Business areas
Banking activity in Spain
Highlights
- Positive trend in lending activity over the quarter.
- Favorable performance of more recurrent revenue.
- Improvement of efficiency due to the steady reduction of expenses.
- Lower impairments and provisions, solid asset-quality indicators.
Spain
Gross income. Year-on-year changes.
€3,050 m
-4.7%
Non Core Real Estate
Highlights
- Continued positive trend in the Spanish real-estate market, although with a more moderate growth rate.
- Agreement with Cerberus that will eliminate net real-estate exposure almost entirely, with its closure estimated for the second half of 2018.
- Significant reduction in exposure and losses in the area.
Spain
Gross income. Year-on-year changes.
-€19 m
+200,8%
The United States
Highlights
- Lending growth supported by consumer and business financing.
- Positive performance of net interest income and provisions.
- Improvement in efficiency.
- Net attributable profit positively affected by the tax reform at the end of 2017.
The United States
Gross income. Year-on-year changes, at constant exchange rate.
€1,437 m
+10.7%
Mexico
Highlights
- In activity, solid growth of the wholesale portfolio.
- Expenses continue to grow below the rate of gross income.
- Double-digit year-on-year growth in net attributable profit.
- Good asset quality indicators.
Mexico
Gross income. Year-on-year changes, at constant exchange rate.
€3,465 m
+7.7%
Turkey
Highlights
- Dynamic activity.
- Solid growth of recurring revenue items.
- Control of operating expenses, with growth below the level of inflation and the area’s gross income.
- Risk indicators affected by the one-off impairment of the wholesale portfolio and the update of the macroeconomic scenario.
Turkey
Gross income. Year-on-year changes, at constant exchange rate.
€1,924 m
+21.2%
South America
Highlights
- Activity continues to grow at a good pace.
- Positive performance of all the lines on the income statement.
- Expenses grow at a rate below the increase in gross income.
- Good asset quality indicators.
South America
Gross income. Year-on-year changes At constant exchange rates.
€2,197 m
+14.3%
Rest of Eurasia
Highlights
- Positive trend in lending activity.
- Performance of deposits strongly influenced by the environment of negative interest rates.
- Earnings affected by decrease in revenues.
- Good performance of the NPL and NPL coverage ratios.
Rest of Eurasia
Gross income. Year-on-year changes.
€216 m
-15.8%
This section presents and analyzes the most relevant aspects of the Group's different business areas. Specifically, it shows a summary of the income statement and balance sheet, the business activity figures and the most significant ratios in each of them.
In 2018 the reporting structure of BBVA Group's business areas remained basically the same as in 2017. It is worth noting that BBVA announced the signing of two agreements, one for the sale of BBVA Chile to The Bank of Nova Scotia (Scotiabank), which was completed on July 6, 2018, although its impact will be reflected in the Group’s financial statements for the third quarter 2018; and another for the creation of a joint venture to which BBVA's real-estate business in Spain will be transferred for the subsequent sale of 80% of the company created to a subsidiary of Cerberus Capital Management, L.P. (Cerberus). For the purpose of the explanations given in this report, the figures for Non Core Real Estate and South America are shown on a comparable basis with previous periods, even though within the balance sheet of the consolidated Group, the operations underway that are mentioned above have been reclassified as non-current assets and liabilities held for sale. The Group's business areas are summarized below:
- Banking activity in Spain includes the Retail Network in Spain, Corporate and Business Banking (CBB), Corporate & Investment Banking (CIB), BBVA Seguros and Asset Management units in Spain. It also includes the portfolios, funding and structural interest-rate positions of the euro balance sheet.
- Non Core Real Estate covers specialist management in Spain of loans to developers in difficulties and real-estate assets mainly coming from foreclosed assets, originated from both, residential mortgages, as well as loans to developers. New loan production to developers or loans that are not in difficulties are managed by Banking activity in Spain.
