South America
Highlights
- Growth in lending activity
- Excellent evolution of the net interest income
- Higher adjustment for hyperinflation in Argentina
- Improvement of the efficiency ratio
Business activity (1)
(VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO
31-12-22)
(1) Excluding repos.
Net interest income / AVERAGE TOTAL ASSETS
(PERCENTAGE AT CONSTANT EXCHANGE RATES)
Operating income
(Millions of euros at constant exchange rates)
(1) At current exchange rates: +25.8%.
Net attributable profit (LOSS)
(Millions of euros at constant exchange rates)
(1) At current exchange rates: -12.2%.
(2) The variation in off-balance sheet funds is affected by the transfer of the pension funds managed by the Pension Fund Administrator that the BBVA Group maintains in Bolivia to the Public Long-Term Social Security Manager of Bolivia.
Financial statements and relevant business indicators (Millions of euros and percentage)
| Income statement | 1H23 | ∆% | ∆% (1) | 1H22 (2) |
|---|---|---|---|---|
| Net interest income | 2,503 | 35.3 | 74.8 | 1,849 |
| Net fees and commissions | 411 | 2.6 | 25.7 | 401 |
| Net trading income | 268 | 32.1 | 59.1 | 203 |
| Other operating income and expenses | (767) | 62.8 | 80.7 | (471) |
| Gross income | 2,415 | 21.9 | 60.7 | 1,982 |
| Operating expenses | (1,083) | 17.3 | 45.6 | (923) |
| Personnel expenses | (505) | 13.1 | 42.7 | (447) |
| Other administrative expenses | (489) | 24.1 | 56.0 | (394) |
| Depreciation | (89) | 7.9 | 16.2 | (83) |
| Operating income | 1,332 | 25.8 | 75.6 | 1,059 |
| Impairment on financial assets not measured at fair value through profit or loss | (539) | 98.3 | 134.9 | (272) |
| Provisions or reversal of provisions and other results | (13) | (68.2) | (59.3) | (42) |
| Profit (loss) before tax | 780 | 4.7 | 57.0 | 745 |
| Income tax | (228) | 57.8 | 273.5 | (145) |
| Profit (loss) for the period | 552 | (8.1) | 26.7 | 601 |
| Non-controlling interests | (185) | 1.1 | 35.5 | (183) |
| Net attributable profit (loss) | 367 | (12.2) | 22.6 | 418 |
| Balance sheets | 30-06-23 | ∆% | ∆% (1) | 31-12-22 (2) |
|---|---|---|---|---|
| Cash, cash balances at central banks and other demand deposits | 8,238 | 7.1 | 9.3 | 7,695 |
| Financial assets designated at fair value | 12,043 | 12.2 | 18.8 | 10,739 |
| Of which: Loans and advances | 247 | 63.3 | 45.0 | 152 |
| Financial assets at amortized cost | 44,107 | 9.0 | 6.3 | 40,448 |
| Of which: Loans and advances to customers | 41,548 | 8.1 | 5.0 | 38,437 |
| Tangible assets | 1,105 | 1.6 | 4.7 | 1,088 |
| Other assets | 2,048 | 3.4 | 1.9 | 1,981 |
| Total assets/liabilities and equity | 67,541 | 9.0 | 8.6 | 61,951 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 4,032 | 43.3 | 28.7 | 2,813 |
| Deposits from central banks and credit institutions | 5,809 | 3.6 | (1.3) | 5,610 |
| Deposits from customers | 43,086 | 7.6 | 7.6 | 40,042 |
| Debt certificates | 3,211 | 8.6 | 5.3 | 2,956 |
| Other liabilities | 5,122 | 10.1 | 22.2 | 4,655 |
| Regulatory capital allocated | 6,281 | 6.9 | 6.4 | 5,874 |
| Relevant business indicators | 30-06-23 | ∆% | ∆% (1) | 31-12-22 |
|---|---|---|---|---|
| Performing loans and advances to customers under management (3) | 41,498 | 7.8 | 4.8 | 38,484 |
| Non-performing loans | 2,086 | 13.6 | 8.2 | 1,835 |
| Customer deposits under management (4) | 43,086 | 7.6 | 7.6 | 40,042 |
| Off-balance sheet funds (5) | 5,925 | (66.6) | (65.3) | 17,760 |
| Risk-weighted assets | 50,144 | 7.1 | 6.4 | 46,834 |
| Efficiency ratio (%) | 44.8 | 46.3 | ||
| NPL ratio (%) | 4.3 | 4.1 | ||
| NPL coverage ratio (%) | 95 | 101 | ||
| Cost of risk (%) | 2.34 | 1.69 |
(1) At constant exchange rates.
