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BBVA Financial Results
& Digital Transformation
June 2019
Index
BBVA Financial Results
Digital Transformation
Sustainable Pledge 2025
01
02
03
Data Sharing & Cybersecurity 04
BBVA Financial Results
01
4 BBVA Financial Results & Digital Transformation
BBVA offers a global presence
FINANCIAL HIGHLIGHTS (MARCH 2019)
Total assets
691,200 €m
Loans
393,321 €m
Deposits
378,527 €m
NAP 1Q19
1,164 €m
NPL ratio
3.9% Coverage ratio
74%
CET 1 FL
11.35%
TBV per share + Shareholders remuneration
6.10 € +11% vs Mar-18
ROE
9.9% ROTE
11.9%
SUSTAINABLE DEVELOPMENT AND DIRECT CONTRIBUTION TO SOCIETY
ALLOCATED TO SOCIAL PROGRAMS BBVA’S PLEDGE 2025
€100 billion MOBILIZED between 2018 and 2025
€104.5 million
CUSTOMERS & DIGITAL SALES (MARCH 2019)
countries branches employees
>30 7,844 125,749
CUSTOMERS
75.7 m
Digital customers
28.4 m
Mobile customers
24.4 m
DIGITAL SALES
PRV
42.6% Units
56.8%
5 BBVA Financial Results & Digital Transformation
With high growth prospects and leadership positioning
LEADERSHIP POSITIONING MARKET SHARE (IN %) AND RANKING
13.2% #3
SPAIN
6.2% #4
USA (SUNBELT)
22.3% #1
MEXICO
18.3% #2
TURKEY
8.5% #3
ARGENTINA COLOMBIA PERU
10.3% #4 20.0% #2
HIGHER GROWTH PROSPECTS THAN PEERS GDP GROWTH (YOY, %)
BREAKDOWN BY BUSINESS AREA TOTAL ASSETS Mar.19
GROSS INCOME 1Q19
BBVA Footprint
Eurozone + UK
67% Developed Markets
39% Developed Markets
6 BBVA Financial Results & Digital Transformation
Resilient capital position
CET1 FULLY-LOADED (%) HIGH QUALITY CAPITAL - LEVERAGE RATIO FULLY-LOADED (%)
European Peers Group: BARC, BNPP, CASA, CS, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS, UCG. European Peer Group figures as of Dec-18. BBVA figures as of Mar-19
Absorbing -11 bps of IFRS16
impact
11,34% 11,35%
dic-18 mar-19
6,4%
5,0%
BBVA European Peer GroupAverage
#1
7 BBVA Financial Results & Digital Transformation
Principles of BBVA Group’s self-sufficient business model: Multiple Point of Entry
No liquidity transfers between the parent and subsidiaries or among subsidiaries
Guidelines for capital and liquidity / ALCO supervision
Common risk culture
Subsidiaries
Corporate Center
Self-sufficient balance-sheet management
Own capital and liquidity management
Market access with its own credit, name and rating
Responsible for doing business locally
Advantages
Medium term orientation / consistent with retail banking
Improves risk assessment: imposes market discipline and proper incentives to reach sustainable credit growth
Absence of cross-funding or cross-subsidies
Helps development of local capital markets
It curtails the risk of contagion: natural firewalls / limited contagion
Safeguards financial stability / proven resilience during the crisis
Liquidity and capital buffers in different balance sheets
Decentralized model
8 BBVA Financial Results & Digital Transformation
BBVA Group Ratings by Agency
All Rating Agencies assign BBVA a rating on the single A space
BBVA LONG TERM ISSUER/SENIOR UNSECURED RATINGS
Stable outlook (Aug. 29th, 2018)
Moody’s
A3
Negative outlook
(Aug. 20th, 2018)
S&P
A-
Negative outlook
(Dec. 5th, 2018)
Fitch
A-
Stable outlook (Mar. 29th, 2019)
DBRS
A (High)
Stable outlook (Oct. 26th. 2017)
Scope
A+
Digital Transformation
02
10 BBVA Financial Results & Digital Transformation
Reshaping of the financial industry
REGULATORY PRESSURE AND THE IMPACT IN PROFITABILITY
NEW PLAYERS ARE ENTERING THE VALUE CHAIN
TRANSFORMING TECHNOLOGIES AND USE OF DATA
BANKS ROE EVOLUTION1 (%)
13,0
-11,6
4,9
8,1
2,4
0,9
1,9
4,2 4,2
2,2
4,6
7,5
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Big Data
Biometrics
Cloud
I.A. 2
Blockchain
Data processing
(1) Source: BBVA; Banks in peer group: Santander, Deutsche, Commerzbank, BNPP, SocGen, CASA, Intesa, Unicredit, HSBC, Barclays, Royal Bank of Scotland, Lloyds, UBS y Credit Suisse, Citigroup, Bank of America, JP Morgan y Wells Fargo
(2) Artificial Intelligence
11 BBVA Financial Results & Digital Transformation
BBVA’s transformation journey
The past… …tomorrow… …today… …the future
DIY SMART
INTERACTIONS DLT / Blockchain
/ Dapps/…?
