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BBVA President Carlos Torres Vila has appealed to the collaboration between the Government, the private sector and society in general in order to accelerate the lifting of restrictions due to the Covid-19 pandemic and achieve a return to activity “lo accelerated as possible. “
The banker has presented the results of the first quarter of the year in a virtual press conference, together with the CEO, Onur Genç. The bank, from January to March, has lost 1,792 million euros after anticipating write-downs of 1,433 million euros due to the coronavirus crisis and the impact of the adjustment of goodwill in the United States.
Despite these losses, the two managers assure that their forecast is to end the year with benefits, since their estimates are that the necessary provisions in future quarters will be lower, since they have preferred to be “very conservative” and anticipate the greater burden of provisions. now.
The same goes for the capital ratio, now at 10.8% CET1 fully loaded. The objective now is to place it at 11%, compared to the 12% initially forecast. Despite this cut, its executives highlight the solidity of the bank and do not believe that the market penalizes them for this cut, especially once international organizations have lowered capital requirements in the face of the health crisis.
Torres, at the press conference, has recognized that practically all countries face a “deep and inevitable” recession that combines “a tremendous shock of supply with a shock of demand” and whose impact on society is difficult. to estimate, but it will depend on the speed at which the restrictions are lifted and the effectiveness of the stimulus policies to the economy.
“What remains is to look ahead and activate the return to activity plan, prioritizing health but also directing all actions to a return as quickly as possible to activity, with the appropriate precautions but seeking to reactivate the productive fabric as soon as possible. to preserve employment in this way, “the president of BBVA.
To achieve a speedy recovery, Torres Vila has insisted that speeding up the lifting of restrictions is “critical”, of course, without putting health at risk. “For that, collaboration between the Government, the private sector and society in general is key,” he said.
During his speech, the BBVA president made reference to the financing lines with guarantees from the Official Credit Institute (ICO), a program that will mobilize up to 100,000 million euros with State guarantees and which, in his opinion, constitutes “a A good financing tool that is making it possible to support companies in the country. “
In Spain, BBVA has formalized more than 47,000 operations to support the self-employed and SMEs and companies through these ICO Lines, with 5,800 million euros, and has already exhausted almost the second tranche of another 20,000 million activated by the Government.
As for the business in Spain, the bank has acknowledged that delinquencies will rise and that credit will fall by the end of the year. He estimates growth in credit to companies, but a drop in mortgages, which in April already fell 55% due to Covid-19, although he expects this fall to decrease in the second half of the year.
RESULTS WITH HISTORICAL LOSSES
BBVA has recorded in the first quarter of the year the worst results in its history and, for the moment, in international banking. The massive write-downs practiced by the entity chaired by Carlos Torres have led the entity to red numbers of 1,792 million in three months. The bank has made provisions both for the impairment of financial assets linked to the pandemic, 1,433 million euros, and for the impairment of goodwill in the United States, 2,084 million euros (in the last quarter of 2019 other writedowns were already noted in the US for 1,350 million), also derived largely from Covid-19. In total, extraordinary charges of 3,517 million euros have been recorded.
Excluding these extraordinary provisions, the ordinary result stood at 1,258 million, 6.4% more than a year earlier, gains that were highlighted by the president of the entity, Carlos Torres (he has been the only president of the six major companies that has presented quarterly accounts).
“The recurrence of profit before provisions, our solid capital position, the solid liquidity position, our diversified business model and our digital capabilities allow us to face the crisis from a position of strength,” said the banker.
Despite the collapse of the profit, Torres assured yesterday in a virtual press conference that his forecasts are to close the year with profits, since they estimate that with the extraordinary provisions they have already made, and classified as “very conservative”, they will be sufficient for the full exercise. The bank, in fact, has sacrificed capital to address these endowments.
The bank has thus modified its capital objectives, after lowering its capital ratio by 90 basis points due to the impact of provisions (although goodwill in the US does not affect the entity’s capital or equity) in the quarter, remaining at 10.84%. If before the objective was between 11.5% and 12%, now a buffer has been set at between 225 and 275 basis points over the ratio required by the ECB, softened in the face of the coronavirus situation. Thus, the new objective is between 10.84% and 11.09%, coinciding with the current level.
Despite this drop in the capital ratio, the bank assures that this index will improve throughout the year, one of which analysts take most into account. Suspension of the dividend As expected, the bank has announced that it will not pay any dividend on account of the results of this exercise until the uncertainty about the pandemic is cleared and, in any case, it will not remunerate the shareholder this year.
The market has penalized BBVA’s results with a drop in its price of 5.53%. The bank, however, does not foresee that the Stock Market will punish its value in the future by cutting its capital ratio.
The bulk of the sanitation corresponds to Spain, with 517 million. Provisions for Mexico total 320 million and those for the United States 280 million. These provisions have raised the cost of risk to 2.57% from 1.12% at the end of 2019. But they expect that throughout the year it will fall to close at 150 basis points to 180 points. The entity’s CEO, Onur Genç, has acknowledged that delinquencies will rise after the pandemic. ICO credits In Spain, the bank has lost 141 million, as a result of provisions of close to 1,000 million, compared to 200 million in March 2019 In the United States (not counting the deterioration of goodwill) the red numbers amount to 100 million. In Mexico, the driving force behind results, they drop 40% to 372 million, while in Turkey they drop 9%.