(2) Restated balances according to IFRS17 - Insurance contracts.
(3) Excluding repos.
(4) Excluding repos and including specific marketable debt securities.
(5) Includes mutual funds, customer portfolios in Colombia and Peru and pension funds in Bolivia as of-31-12-2022.
South America. Data per country (Millions of euros)
| Operating income | Net attributable profit (loss) | |||||||
|---|---|---|---|---|---|---|---|---|
| Country | 1H23 | ∆% | ∆% (1) | 1H22 (2) | 1H23 | ∆% | ∆% (1) | 1H22 (2) |
| Argentina | 383 | 109.6 | n.s. | 183 | 100 | (0.5) | n.s. | 101 |
| Colombia | 254 | (28.8) | (17.4) | 357 | 95 | (37.7) | (27.8) | 153 |
| Peru | 534 | 25.1 | 23.0 | 427 | 111 | (5.4) | (6.9) | 117 |
| Other countries (3) | 161 | 74.3 | 67.0 | 92 | 60 | 29.6 | 23.9 | 46 |
| Total | 1,332 | 25.8 | 75.6 | 1,059 | 367 | (12.2) | 22.6 | 418 |
(1) Figures at constant exchange rates.
(2) Restated balances according to IFRS17 - Insurance contracts.
(3) Bolivia, Chile (Forum), Uruguay and Venezuela. Additionally, it includes eliminations and other charges.
South America. Relevant business indicators per country (Millions of euros)
| Argentina | Colombia | Peru | ||||
|---|---|---|---|---|---|---|
| 30-06-23 | 31-12-22 | 30-06-23 | 31-12-22 | 30-06-23 | 31-12-22 | |
| Performing loans and advances to customers under management (1) (2) | 3,864 | 2,593 | 15,510 | 14,962 | 17,437 | 17,443 |
| Non-performing loans (1) | 81 | 43 | 757 | 676 | 1,089 | 1,085 |
| Customer deposits under management (1) (3) | 7,197 | 4,715 | 15,157 | 14,703 | 16,848 | 16,702 |
| Off-balance sheet funds (1) (4) | 2,266 | 1,559 | 2,188 | 2,304 | 1,468 | 1,496 |
| Risk-weighted assets | 7,309 | 8,089 | 17,787 | 15,279 | 19,396 | 17,936 |
| Efficiency ratio (%) | 52.4 | 61.3 | 45.0 | 40.4 | 36.6 | 37.2 |
| NPL ratio (%) | 1.9 | 1.6 | 4.5 | 4.2 | 5.0 | 4.9 |
| NPL coverage ratio (%) | 157 | 173 | 97 | 106 | 87 | 91 |
| Cost of risk (%) | 4.13 | 2.61 | 1.86 | 1.56 | 2.33 | 1.58 |
(1) Figures at constant exchange rates.
(2) Excluding repos.
(3) Excluding repos and including specific marketable debt securities.
(4) Includes mutual funds and customer portfolios (in Colombia and Peru).
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rates. These rates, together with the changes at current exchange rates, can be found in the attached tables of the financial statements and relevant business indicators.
Activity and results
The most relevant aspects related to the area's activity during the first half of the year 2023 were:
- Lending activity (performing loans under management) increased 4.8%, with growth focused on the retail portfolio, which grew more than the wholesale portfolio (7.5% versus 2.2%), mainly favored by the evolution of consumer loans (7.9%), credit cards (+25.1%) and corporate loans (+2.4%).
- Customer funds under management decreased (-14.2%) compared to the closing balances at the end of 2022, with an increase in time deposits (21.7%) in an environment of rising benchmark rates and, reduction of off-balance sheet funds (-65.3%) due to the transfer of pension funds managed by the Pension Fund Administrator that the BBVA Group maintains in Bolivia the Public Long-Term Social Security Management Company of this country.
The most relevant aspects related to the area's activity during the second quarter of the year 2023 were:
- Lending activity (performing loans under management) recorded an increase of 2.2%, thanks to the good performance of the retail portfolio, that continues to benefit from consumer loans (3.0%) and credit cards (13.9%).
