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BBVA Spain: Management Priorities in the New Environment

BBVA Spain's management priorities in the new environment are: 1) Driving profitable growth by capturing demand from the economic recovery in Spain and gaining market share. 2) Continuing the transformation process to improve the customer experience through digitalization and new business models. 3) Maintaining a strong focus on risk management given the challenges of regulation and low interest rates.

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BBVAFinance BBVA Spain: Management Priorities in the New Environment SG Premium Review Conference
2 SG Premium Review Conference Paris, December 3th, 2015 BBVA Spain: Management Priorities in the New Environment Ángel Reglero, BBVA Spain Chief Financial Officer
3 Disclaimer This document is only provided for information purposes and does not constitute, nor must it be interpreted as, an offer to sell or exchange or acquire, or an invitation for offers to buy securities issued by any of the aforementioned companies. Any decision to buy or invest in securities in relation to a specific issue must be made solely and exclusively on the basis of the information set out in the pertinent prospectus filed by the company in relation to such specific issue. Nobody who becomes aware of the information contained in this report must regard it as definitive, because it is subject to changes and modifications. This document contains or may contain forward looking statements (in the usual meaning and within the meaning of the US Private Securities Litigation Act of 1995) regarding intentions, expectations or projections of BBVA or of its management on the date thereof, that refer to miscellaneous aspects, including projections about the future earnings of the business. The statements contained herein are based on our current projections, although the said earnings may be substantially modified in the future by certain risks, uncertainty and other factors relevant that may cause the results or final decisions to differ from such intentions, projections or estimates. These factors include, without limitation, (1) the market situation, macroeconomic factors, regulatory, political or government guidelines, (2) domestic and international stock market movements, exchange rates and interest rates, (3) competitive pressures, (4) technological changes, (5) alterations in the financial situation, creditworthiness or solvency of our customers, debtors or counterparts. These factors could condition and result in actual events differing from the information and intentions stated, projected or forecast in this document and other past or future documents. BBVA does not undertake to publicly revise the contents of this or any other document, either if the events are not exactly as described herein, or if such events lead to changes in the information contained in this document. This document may contain summarised information or information that has not been audited, and its recipients are invited to consult the documentation and public information filed by BBVA with stock market supervisory bodies, in particular, the prospectuses and periodical information filed with the Spanish Securities Exchange Commission (CNMV) and the Annual Report on form 20-F and information on form 6-K that are disclosed to the US Securities and Exchange Commission. Distribution of this document in other jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. By accepting this document you agree to be bound by the foregoing restrictions.
4 Index 2 BBVA Spain: Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
5 BBVA, ready to take advantage of the new industry environment Industry themes BBVA’s strengths A well-diversified footprint with leading franchises Ability to generate capital organically Leading the change Global growth 1 Regulation 2 Banking industry transformation 3
