75 | |||
| = | Adjusted earning (loss) per share (euros) | 0.37 | 1.32 | 0.30 | |
(1) The period January-March 2024 includes the total shares acquired in execution of the share buyback program initiated on March 1, 2024. In the periods January-March and January-December 2023 the two redemptions made corresponding to the programs announced in that year are considered.
Efficiency ratio
This measures the percentage of gross income consumed by an entity's operating expenses. It is calculated as follows:
| Operating expenses |
| Gross income |
Explanation of the formula: both "Operating expenses" and "Gross income" are taken from the Group’s consolidated income statement. Operating expenses are the sum of the administration costs (personnel expenses plus other administrative expenses) plus depreciation. Gross income is the sum of net interest income, net fees and commissions, net trading income dividend income, share of profit or loss of entities accounted for using the equity method, other operating income and expenses, and income from assets and expenses from liabilities under insurance and reinsurance contracts. For a more detailed calculation of this ratio, the graphs on "Results" section of this report should be consulted, one of them with calculations with figures at current exchange rates and another with the data at constant exchange rates.
Relevance of its use: this ratio is generally used in the banking sector. In addition, it is the metric for one of the six Strategic Priorities of the Group.
| EFFICIENCY RATIO | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | + | Operating expenses | 3,383 | 12,308 | 3,016 |
| Denominator (Millions of euros) | + | Gross income | 8,218 | 29,542 | 6,958 |
| = | Efficiency ratio | 41.2 % | 41.7 % | 43.3 % | |
Book value per share
The book value per share determines the value of a company on its books for each share held. It is calculated as follows:
| Shareholders' funds + Accumulated other comprehensive income |
| Number of shares outstanding - Treasury shares |
Explanation of the formula: the figures for both "Shareholders' funds" and "Accumulated other comprehensive income" are taken from the balance sheet. Shareholders' funds are adjusted to take into account the execution of the "dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results. The denominator includes the final number of outstanding shares excluding own shares (treasury shares) and excluding the shares corresponding to share buyback programs. In addition, the denominator is also adjusted to include the capital increase resulting from the execution of the dividend options explained above. Both the numerator and the denominator take into account period-end balances.
Relevance of its use: it shows the company's book value for each share issued. It is a generally used ratio, not only in the banking sector but also in others.
| BOOK VALUE PER SHARE | |||||
|---|---|---|---|---|---|
| 31-03-24 | 31-12-23 | 31-03-23 | |||
| Numerator (Millions of euros) | + | Shareholders' funds | 66,947 | 67,955 | 63,986 |
| + | Accumulated other comprehensive income | (14,944) | (16,254) | (16,195) | |
| Denominator (Millions of shares) | + | Number of shares outstanding | 5,838 | 5,838 | 6,030 |
| - | Treasury shares | 12 | 4 | 10 | |
| - | Share buyback program (1) | 75 | - | 65 | |
| = | Book value per share (euros / share) | 9.04 | 8.86 | 8.02 | |
(1) The period January-March 2024 includes the total shares acquired in execution of the share buyback program initiated on March 1, 2024.
Tangible book value per share
The tangible book value per share determines the value of the company on its books for each share held by shareholders in the event of liquidation. It is calculated as follows:
| Shareholders' funds + Accumulated other comprehensive income - Intangible assets |
| Number of shares outstanding - Treasury shares |
Explanation of the formula: the figures for "Shareholders' funds", "Accumulated other comprehensive income" and "Intangible assets" are all taken from the balance sheet. Shareholders' funds are adjusted to take into account the execution of the "Dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the Group´s results. The denominator includes the final number of shares outstanding excluding own shares (treasury shares) and excluding the shares corresponding to share buyback programs which are deducted from the shareholders' funds. In addition, the denominator is also adjusted to include the result of the capital increase resulting from the execution of the dividend options explained above. Both the numerator and the denominator take into account period-end balances.
Relevance of its use: it shows the company's book value for each share issued, after deducting intangible assets. It is a generally used ratio, not only in the banking sector but also in others.
| TANGIBLE BOOK VALUE PER SHARE | |||||
|---|---|---|---|---|---|
| 31-03-24 | 31-12-23 | 31-03-23 | |||
| Numerator (Millions of euros) | + | Shareholders' funds | 66,947 | 67,955 | 63,986 |
| + | Accumulated other comprehensive income | (14,944) | (16,254) | (16,195) | |
| - | Intangible assets | 2,407 | 2,363 | 2,209 | |
| Denominator (Millions of shares) | + | Number of shares outstanding | 5,838 | 5,838 | 6,030 |
| - | Treasury shares | 12 | 4 | 10 | |
| - | Share buyback program (1) | 75 | - | 65 | |
| = | Tangible book value per share (euros / share) | 8.62 | 8.46 | 7.65 | |
(1) The period January-March 2024 includes the total shares acquired in execution of the share buyback program initiated on March 1, 2024.