- The United States includes the Group's business activity in the country through the BBVA Compass group and the BBVA New York branch.
- Mexico basically includes all the banking and insurance businesses carried out by the Group in the country. Since 2018 it has also included the BBVA Bancomer branch in Houston (in previous years located in the United States). Consequently, the figures from previous years have been reworked to incorporate this change and show comparable series.
- Turkey includes the activity of the Garanti group.
- South America basically includes BBVA's banking and insurance businesses in the region.
- The rest of Eurasia includes the Group's retail and wholesale business activity in the rest of Europe and Asia.
In addition to the above, all the areas include a remainder made up basically of other businesses and a supplement that includes deletions and allocations not assigned to the units making up the above areas.
Lastly, the Corporate Center is an aggregate that contains the rest of the items that have not been allocated to the business areas, as it corresponds to the Group's holding function. It includes: the costs of the head offices that have a corporate function; management of structural exchange-rate positions; specific issues of equity instruments to ensure adequate management of the Group’s global solvency; portfolios and their corresponding results, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with employees; goodwill and other intangibles.
In addition to this geographical breakdown, supplementary information is provided for all the wholesale businesses carried out by BBVA, i.e. Corporate & Investment Banking (CIB), in the geographical areas where it operates. This aggregate business is considered relevant to better understand the Group because of the characteristics of the customers served, the type of products offered and the risks assumed.
Finally, as usual, in the case of the Americas, Turkey and CIB areas, the results of applying constant exchange rates are given in addition to the year-on-year variations at current exchange rates.
The information by areas is based on units at the lowest level and/or companies making up the Group, which are assigned to the different areas according to the main geographical area in which they carry out their activity.
Major income statement items by business area (Million euros)
| Business areas | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| BBVA Group | Banking activity in Spain | Non Core Real Estate | The United States | Mexico | Turkey | South America | Rest of Eurasia | ∑ Business areas | Corporate Center and other | |
| 1H18 | ||||||||||
| Net interest income | 8,643 | 1,836 | 20 | 1,082 | 2,648 | 1,510 | 1,606 | 82 | 8,784 | (140) |
| Gross income | 12,074 | 3,050 | (19) | 1,437 | 3,465 | 1,924 | 2,197 | 216 | 12,269 | (196) |
| Operating income | 6,131 | 1,405 | (58) | 546 | 2,321 | 1,247 | 1,252 | 74 | 6,787 | (655) |
| Profit/(loss) before tax | 4,443 | 1,110 | (41) | 495 | 1,667 | 966 | 891 | 90 | 5,177 | (734) |
| Net attributable profit | 2,649 | 793 | (36) | 387 | 1,208 | 373 | 452 | 58 | 3,235 | (586) |
| 1H17 | ||||||||||
| Net interest income | 8,803 | 1,864 | 31 | 1,078 | 2,696 | 1,611 | 1,617 | 95 | 8,993 | (190) |
| Gross income | 12,718 | 3,200 | (6) | 1,446 | 3,530 | 1,998 | 2,252 | 256 | 12,675 | 43 |
| Operating income | 6,407 | 1,485 | (56) | 505 | 2,328 | 1,230 | 1,211 | 102 | 6,805 | (398) |
| Profit/(loss) before tax | 4,033 | 936 | (233) | 386 | 1,488 | 1,010 | 790 | 104 | 4,481 | (448) |
| Net attributable profit | 2,306 | 665 | (186) | 284 | 1,094 | 374 | 404 | 73 | 2,708 | (402) |
Gross income (1), operating income (1) and net attributable profit breakdown (1) (Percentage. 1st Half 2018)
(1) Excludes the Corporate Center.
(2) Includes the areas Banking activity in Spain and Non Core Real Estate.