66 Mexico Spain Rest of Eurasia 2% USA BBVA has a well-diversified footprint supported by dominant and quality franchises … Turkey (1) Pro-forma calculation including a 39.9% stake in Garanti. Figures exclude Corporate Centre. (2) Spain: Other domestic sector + Public sector data as of June, 2015 (BBVA+ Catalunya Banc (CX)); Mexico: data as of July, 2015; South America: data as of June, 2015: ranking considering only our main peers in each country; USA: as of June, 2015 considering only Texas and Alabama; Turkey: BRSA data for commercial banks as of September 2015. (3) Investment grade countries: Spain, USA, Mexico, Chile, Colombia, Peru, Uruguay, China, Turkey (except by S&P) and rest of Europe; Non-investment grade countries: Portugal, Argentina, Paraguay and Venezuela. BBVA Group’s 9m15 Net attributable profit Breakdown by country (1) Colombia Argentina Peru Chile South America 19% Other > 90% of net attributable profit coming from investment grade countries (3), mainly from Mexico and Spain Ranking (#) Mexico Spain Turkey South America (ex Brazil) 24.1% 14.7% 11.9% 10.4% Market share (%) USA (Sunbelt) 6.3% Market share and ranking by loans Detail by country (2) 1st 2nd 2nd 1st 4th 41% 19% 11% 9% 5% 5% 4% 3% 1% Net Attrib. Profit 9m15 (excl. Corp. Operations) € 2,815 Mn Risk ManagementGlobal Growth1
7 … allowing BBVA to maintain resilient profits … BBVA’s operating income vs. provisions and impairment on non-financial assets (€ Bn) … even under stressed scenarios 9.6 10.5 12.3 11.9 10.6 11.1 10.2 10.4 8.5 -1.9 -3.0 -7.0 -5.2 -6.1 -9.1 -6.3 -4.8 -3.5 0 2007 2008 2009 2010 2011 2012 2013 2014 9m15 Operating Income Provisions and impairments on non-financial assets Risk ManagementGlobal Growth1
8 Regulatory environment: despite considerable increase in capital levels in recent years … Since 2007, banks have increased their capital ratios in a significant manner From Basel II … The focus is now on harmonization (CET1, RWAs), resolution and taxpayer protection … to Basel III ~ 6% %CET1 BIS II (2007) ≥ 10% %CET1 BIS III FL (2014)   (1) %CET1 average, including BBVA and its European Peer Group (BARC, BNPP, CASA, CS, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS and UCG). (1) (1) … still unclear impact of the implementation of new proposals Pillar II TLAC / MREL IFRS 9CET1 harmonization Basel IV (RWAs) TLAC/ MREL Regulation2 Risk ManagementRegulation2
9 CET1 capital ratios 2014 quarterly average 1Q15 2Q15 3Q15 8 bps 11 bps 12 bps 11 bps Organic capital generation CET1 capital ratio fully-loaded BBVA Group >10 bps per quarter Solvency BBVA Group (Sept.15) Leverage Ratio Fully-loaded 5.7% Fully-loaded 9.8% Phased-in 11.7% Disciplined capital management as a key priority BBVA has a proven ability to generate capital organically Regulation2 Risk ManagementRegulation2
10 RWAs / Total Assets (%) Leverage ratio(%) (1) (1) CRDIV fully-loaded. Within the European Peers average for the leverage ratio, CASA e ISP do not publish their leverage ratio. European peer group: BARC, BNPP, CASA, CS, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS and UCG. European peer data as of Jun.15 vs. BBVA as of Sept.15 53% 33% BBVA European Peers average 5,7% 4,3% BBVA European Peers average #1#1 BBVA stands out among its peers for the quality of its capital Well prepared for the harmonization process Regulation2 Risk ManagementRegulation2
11 BBVA ahead of its peers in the industry transformation process A first class workforce Unrivaled efficiency Optimize capital allocation New business models Drive digital sales New standard in customer experience Strategic Priorities: Customer at the center of all strategic decisions Global approach Ready to benefit from the investment in technology 1 2 3 4 5 6 Top Management commitment Industry transformation3
12 Index 2 BBVA Spain: Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
13 Economic growth: Spain will continue growing more than Eurozone Source: BBVA Research GDP Growth (%) -1,2% 1,4% 3,2% 2,7% -0,4% 0,9% 1,5% 1,9% 2013 2014 2015e 2016e Spain Eurozone The recovery of domestic demand key for new loan production growth Strong contribution of internal demand, highlighting the recovery of investment in machinery and equipment Expansionary monetary and fiscal policies, and low oil prices support Spanish recovery EUR/USD depreciation benefits exports
14 Challenges and opportunities in the new banking business environment Early signs of demand recovery Regulation Historically low Interest rates Competitive landscape New customer expectations and behaviours New competitors with new value propositions Euribor 12 month rate % New loan production in Spain 9M15 vs 9M14 16,3% 14,6% 26,3% Total loans Commercial loans Retail loans  Banks’ focus on capturing solvent demand impacting customer spreads  Impact on future profitability still unclear  Fintech start-ups disaggregating the value chain  Digital players  Mobile & internet transforming society Source: Bank of Spain 0,0 1,0 2,0 3,0 4,0 5,0 6,0 Source: Bloomberg Oct ’15 0.142%