- With regard to asset quality, the NPL ratio stood at 4.3%, an increase of 9 basis points in the quarter at the regional level, generalized in all geographies due to retail entries, except in Peru, where the NPL ratio falls as a consequence of a higher volume of write-offs. The area's NPL coverage ratio stood at 95%.
- Customer funds under management decreased (-17.7%) compared to the previous quarter, due to the transfer of pension funds from Bolivia.
South America generated a cumulative net attributable profit of €367m at the end of the first half of the year 2023, which represents a year-on-year increase of +22.6%, thanks to the good performance of recurring income (+65.7%) and the area's NTI, which offset the increase in expenses, in a highly inflationary environment throughout the region, and the higher provisioning requirements for impairment on financial assets.
With regard to the inflation impact in Argentina, it stood at €-594m at the end of June 2023, above the €-360m accumulated at the end of June 2022, registered in the "Other operating income and expenses" heading of the area's income statement.
More detailed information on the most representative countries of the business area is provided below:
Argentina
Macro and industry trends
The unfavorable macroeconomic conditions have continued to deteriorate, increasing the risk of economic and financial turbulence ahead of the presidential elections scheduled for the last quarter of the year. Likewise, after growing by 5.2% in 2022, GDP is expected to fall by around 3.5% this year, 100 basis points more than previously forecast by BBVA Research (-2.5%), largely due to the impact of the negative weather shock on the production and export of agricultural goods. In this context, its impact on the external and fiscal accounts has contributed to accelerate the exchange rate depreciation and inflation, which in annual terms reached 115.6% in June.
The banking system continues to grow at a steady pace, but driven by high inflation. With data as of April 2023, total lending grew by 88.1% compared to the same month in 2022, favored by both consumer and corporate portfolios, reaching growth of 81.3% and 104.2% year-on-year, respectively. For its part, deposits accelerated their growth compared to previous months, increasing by 114.8% year-on-year according to the data as of the end of April 2023. Finally, the NPL ratio remained stable at 3.1% in April 2023 (49 basis points lower than in the same month in 2022).
Activity and results
- In the first half of 2023, performing loans under management increased by 49.0%, a figure that is well below inflation, with growth in both the business portfolio (51.5%) and the retail portfolio (+46.9%), highlighting in the latter credit cards (+45.1%) and consumer loans (+46.0%). The NPL ratio stood at 1.9%, which represents an increase of 20 basis points compared to the previous quarter due to higher entries in NPLs in the retail segment, especially credit cards. The NPL coverage ratio stood at 157% due to the increase in the non-performing loans balance mentioned above.
- Balance sheet funds grew by 52.6% between January and June 2023, with time deposits increasing at a faster rate than demand deposits (+54.3% versus +50.2%). For its part, investment funds also experienced a favorable growth (+45.3%).
- The cumulative net attributable profit at the end of June 2023 stood at €100m, well above the figure achieved in the first half of 2022, which is mainly explained by the favorable evolution of the net interest income, driven by both volume and price effect;, with an improvement in customer spread, as well as a higher profitability of the securities portfolios. The year- on-year evolution of recurring income and NTI was also favorable and was partially offset by a more negative adjustment for inflation (mainly collected in the other operating income and expenses line), higher expenses both in personnel due to salary revisions, as well as general expenses and impairment of financial assets. The quarterly evolution shows the same dynamics as mentioned for the cumulative income statement.
Colombia
Macro and industry trends
After GDP growth of 7.3% in 2022, economic activity has lost dynamism in the first half of 2023. However, the slowdown recorded in recent months has been lower than expected by BBVA Research, justifying an upward revision of the growth forecast for this year to 1.2% (50 basis points higher than previously expected). In a context of uncertainty regarding public policies, high inflation (12.1% in June) has contributed to the Bank of the Republic raising interest rates to 13.25% in the second quarter of the year. Also, the expected moderation of inflation during the second half of the year (its average would be around 11.7% for the year) would probably allow interest rates to be cut starting in the fourth quarter of 2023.