Bank Digital Bank Digital Company (ecosystem)
Decentralized Economy
12 BBVA Financial Results & Digital Transformation
Our transformation is truly client centric…
Digital Customers (Mn, % growth)
Mobile Customers (Mn, % growth)
Digital Sales (% of total sales YtD, # of transactions and PRV*)
13 BBVA Financial Results & Digital Transformation
The impact of transformation
GROWTH Digital driving growth
ACTIVE CLIENTS GROWTH (# OF CLIENTS, BBVA GROUP)
+4.6 million
in the last 2 years
HIGHER ENGAGEMENT AND CROSS SELL (# MULTIPRODUCT CUSTOMERS, 3 MONTHS AFTER ONBOARDING, PERU)
2.4x
With new digital tools
NETWORK PRODUCTIVITY
Devoting more time to advice and sales
BRANCH PRODUCTIVITY (PRODUCTS SOLD PER BRANCH PER MONTH, USA)
+42%
in the last 2 years
PROCESSING COST PER TRANSACTION (€/Tx, BBVA GROUP)
ENGAGEMENT AND TRANSACTIONALITY Being in the cash flow of our clients
-31%
in the last 2 years
EFFICIENCY Reducing transaction costs
14 BBVA Financial Results & Digital Transformation
… and having a huge positive impact
Reference group: Spain: Santander, CaixaBank, Bankia, Sabadell// Mexico: Banamex, Santander, Banorte , HSBC // Turkey: Akbank, Isbank , YKB, Deniz, Finans / / Peru: Interbank, BCP, Scotiabank // Uruguay: ITAU, Santander, Scotiabank // Paraguay: Continental, Itau, Regional.
BBVA NPS DEC-18
Spain
Mexico
Turkey
Peru
Uruguay
Paraguay
#1
#1
#1
#1
#1
#1
ATTRITION RATE - DIGITAL VS NON DIGITAL CLIENTS
Non digital clients Digital clients
-47%
#1
Sustainable Pledge 2025
03
16 BBVA Financial Results & Digital Transformation
70% RENEWABLE ENERGY
68% CO2
EMISSIONS REDUCTION
Pledge 2025
Our purpose: to bring the age of opportunity to everyone
BBVA strategy on climate change and sustainable development
To finance To manage To engage We will help to create the scale of capital mobilization to halt global climate change & attain the UN Sustainable Development Goals
We will manage our environmental & social risks to minimize potential negative direct & indirect impacts
We will engage with all our stakeholders to collectively promote the contribution of financial industry to sustainable development
Transparency in carbon-related exposure
Activity progressively aligned with the Paris Agreement
Sector norms in mining, energy, agribusiness & infrastructure
TCFD recommendations implementation on 2020
Financial education
Promotion of Responsible Banking standards within the industry
Green finance
Sustainable infrastructure and agribusiness
Financial inclusion & entrepreneurship
€100 Billion MOBILIZED
ACTIVE COLLABORATION
17 BBVA Financial Results & Digital Transformation
Green lending to companies & institutions
Green bonds intermediated as bookrunner
Energy efficiency, water & waste management & solutions for SMEs & individuals
Green investment funds & equity
Project & corporate lending in education, health & affordable housing
Social bonds intermediated as bookrunner
Social investment funds & equity
Agribusiness lending under sustainability criteria
Lending to underserved
Lending to vulnerable microentrepreneurs
Lending to women entrepreneurs
New digital business
Impact investment
A €100 Billion mobilization between 2018 and 2025
Transition to a low carbon economy
Infrastructures & agribusiness
Financial inclusion & entrepreneurship
€ 70 BILLION
€ 12 BILLION
€ 18 BILLION
To finance To manage To engage
Data Sharing & Cybersecurity
04
19 BBVA Financial Results & Digital Transformation
Data Sharing - What are we calling for?
A NEW EU REGULATION PROVIDING A COMPREHENSIVE USER DATA SHARING FRAMEWORK
Principle User control (“consent”) regarding what data to share and with whom
What data? All large firms, all provided + observed electronic data regarding the user
How Use of APIs: real-time, standardised, secure data transfers (as in PSD2)
20 BBVA Financial Results & Digital Transformation
KEY RISKS
Data loss (reputation)
Digital disruption
Fraud
RATIONALE
• Workplace environment as a common target of attacks
• Malware / APT taking advantage of vulnerabilities
• Uneven control in third parties accessing information
• Big amounts of information accessible in big data environments
• Exposed cloud environments prone to admin errors
• DDoS with growing bandwidth and attacking the application layer
• Cloud perimeter exponentially increasing
• Ransomware taking advantage of vulnerabilities
• Technology/processes failures in complex/distributed environments
• Resources stolen for cryptocurrencies mining
• Increase in card not present & e-commerce fraud
• Internet banking fraud using social engineering and malware
• Spear attacks to SWIFT environments
• Growing severity of ATM attacks like jackpotting
High level priorities
BBVA Financial Results
& Digital Transformation
June 2019