15 BBVA Spain well positioned to benefit from the new environment Transformation Risk management Profitable growth 3 9M14 9M15 16.3% 8.3% (1) Market share considering the following peers: CABK, SAN (Spain + RE), SAB, POP, BKIA and BKT Above BBVA’s business volume market share BBVA Spain management priorities Net attributable profit market share (1) BBVA Spain Banking Activities + Real Estate 2 1
16 In the new environment, banks need higher market share to be profitable 2011 2012 2013 2015 +40pbs +40pbs +30pbs +70pbs +180pbs 12.9% 12.1% 1.8% 1.8% Gross loans Customer funds 13.9% 14.7% Source: Gross Loans (Other domestic sector+Public Sector Loans) and customer funds (deposits, mutual and pension funds) based on Bank of Spain data as of June 2015. Source: FRS Inmark, first supplier share. Unnim acquisition Catalunya Banc acquisition 10.7% 11.1% 11.8% 12.2% 14.1% BBVA has gained market share organically and through acquisitions … … being one of the leaders in the Spanish banking industry 2014 12.3% +10pbs 10.4% Profitable growth1 Retail customer market share Catalunya Banc (CX) BBVA
17 Deleveraging process coming to an end Slight loan decrease explained by public sector and residential mortgages Gross loans evolution (1) BBVA Spain Banking Activity, ex-CX New loan production by segment Monthly average ex-CX (€ Bn) Consumer loans Residential mortgages Small businesses Retail banking: strong new loan production growth Commercial banking already growing the stock Gross loans evolution YTD evolution Sept 15, ex-CX 0,3% 1,1% SMEsLarge companies -1,5% -8,8% -3,7% -2.3% 2012- 2013 2013- 2014 YTD Sept 15 66 86 120 9M13 9M14 9M15 161 167 239 9M13 9M14 9M15 442 512 698 9M13 9M14 9M15 +83% +49% +58% (1) Gross loans excluding Repos Excl. Public Sector Loans Profitable growth1
18 A more profitable mix of customer funds 77,6 62,1 63,8 72,8 28,5 31,1 Sept 14 Sept 15 Mutual funds Demand deposits Time deposits 20% 9% 14% 169.8 166.1 Customer funds evolution, ex-CX BBVA Spain Banking Activity (€ Bn) -2% Cost of time deposits, ex-CX Average cost on the last month of the quarter (%) 1,61 1,41 1,27 1,12 0,93 0,74 Jun 14 Sept 14 Dec 14 Mar 15 Jun 15 Sept 15 New time deposits 26bps (Sept 15) Average fee on mutual funds, ex-CX Quarterly average (%) 1,03 1,06 1,07 1,12 1,16 1,15 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Profitable growth1
19 Net interest income growth driven by improvement in customer spread … 2,860 2.834 9M14 9M15 3,000 +0.9% +5.8% incl. CX CX Contribution Net Interest Income evolution BBVA Spain Banking Activity (€ Bn) Customer spread evolution BBVA Spain Banking Activity (in %) 1,77 1,83 1,92 1,94 1,93 1,96 1,98 1,88 1,83 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 BBVA incl. CX (1) BBVA standalone (1) Customer spread including CX since integration in April 24th ... loan demand recovery as the next key variable Profitable growth1
20 Revenue diversification in a low interest rate environment CX Contribution 1.150 1.086 9M14 9M15 1,219 +5.9% +12.3% incl. CX 5.147 4.879 9M14 9M15 5,386 +5.5% +10.4% incl. CX Net Fees and Commissions BBVA Spain Banking Activity (€ Bn) Gross Income BBVA Spain Banking Activity (€ Bn) CX Contribution Profitable growth1
21 Ongoing cost control improvement 52.3% 52.0% 9M14 9M15 Efficiency ratio excluding Net Trading Income BBVA Spain Banking Activity (%) Reallocation of expenses from the Corporate Center to Spain in 2015 Catalunya Banc consolidation in 2015 Efficiency improvement despite: CX integration allows for additional cost savings - 37 bps Profitable growth1
22 Loan Loss Provisions and Cost of Risk Spain Banking Activity + RE (€ Bn, ex-CX) Risk indicators continue to evolve favorably NPLs Spain Banking Activity + RE (€ Bn, ex-CX) 19,8 17,2 Sept 14 Sept 15 -13.1% Cost of risk normalization as the key P&L driver 1.974 2014 2015e 2017e 103 bps ~ 50 bps Cost of risk 80-85 bps Risk ManagementRisk Management2
23 10 15 20 25 30 Improving dynamics in the Spanish Real Estate market Housing prices have bottomed-out Demand is growing from very low levels House price evolution YoY (%) Residential homes sales Quarterly moving average (in thousands of units) Source: BBVA estimates based on Ministry of Public Works and Transport data. Source: BBVA and INE. Reduction of unsold stock continues thanks to demand recovery in the absence of new home building -15% -10% -5% 0% 5% 10% 15% Mar 06 Jun 08 Sept 10 Dec 12 Mar 15 Jun 17 Risk ManagementRisk Management2
