Rest of Eurasia
Highlights
- The loan book continues its upward path begun in the fourth quarter of 2016.
- Reduction in the balance of deposits.
- Slight decline in earnings, which compare with an excellent performance during the first half of 2016.
- Improvement in the asset quality indicators.
Macro and industry trends
Economic recovery in the Eurozone has gained traction since the close of last year, according to figures from Eurostat, with a quarterly rise of 0.5% in the fourth quarter of 2016 and 0.6% in the first quarter of 2017, supported by the growth of global demand in a context of generally improved confidence. However, uncertainty remains high. Some stimuli that are supporting the recovery could fade out over the coming quarters, making it difficult to imagine a much greater acceleration moving forward in an economy that has already been growing above its potential since 2015. Overall, BBVA Research expects growth of around 2% in 2017, with greater support from the foreign sector and investment offsetting some moderation in private consumption. Fiscal policy will remain expansive in the area as a whole. The ECB remains cautious with respect to the future of inflation and is still committed to an accommodative monetary policy, despite the greater optimism with respect to growth.
Activity and result
This business area basically includes the retail and wholesale business of the Group in Europe (excluding Spain) and Asia.
The area's loan book (performing loans under management) increased 5.4% in the first half of 2017 on the figure at the close of 2016, with growth in the branches in both Europe (up 5.9%) and Asia (up 3.6%).
With respect to the main credit risk indicators, since March 2017 there has been a slight improvement in the NPL ratio, which closed June at 2.6% (compared with 2.8% at the close of March 2017, and 2.7% in December), while the NPL coverage ratio has increased to 82% (75% as of 31-Mar-2017 and 84% as of 31-Dec-2016).
Customer deposits under management have fallen by 22.4% in the half-year, due to the reduction in branches in Europe (down 15.5%) and those in Asia (down 49.2%) and influenced by the negative interest-rate environment.
With respect to earnings, gross income has fallen by 7.8% on the same period last year, mainly due to the payment, in 2016, of the CNCB dividend. In addition, operating expenses continue to moderate (down 8.4% year-on-year), due mainly to personnel expenses and general expenses being kept in check. Finally, it was a period with no relevant changes over the period in impairment losses on financial assets. As a result, this geographic area has contributed a net attributable profit in the first half of 2017 of €73m, 2.1% less than in the same period in 2016.
Financial statements and relevant business indicators (Million euros. Percentage)
| Income statement | 1H17 | ∆% | 1H16 |
|---|---|---|---|
| Net interest income | 95 | 10.8 | 86 |
| Net fees and commissions | 82 | (9.2) | 90 |
| Net trading income | 80 | 34.0 | 59 |
| Other income/expenses | (0) | n.s. | 42 |
| Gross income | 256 | (7.8) | 278 |
| Operating expenses | (154) | (8.4) | (168) |
| Personnel expenses | (80) | (10.1) | (89) |
| Other administrative expenses | (68) | (7.3) | (73) |
| Depreciation | (6) | 4.3 | (6) |
| Operating income | 102 | (6.8) | 110 |
| Impairment on financial assets (net) | 9 | n.s. | (9) |
| Provisions (net) and other gains (losses) | (7) | n.s. | 2 |
| Profit/(loss) before tax | 104 | 1.8 | 103 |
| Income tax | (31) | 12.1 | (28) |
| Profit/(loss) for the year | 73 | (2.1) | 75 |
| Non-controlling interests | 0 | - | 0 |
| Net attributable profit | 73 | (2.1) | 75 |
| Balance sheets | 30-06-17 | ∆% | 31-12-16 |
|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 792 | (40.8) | 1,337 |
| Financial assets | 1,131 | (36.7) | 1,787 |
| Loans and receivables | 16,525 | 6.1 | 15,574 |
| of which loans and advances to customers | 16,298 | 6.3 | 15,325 |
| Inter-area positions | - | - | - |
| Tangible assets | 37 | (2.7) | 38 |
| Other assets | 322 | (12.8) | 369 |
| Total assets/liabilities and equity | 18,807 | (1.6) | 19,106 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 52 | (23.4) | 67 |
| Deposits from central banks and credit institutions | 2,435 | (8.8) | 2,670 |
| Deposits from customers | 7,304 | (22.3) | 9,396 |
| Debt certificates | 242 | (23.2) | 315 |
| Inter-area positions | 7,442 | 54.3 | 4,822 |
| Other liabilities | 365 | (36.8) | 577 |
| Economic capital allocated | 968 | (23.1) | 1,259 |
| Relevant business indicators | 30-06-17 | ∆% | 31-12-16 |
|---|---|---|---|
| Loans and advances to customers (gross) (1) | 16,816 | 6.2 | 15,835 |
| Non-performing loans and guarantees given | 652 | 3.0 | 633 |
| Customer deposits under management (1) | 7,237 | (22.4) | 9,322 |
| Off-balance sheet funds (2) | 363 | (1.0) | 366 |
| Risk-weighted assets | 14,144 | (9.5) | 15,637 |
| Efficiency ratio (%) | 60.2 | 69.6 | |
| NPL ratio (%) | 2.6 | 2.7 | |
| NPL coverage ratio (%) | 82 | 84 | |
| Cost of risk (%) | (0.14) | (0.22) |
- (1) Excluding repos.
- (2) No incluye las cesiones temporales de activos.
- (3) Includes mutual funds, pension funds and other off-balance sheet funds.