Non-performing loan (NPL) ratio
It is the ratio between the risks classified for accounting purposes as non-performing loans and the total credit risk balance. It is calculated as follows:
| Non-performing loans |
| Total credit risk |
Explanation of the formula: non-performing loans and the credit risk balance are gross, meaning they are not adjusted by associated accounting provisions.
Non-performing loans are calculated as the sum of “loans and advances at amortized cost” and the “contingent risk” in stage 314 and the following counterparties:
- other financial entities
- public sector
- non-financial institutions
- households.
The credit risk balance is calculated as the sum of "Loans and advances at amortized cost" and "Contingent risk" in stage 1 + stage 2 + stage 3 of the previous counterparts.
This indicator is shown, as others, at a business area level.
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the current situation and changes in credit risk quality, and specifically, the relationship between risks classified in the accounts as non-performing loans and the total balance of credit risk, with respect to customers and contingent liabilities.
| NON-PERFORMING LOANS (NPLs) RATIO | |||||
|---|---|---|---|---|---|
| 31-03-24 | 31-12-23 | 31-03-23 | |||
| Numerator (Millions of euros) | NPLs | 15,716 | 15,305 | 14,141 | |
| Denominator (Millions of euros) | Credit Risk | 462,457 | 448,840 | 428,423 | |
| = | Non-Performing Loans (NPLs) ratio | 3.4 % | 3.4 % | 3.3 % | |
NPL coverage ratio
This ratio reflects the degree to which the impairment of non-performing loans has been covered in the accounts via allowances. It is calculated as follows:
| Provisions |
| Non-performing loans |
Explanation of the formula: it is calculated as "Provisions" from stage 1 + stage 2 + stage 3, divided by non-performing loans, formed by “credit risk” from stage 3.
This indicator is shown, as others, at a business area level.
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the situation and changes in the quality of credit risk, reflecting the degree to which the impairment of non-performing loans has been covered in the accounts via value adjustments.
| NPL COVERAGE RATIO | |||||
|---|---|---|---|---|---|
| 31-03-24 | 31-12-23 | 31-03-23 | |||
| Numerator (Millions of euros) | Provisions | 11,943 | 11,762 | 11,661 | |
| Denominator (Millions of euros) | NPLs | 15,716 | 15,305 | 14,141 | |
| = | NPL coverage ratio | 76 % | 77 % | 82 % | |
Cost of risk
This ratio indicates the current situation and changes in credit-risk quality through the annual cost in terms of impairment losses (accounting loan-loss provisions) of each unit of loans and advances to customers (gross). It is calculated as follows:
| Loan-loss provisions |
| Average loans and advances to customers (gross) |
Explanation of the formula: "Loans to customers (gross)" refers to the "Loans and advances at amortized cost" portfolios with the following counterparts:
- other financial entities
- public sector
- non-financial institutions
- households, excluding central banks and other credit institutions.
Average loans to customers (gross) is calculated by using the average of the period-end balances of each month of the period analyzed plus the previous month. If the metric is presented on a date before the close of the fiscal year, the numerator will be annualized. By doing this, "Annualized loan-loss provisions" are calculated by accumulating and annualizing the loan-loss provisions of each month of the period under analysis (based on days passed).
Loan-loss provisions refer to the aforementioned loans and advances at amortized cost portfolios.
This indicator is shown, as others, at a business area level.
Relevance of its use: this is one of the main indicators used in the banking sector to monitor the situation and changes in the quality of credit risk through the cost over the year.
| COST OF RISK | |||||
|---|---|---|---|---|---|
| Jan.-Mar.2024 | Jan.-Dec.2023 | Jan.-Mar.2023 | |||
| Numerator (Millions of euros) | Annualized loan-loss provisions | 5,421 | 4,345 | 3,864 | |
| Denominator (Millions of euros) | Average loans to customers (gross) | 390,828 | 378,402 | 369,340 | |
| = | Cost of risk | 1.39% | 1.15% | 1.05% | |
13 With the exception of those countries whose economies have been considered hyperinflationary, for which the closing exchange rate of the most recent period will be used.
14 IFRS 9 classifies financial instruments into three stages, which depend on the evolution of their credit risk from the moment of initial recognition. The stage 1 includes operations when they are initially recognized, stage 2 comprises operations for which a significant increase in credit risk has been identified since their initial recognition and, stage 3, impaired operations.