RNS No 7545x
BANCO BILBAO VIZCAYA S.A.
22nd October 1998
THE BBV GROUP - THIRD QUARTER 1998
The BBV Group continued to show its capacity to generate profits, increasing its
bottom line (and hence EPS) by more than 25% to 111,384 million pesetas. This
brings the Group's ROE (return on equity) up to 20%. Despite the difficult
quarter, BBV continues surpassing the demanding commitments undertaken at the
beginning of 1998 as part of its strategic Programa Two* 1000.
These results were obtained after booking provisions of over 200 billion
pesetas, a 55.6% increase over the September 1997 provision level. It should be
noted the voluntary charge to the income statement of over 120 billion pesetas
of extraordinary provisions (accelerated goodwill amortisation, special reserve
allocations, country-risk provisions and other Latin American provisions.) The
fact that the BBV Group produced such strong profit in spite of large
provisioning reaffirms one of the BBV Group's basic characteristics, its ability
to generate income on a recurrent basis - even in adverse economic conditions.
In addition to its always-strict control measures, BBV has historically applied
stringent cautious criteria with regard to financial market risk assumptions.
At the end of August, our investment in Russia and Asia was non-existent, and
the fixed income trading portfolio represented only 0.5% of total assets
managed. As a result if we look at the third quarter alone, we note a decline
in market operations profits versus previous quarters. Nonetheless, the balance
has again become positive at 6,715 million pesetas.
Among the highlights of the quarter were the incorporations of Banco Excel of
Brazil (August), Banco BHIF of Chile (30 September) and PonceBank following its
merger with BBV Puerto Pico (July). In total, these banks brought with them
assets of 1.2 trillion pesetas. The net profit of BBV-America continued to grow
in the third quarter reaching 32.4 billion pesetas, more than twice the 1997
nine first months figure. When looking at these results, it is crucial to bear
in mind the level of accelerated goodwill amortisation of these banks combined
with other extraordinary provisions exceeds such net profit. In simple terms,
though BBV-America is generating profits, such area is not contributing yet to
the bottom line of the Consolidated Group.
About the year 2000 issue the BBV Group set-up almost three years ago a
project to evaluate and resolve the risks derived from the so-called "year 2000
effect". The top management of the Group has begin directly involved and each
business area has joined-in as its participation has been made necessary. This
project consists of several action plans among which its worth noting those for
systems adaption, tests and possible contingencies in order to ensure the
adequate performance of all the computer applications from January 1st 2000.
Consumer lending, which has been strong all year, continued to show a favourable
evolution during the third quarter. This activity, along with guaranteed
mortgages which grew by more than 20%, is in large part responsible for the
19.6% year on year increase in resident sector lending, where the BBV Group
is gaining market share. Lower credit demand from the Public Sector accounts for
the 9% drop in this line from last year. Lastly, non-resident sector lending
showed the greatest increase, though this is mainly explained by the larger
perimeter of consolidation as strict risk control has in fact held back growth
in some of the Latin American countries. Overall, BBv's lending portfolio topped
10 trillion pesetas, 23% more than September 1997.
BBV's non-performing loan ratio declined to 2.67%, 50 basis points lower than
September 1997. The resident sector non-performing loan ratio dropped by 0.74
percentage points to a new low of 1.48%. High provisioning again kept the
coverage ratio over 100% and was in fact higher than the June 98 figure and
September 1997 levels, both domestically and in Latn America.
Within the resident sector deposits, savings and demand account balances
remained stable in the third quarter, despite the summer holiday period. Time
deposits and repurchase agreements showed lower balances in the quarter. The
third quarter was no different than the first and second quarters of the year,
and BBV gained market share in transactional deposits. Total customer funds
totalled 13.5 trillion pesetas.
There were no significant changes in the trend of custorner funds caption in the
third quarter. Growth in mutual funds was, however, restrained, clearly the
result of the extremely negative price brought on by the recent market crisis.
In any case, year on year growth was over 30% for the Group and nearly 33% in
Spain alone, almost nine percentage points above the growth in the domestic
financlal system as a whole. This translated into a 0.66 percentage point
increase in market share since December 1997 (0.88 percentage points over
September 1997).
BBV continued as leader in pension fund management in Spain, increasing funds
under management by 22.6%. The increase for the Group as a whole including
funds managed in Latin America was 29%.
The BBV Group's net interest income in the third quarter of 1998 was its best
ever. The net interest income of the Group's Latin affilates combined increased
by 50% -the result of popular new products and BBV management techniques.