Major balance-sheet items and risk-weighted assets by business area (Million euros)
| Business areas | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| BBVA Group | Banking activity in Spain | Non Core Real Estate | The United States | Mexico | Turkey | South America | Rest of Eurasia | ∑ Business areas | Corp. Center and other | NCA&L variation(1) | |
| 30-06-18 | |||||||||||
| Loans and advances to customers | 377,175 | 170,055 | 1,139 | 56,975 | 49,498 | 48,530 | 48,837 | 15,287 | 390,320 | - | (13,145) |
| Deposits from customers | 367,312 | 173,441 | 42 | 60,704 | 49,573 | 42,309 | 45,615 | 5,233 | 376,916 | - | (9,604) |
| Off-balance sheet funds | 101,500 | 63,874 | 4 | 0 | 20,823 | 3,440 | 12,971 | 388 | 101,500 | - | 0 |
| Total assets/liabilities and equity | 689,632 | 325,603 | 8,041 | 77,171 | 94,611 | 72,818 | 70,682 | 18,457 | 667,383 | 22,248 | - |
| Risk-weighted assets | 356,985 | 101,633 | 7,547 | 61,473 | 50,630 | 58,770 | 55,151 | 15,002 | 350,206 | 6,780 | - |
| 31-12-17 | |||||||||||
| Loans and advances to customers | 387,621 | 183,172 | 3,521 | 53,718 | 45,768 | 51,378 | 48,272 | 14,864 | 400,693 | - | (13,072) |
| Deposits from customers | 376,379 | 177,763 | 13 | 60,806 | 49,964 | 44,691 | 45,666 | 6,700 | 385,604 | - | (9,225) |
| Off-balance sheet funds | 98,005 | 62,054 | 4 | - | 19,472 | 3,902 | 12,197 | 376 | 98,005 | - | - |
| Total assets/liabilities and equity | 690,059 | 319,417 | 9,714 | 75,775 | 94,061 | 78,694 | 74,636 | 17,265 | 669,562 | 20,497 | - |
| Risk-weighted assets | 361,686 | 108,141 | 9,692 | 58,688 | 44,941 | 62,768 | 55,975 | 15,150 | 355,354 | 6,332 | - |
- (1) Includes non-current assets and liabilities held for sale (AyPNCV for its acronym in Spanish) of the BBVA Chile and real estate operations.
Interest rates (Quarterly averages. Percentage)
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |
| Official ECB rate | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Euribor 3 months | (0.33) | (0.33) | (0.33) | (0.33) | (0.33) | (0.33) |
| Euribor 1 year | (0.19) | (0.19) | (0.19) | (0.16) | (0.13) | (0.10) |
| USA Federal rates | 1.81 | 1.58 | 1.30 | 1.25 | 1.05 | 0.80 |
| TIIE (Mexico) | 7.88 | 7.84 | 7.42 | 7.37 | 7.04 | 6.41 |
| CBRT (Turkey) | 14.82 | 12.75 | 12.17 | 11.97 | 11.80 | 10.10 |
Exchange rates (Expressed in currency/euro)
| Year-end exchange rates | Average exchange rates | ||||
|---|---|---|---|---|---|
30-06-18 |
∆% on 30-06-17 |
∆% on 31-12-17 |
1H18 |
∆% on 1H17 |
|
| Mexican peso | 22.8817 | (10.0) | 3.4 | 23.0808 | (8.9) |
| U.S. dollar | 1.1658 | (2.1) | 2.9 | 1.2105 | (10.5) |
| Argentine peso | 32.4233 | (42.0) | (30.3) | 26.0132 | (34.6) |
| Chilean peso | 755.29 | 0.2 | (2.3) | 740.19 | (3.4) |
| Colombian peso | 3,436.43 | 1.0 | 4.3 | 3,448.28 | (8.2) |
| Peruvian sol | 3.8159 | (3.1) | 1.7 | 3.9303 | (9.8) |
| Venezuelan bolivar | 1,000,000.00 | (99.6) | (98.2) | 1,000,000.00 | (99.6) |
| Turkish lira | 5.3385 | (24.8) | (14.8) | 4.9561 | (20.5) |