24 - 636 - 407 9M14 9M15 -36.0% BBVA gradually decreasing its Real Estate exposure … BBVA’s Real Estate Net exposure (1) (€ Bn) BBVA’ Real Estate Net Attributable Profit (€ Mn) (1) Net of provisions exposure based on Bank of Spain transparency criteria (Circular 5-2011). Data include developer loans and foreclosed assets. … while significantly improving the P&L contribution 11,8 13,3 12.8 Sept 14 Sept 15 -11.3% -3.2 incl. CX CX Contribution Risk ManagementRisk Management2
25 BBVA Spain: improving P&L dynamics BBVA Spain Banking Activity 9M15 € mn Growth 9M15 vs 9M14 Abs. % Net Interest Income 3,000 + 165 5.8% Gross Income 5,386 + 507 10.4% Costs -2,375 - 238 11.1% Operating Income 3,010 + 269 9.8% Income Before Tax 1,565 + 383 32.4% Net Attributable Profit Spain Banking Activity 1,101 + 267 32.0% Net Attributable Profit Spain Real Estate -407 + 229 -36.0% Net Attributable Profit SPAIN Banking Activity + RE 694 + 496 250.5%
26 Ne Banks must adapt to the new landscape Fintech startups Digital Players New customer expectations and behaviors 1 3 e New industry players Risk ManagementTransformation3 BBVA’s transformation plan based on 4 pillars:
27 BBVA moving ahead in the transformation of its distribution model Dependent branch Remote advisor CBC Retail Banking Center (RBC) Digital Sales 31% 79% Dec 13 Sept 15 BBVA Spain: % of Retail Banking Centers with >5 branches under its influence 344 280 Dec 13 Sept 15 BBVA Spain: Number of Retail Banking Centers -19%  Ongoing transformation of branch network: Hub & Spoke model  RBCs managing the new relationship model: integrating face-to-face, remote advisors and digital sales  RBCs manager responsible for the customer flow management: improving convenience and efficiency … RBCs: larger branches with higher critical mass and more functionalities New distribution model Note: Retail Banking Centers in urban areas Distribution Model Evolution Risk ManagementTransformation3
28 New customer experience: mobile as the key relationship device BBVAWallet Added Value offer … Digitalproducts signing Digitalservicing Retail Banking Center (RBC) From a face-to-face approach to an Omnichannel vision New customer experience Mobile commercial campaigns Risk ManagementTransformation3 Transformation of the added value offer: Increasing the catalogue of non face-to- face products and solutions
29 1,8 2,2 2,6 2,8 2012 2013 2014 Sept 15 Digital Customers BBVA Spain – in millions Mobile Customers BBVA Spain – in millions x 1.6 0,6 1,1 1,5 1,7 2012 2013 2014 Sept 15 x 2.7 Client digitalization, driver of digital sales growth Increase the number of digital clients Digitize current existing customers through Retail Banking Centers Boost client acquisition through digital channels Digital sales   Transformation3
30 Digital sales as an additional source of business 15,7 15,9 15,7 20,5 17,2 25,6 23,7 23,5 9,3 10,3 17,9 23,7 Jan.15 Mar.15 Jun.15 Consumer loans % of new loans through digital channels (in number of loans) Sept.15 Jan.15 Mar.15 Jun.15 Sept.15 Jan.15 Mar.15 Jun.15 Sept.15 65,7 70,5 65,7 67,7 Jan.15 Mar.15 Jun.15 Sept.15 (1) Include equities, warrants, and ETFs Digital sales Transformation3 Contributions to pension funds % contributions through digital channels (in number of contributions) Contributions to mutual funds % of contributions through digital channels (in number of contributions) Purchase and sale of domestic equities (1) % of operations through digital channels (in number of operations)
31 Outstanding customer satisfaction (1) Source: FRS Inmark Report 2015. Reference group: BKIA, CABK, POP, SAB, SAN. (2) General Satisfaction Index as the average of customer interviews ranking their satisfaction from 0 to 10. (3) Source: Bank of Spain. 2014 report. Peers include: SAN, CABK, BKIA, POP, SAB, CX, Unicaja, Marenostrum and Caja España Note: All data in this page refer to BBVA excluding Catalunya Banc. Online banking customer satisfaction BBVA Spain vs. peer group (1) Mobile banking customer satisfaction BBVA Spain vs. peer group (1) 81% 79% 76% 75% 70% 66% Peer1 BBVA Peer 2 Peer 3 Peer 4 Peer 5 #2 78% 74% 73% 69% 63% 58% BBVA Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 #1 Customer satisfaction: General Satisfaction Index (2) BBVA Retail Banking Number of claims in Spain Yearly claims (3) 8,07 8,32 8,50 8,58 8,61 2011 2012 2013 2014 9M15 3.666 2.081 1.801 1.3311.238 1.076 1.009 816 765 548 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 BBVA Claims market share: 2.6% Digital clients Total retail clients Superior quality of service Transformation3