Total lending growth in the banking sector stood at 12.5% year-on-year in March 2023, and continues to be driven by corporate credit at 14.8% and lending to households, mainly consumer loans, at 11.7% year-on-year. Moreover, total deposits grew by 13.5% year-on- year at March 2023, characterized by a strong shift towards time deposits (up 63.5% year-on-year) and a drop in demand deposits (to -7.7% year-on-year). The system's NPL ratio has grown in recent months and it has reached to 4.3% in March 2023, 47 basis points above the same month in 2022.
Activity and results
- Lending activity registered a growth of 3.7% compared to the end of 2022. Both the retail and wholesale portfolio increased (3.7% and 3.6%, respectively), thanks to the performance of consumer loans, credit cards and business loans. In terms of asset quality, the NPL ratio increased in the second quarter of the year (+17 basis points) to 4.5%, originating from retail portfolios, mainly consumer portfolios. For its part, the NPL coverage ratio declined slightly in the quarter to 97%.
- In the first half of 2023, customer deposits increased by 3.1% thanks to the positive evolution of time deposits (13.6%).
- The cumulative net attributable profit at the end of the first half of 2023 stood at €95m, that is, 27.8% lower than at the end of the same period of the previous year. The lower contribution from net interest income was affected by the high cost of funds and was partially offset by NTI and net fees and commissions. On the lower part of the income statement, higher operating expenses and higher provisions for impairment of financial assets. In the second quarter of 2023, net interest income and NTI contracted while net fees and commissions increased thanks to the performance of fees for means of payment and securities. On the lower part of the income statement, lower operating expenses and loan-loss provisions increase, although there was a positive tax impact which helped the net attributable profit growth in the quarter to stand at 27.8%.
Peru
Macro and industry trends
In a context marked by political instability, and, more recently negative weather shocks, GDP expanded by 2.7% in 2022 and growth could slow to around 1.6% in 2023, according to BBVA Research, a forecast 30 basis points lower than the previous one. Inflation, which reached 6.7% in June, is expected to remain high in 2023 (around 6.5% on average) despite the prospect of gradual moderation. Official interest rates will remain at the current level of 7.75% in the coming months, but are likely to start to be cut from the last quarter of this year.
Total credit in the Peruvian banking system remained flat in April 2023 (0% year-on-year), The performance by portfolios is uneven, with the greatest deceleration continuing to be observed in credit to companies, with a contraction in the loan balance of -5.8% year-on-year. In contrast, the dynamism of consumer loans remains, with the balance growing by 17.1% year-on-year in March 2023, while the mortgage portfolio maintained a stable growth rate of around 5.6% year-on-year. The system's total deposits remained practically flat (+0.4% year-on-year in April 2023), with a greater shift towards time deposits (+36.7% year-on-year) to the detriment of demand deposits (-12.5% year-on-year). For its part, the system's NPL ratio remains at similar levels in recent months, at 4.0% in April 2023 (25 basis points higher than in the same month in 2022).
Activity and results
- Lending activity remained flat compared to the close of December 2022 due to a deleveraging of the corporate portfolio (-3.3%), mainly due to the maturities of the "Reactiva Perú" program and some CIB operations, partially offset by a favorable evolution of consumer loans (+10.8%) and credit cards (+14.5%). In terms of credit quality indicators, the NPL ratio decreased during the quarter to 5.0%, thanks to a high volume of write-offs mitigating the higher volume of entries to doubtful assets. For its part, the NPL coverage ratio decreased to 87%.
- Customers funds under management increased slightly during the first half of 2023 (+0.6), due to the favorable performance of time deposits (25.0%), supported by the rise in benchmark rates by the central bank, which offset lower balances in demand deposits (-8.9%) and off-balance sheet funds (-1.9%).
- BBVA Peru's net attributable profit stood at €111m at the end of June 2023, 6.9% below the figure achieved at the end of the same half of the previous year, despite the good performance of recurring income from the banking business, which grew by 22.5%, and NTI. On the lower part of the income statement, there was an increase in operating expenses (+21.4%) and provisions for impairment of financial assets (+174.4%), mainly due to the worsening of the macroeconomic scenario and greater needs in retail portfolios. In the second quarter of 2023, net interest income increased, favored by the greater dynamism of the retail portfolio, together with an improvement in the customer spread, there was a lower NTI and higher loan-loss provisions, bringing BBVA Peru's net attributable profit at the end of the second quarter to, excluding the effect of exchange rate fluctuations, €53m, 7.3% lower than in the first quarter.