Similarly, successful definse of margins and of domestic products has enabled
the Group to maintain its customer spread despite the fall in interest rates.
This quarter's results put the Group's interannual growth rate near 25%.
Net fee income was healthy as well, with year on year growth at 50.8%. Again
notable were the increases in mutual/pension fund management income and
income from investment security services. Lack of large public offering
transactions caused the figures for the third quarter be slightly below the
first half average, as did the strong seasonal influence of summer. Despite
this comparison, growth in commission income was up 33.1% over 3rd quarter
1997.
Turbulence in the stock market significantly reduced income from market
operations in the third quarter, and nine months figure which was down 38.4%
over the same period 1997. Nonetheless, adequate market risk management
produced a net profit in the third quarter of over 6,700 million pesetas.
The positive results of PRACTYCO are becoming evident in the income
statement. Excluding Latin America, operating increased by a scant 1.7%,
which improved the efficiency ratio by some two points. As a result,
the Group's overall efficiency ratio in third quarter 1998 is the same as it
was at year end 1997, despite the drop in revenue from markets, the opening of
new offices in Latin America and the recent incorporation of some
still-inefficient affiliates.
At the General Shareholder Meeting on June 30, another three for one split was
approved. Such split took place on July ll, 1998 in Spain. Following the
split the nominal value of each share stands at 90 pesetas. This operation
was undertaken for the same reason as in 1997: to make the BBV share more
accessible to the individual investor and to increase liquidity.
On July 11, 1998, the first 19% interim dividend was paid in the gross amount
of 7.7 pesetas per share. (Note that this amount was paid to each share
outstanding after the three for one split, which corresponds to a pre-split
amount of 23.10 pesetas per share.) On October 10, 1998, the second 1998 interim
dividend was paid again in the gross amount of 7.7 pesetas per share. Both
dividends represent a 21 % increase over the first and second divdends of 1997.
Lastly, in the last low weeks, the leading rating agencies have reviewed the
BBV fundamentals, confirming BBV ratings.
If you prefer to receive BBV information via e-mail, please let
us know at fax 94 487 60 60
Investors relations office
(Spain/34) 94 487 55 87
(Spain/34) 91 374 42 22
(USA/212) 728 15 00
(UK/171) 397 60 76 Internet info (http://www.bbv.es)
BBV GROUP HIGHLIGHTS
(consolidated figures)
SEP. 98 SEP. 97 % Change
Balance sheet (Millions of pesetas)
Total assets 22,007,972 19,539,431 12.6
Total lending 10,014,223 8,138,364 23.0
Customer funds recorded on the
balance sheet 13,489,369 12,499,427 7.9
Other Customer funds managed 8,106,918 6,244,450 29.8
Shareholder's funds 848,568 775,579 9.4
Income statement (Millions of pesetas)
Basic Margin 734,575 557,097 31.9
Operating income 297,756 242,273 22.9
Income before taxes 213,541 187,234 14.1
Net attributable profit 111,384 88,853 25.4
Data per share (Pesetas)
Net attributable profit 55 44 25.0
Book value 415 382 8.7
Share price 1,520 1,532 0.8
Key ratios (%)
R.O.A (Net income/Average total assets) 0.97 0.94 -
RORWA (Net income/Risk weighted assets) 1.86 1.87 -
R.O.E. (Net attributable/Average equity) 20.0 17.6 -
Other relevant figures
Number of employees 69,669 61,167 -
Spain 24,790 25,538 -
Abroad 44,879 35,629 -
Number of branches 4,747 4,122 -
Spain 2,804 2,823 -
Abroad 1,943 1,299 -
BBV GROUP INCOME STATEMENT
(millions of pesetas)
SEP. 98
SEP. 98 SEP. 97 % Change (US$ millions)
Financial revenues 1,261,800 1,103,873 14.31 8,867
Financial costs -751,704 -695,683 8.05 -5,282
NET INTEREST INCOME 510,096 408,190 24.97 3,585
Fees & Commissions 224,479 148,907 50.75 1,577
Collection and payment services 79,601 66,054 20.51 559
Investment securities services 43,442 25,441 70.76 303
Mutual and pension funds
management 78,721 36,736 114.29 553
Other Commissions 22,715 20,676 9.86 160
BASIC MARGIN 734,575 557,097 31.86 5,162
Market operations 40,551 65,826 -38.40 285
ORDINARY REVENUE 775,126 622,923 24.43 5,447
Administrative Costs -423,407 -337,056 25.62 -2,976
Personnel -272,219 -227,036 19.90 -1,913
Wages and other -258,534 -215,852 19.77 -1,817
Pensions -13,685 -11,184 22.36 -96
General expenses -151,188 -110,020 37.42 -1,063
Other income-costs -14,958 -9,434 58.55 -105
DGF annual fee -14,548 -10,299 41.26 -102
Other items 410 865 n.m. -3
Depreciation -39,005 -34,160 14.18 -274
OPERATING INCOME 297,756 242,273 22.90 2,092
Income from associates 120,540 72,809 65.56 847
Group Net transactions 94,371 55,444 70.21 663
Income by the equity method 26,169 17,365 50.70 184
Loan Loss provisions (net) -101,234 -53,663 88.65 -711
Gross -138,769 -85,000 63.26 -975
Reversals 22,895 20,138 13.69 161
Bad debts' recoveries 14,640 11,199 30.73 103
Securities writedowns 314 157 n.m. -2
Goodwill amortization -58,692 -48,620 20.72 412
Extraordinary items -44,515 -25,722 73.06 -313
Disposals 5,719 2,976 92.17 40
Other -50,234 -28,698 75.04 -353
PROFIT BEFORE TAX 213,541 187,234 14.05 1501
Corporate Tax -64,513 -59,509 8.41 -453
NET INCOME 149,028 127,725 16.68 1,048
Minority interests -37,644 -38,872 -3.16 -264
Preference shares -11,866 -7,979 48.72 -83
Other -25,778 -30,893 -16.56 -181
NET ATTRIBUTABLE 111,384 88,853 25.36 784
(") US$: ptas.142.3. Consolidated accounts are presented in accordance with Bank
of Spain 4/91 and 5/97 (and ensuing circulars) and follow generally accepted
accounting principles.
BBV GROUP BALANCE SHEET
(millions of pesetas)
ASSETS SEP.98 SEP.97 % CHANGE SEP.98
(US$ MILLIONS)
Cash and Central Banks 496,186 319,711 55.20 3,487
Government Debt 891,655 1,145,527 -22.20 6,266
Due from Banks 6,002,870 6,111,392 - 1.78 42,183
Total lending (Gross) 10,014,223 8,138,364 23.05 70,371
-Reserves -331,978 -299,423 10.87 -2,333
Investment Portfolio 3,225,343 2,807,780 14.87 22,665
Fixed income 2,478,919 2,189,529 13.22 17,420
Securities 746,424 618,251 20.73 5,245
Premises and Equipment 588,662 575,675 2.26 4,136
Other Assets Account 747,878 403,975 85.13 5,255
Accrual Accounts 373,133 336,430 10.91 2,622
TOTAL 22,007,972 19,539,431 12.63 154,652
LIABILITIES
Capital 183,843 175,849 4.55 1,292
Reserves 759,690 597,385 27.17 5,338
Minority Interests 414,330 419,260 -1.18 2,972
Due to Banks 6,095,151 5,051,041 20.67 42,831
Customer Funds 13,489,369 12,499,427 7.92 94,791
Other Liabilities
Accounts 518,646 300,517 72.58 3,645
Accrual Accounts 397,915 368,227 7.76 2,796
Net income 149,028 127,725 16.68 1,047
TOTAL 22,007,972 19,539,431 12.63 154,652
Average Total Assets 20,814,889 17,811,349 16.9 146,268
Average shareholders'
funds 767,699 693,842 l0.6 5,395
BIS Ratio (Tier 1) 10.7 (7.4) 13.2 (9.5) -
Risk weighted assets 10,840,981 8,915,616 21.6 76,181
BBV BBV (1)
SEP. 98 SEP. 97 SEP. 98
NPL as % Lending (Bank of Spain) 2.67 3.18 1.46
NPL
Initial 257,980 227,203 129,000
SEPTEMBRE 30th 266,999 258,765 104,406
Net Change 9,019 31,562 -22,594
% net Change 3.50 13.89 -17.51
NPL's Reserves
Last 331,798 299,423 144,995
% Coverage NPL 124.34 115.71 136.26
Lending quality (international regulations)
NPL as % lending 1.71 1.87 0.66
% Coverage NPL 174.83 171.02 268.17
TOTAL LENDING AND CUSTOMER FUNDS BREAKDOWN
(millions of pesetas)
Sep. 98 Sep. 97 % Change
Due from Public Sector 441,945 486,267 -9.11
Due from residents 5,697,037 4,762,487 19.62
Commercial bills 655,118 642,194 2.01
Borrowers with collateral 1,706,115 1,404,350 21.49
Personal loans 1,923,341 1,627,310 18.19
Credit accounts 576,602 534,946 7.79
Other term loans 307,382 122,495 150.93
Others 263,310 203,954 29.10
Leasing 265,169 227,238 16.69
Due from non residents 3,608,242 2,630,845 37.15
Non performing loans 266,999 258,765 3.18
TOTAL LENDING (GROSS) 10,014,223 8,138,364 23.05
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(-) RESERVES -331,978 -299,423 10.87
TOTAL LENDING (NET) 9,682,245 7,838,941 23.51
Pesetas 6,037,611 5,124,638 17.82
Foreign Currencies 3,644,634 2,714,303 34.28
Public Sector 672,158 603,112 11.45
Other resident sectors 6,701,480 6,505,915 3.01
Current accounts 1,644,255 1,470,398 11.82
Saving accounts 1,102,143 1,030,237 7.00
Time deposits 2,238,138 1,994,125 12.24
Sales with repurchase agreements 1,689,644 1,969,869 -14.24
Others 27,300 41,286 -33.89
Non-residents 4,654,401 4,224,103 10.19
Marketables Debt Securities 1,178,281 908,178 29.74
Subordinated Debt 283,049 258,119 9.66
TOTAL CUSTOMER FUNDS 13,498,369 12,499,427 7.92
-------------------------------------------------------------------------
Pesetas 7,709,600 7,523,842 2.47
Foreign currencies 5,779,769 4,975,585 16.16
Mutual funds 4,769,826 3,658,956 30.36
Pension funds 1,232,580 957,872 28.68
Portfolio management 2,104,512 1,627,622 29.30
OFF-BALANCE FUNDS 8,106,918 6,244,450 29.83
TOTAL MANAGED CUSTOMER FUNDS 21,596,287 18,743,877 15.22
YIELDS AND COSTS
(millions of pesetas and %)
SEP. 98 SEP. 97
Average Average Average Average
Balance Yield Rates Balance Yield Rates
Total lending 9,067,524 713,852 10.53 7,549,601 580,085 10.27
Pesetas 5,741,578 299,110 6.97 5,097,201 325,295 8.53
Foreign currencies 3,325,946 414,742 16.67 2,452,400 254,790 13.89
Investment securities 3,355,501 243,587 9.71 3,393,069 254,265 10.02
Pesetas 1,029,306 46,204 8.00 1,328,046 60,722 6.11
Foreign currencies 2,326,195 197,383 11.37 2,065,023 193,543 12.53
Equity method
securities 593,214 32,513 7.33 548,936 26,468 6.45
Other investment
securities 134,140 3,602 3.59 93,656 2,861 4.08
Credit entitles 6,320,193 248,180 5.25 5,572,851 225,771 5.42
Pesetas 2,421,289 74,942 4.14 2,343,817 93,593 5.34
Foreign currencies 3,898,904 173,238 5.94 3,229,034 132,178 5.47
Bank of Spain 132,239 6,098 6.17 175,245 8,204 6.26
Non-income producing
assets 1,389,206 1,095,315
Other financial
products 13,968 6,219
INTEREST REVENUES 20,992,017 1,261,800 8.04 18,428,673 1,103,873 8.01
SEP. 98 SEP. 97
Average Average Average Average
Balance Cost Rates Balance Cost Rates
Customers' funds 12,894,113 483,193 5.01 11,513,752 453,904 5.27
Pesetas 7,490,375 159,663 2.85 7,217,036 213,592 3.96
Customers'deposits 5,650,127 97,334 2.30 5,360,749 132,625 3.31
Repo assets 1,731,701 57,031 4.40 1,754,267 75,607 5.76
Marketable debt
securit. 108,547 5,298 6.53 102,020 5,360 7.02
Foreign currencies 5,403,738 323,530 8.00 4,296,716 240,312 7.48
Due to cre, Ent, and
B, of Spain 5,863,964 261,218 5.96 5,052,954 234,870 6.21
Pesetas 1,900,003 70,092 4.93 2,116,112 87,799 5.55
Foreign currencies 3,963,961 191,126 8.45 2,936,842 147,071 6.70
Shareholders' funds 792,800 715,783
Funds without cost 1,146,184
Other interest
expenses 1,441,140 7,293 6,909
INTEREST EXPENSES 20,992,017 751,704 4.79 18,428,673 695,683 5.05
NET INTEREST INCOME 510,096 3.25 408,190 2.96
END
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