32 Index 2 BBVA Spain: Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
33 BBVA has built a sustainable competitive advantage, not easily replicated Resilient growth thanks to a well-diversified footprint with leading franchises High quality capital and sustainable organic generation Leading the industry transformation, placing customers at the center of our strategy BBVA Spain, increasing contribution to the Group’s P&L  Deleveraging process coming to an end  Cost of Risk normalization as the main P&L driver  Transformation of the distribution model to offer the best customer experience
34 SG Premium Review Conference Paris, December 3th, 2015 BBVA Spain: Management Priorities in the New Environment Ángel Reglero, BBVA Spain Chief Financial Officer

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BBVA Spain: Management Priorities in the New Environment

  • 1.
    BBVAFinance BBVA Spain: ManagementPriorities in the New Environment SG Premium Review Conference
  • 2.
    2 SG Premium ReviewConference Paris, December 3th, 2015 BBVA Spain: Management Priorities in the New Environment Ángel Reglero, BBVA Spain Chief Financial Officer
  • 3.
    3 Disclaimer This document isonly provided for information purposes and does not constitute, nor must it be interpreted as, an offer to sell or exchange or acquire, or an invitation for offers to buy securities issued by any of the aforementioned companies. Any decision to buy or invest in securities in relation to a specific issue must be made solely and exclusively on the basis of the information set out in the pertinent prospectus filed by the company in relation to such specific issue. Nobody who becomes aware of the information contained in this report must regard it as definitive, because it is subject to changes and modifications. This document contains or may contain forward looking statements (in the usual meaning and within the meaning of the US Private Securities Litigation Act of 1995) regarding intentions, expectations or projections of BBVA or of its management on the date thereof, that refer to miscellaneous aspects, including projections about the future earnings of the business. The statements contained herein are based on our current projections, although the said earnings may be substantially modified in the future by certain risks, uncertainty and other factors relevant that may cause the results or final decisions to differ from such intentions, projections or estimates. These factors include, without limitation, (1) the market situation, macroeconomic factors, regulatory, political or government guidelines, (2) domestic and international stock market movements, exchange rates and interest rates, (3) competitive pressures, (4) technological changes, (5) alterations in the financial situation, creditworthiness or solvency of our customers, debtors or counterparts. These factors could condition and result in actual events differing from the information and intentions stated, projected or forecast in this document and other past or future documents. BBVA does not undertake to publicly revise the contents of this or any other document, either if the events are not exactly as described herein, or if such events lead to changes in the information contained in this document. This document may contain summarised information or information that has not been audited, and its recipients are invited to consult the documentation and public information filed by BBVA with stock market supervisory bodies, in particular, the prospectuses and periodical information filed with the Spanish Securities Exchange Commission (CNMV) and the Annual Report on form 20-F and information on form 6-K that are disclosed to the US Securities and Exchange Commission. Distribution of this document in other jurisdictions may be prohibited, and recipients into whose possession this document comes shall be solely responsible for informing themselves about, and observing any such restrictions. By accepting this document you agree to be bound by the foregoing restrictions.
  • 4.
    4 Index 2 BBVA Spain:Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
  • 5.
    5 BBVA, ready totake advantage of the new industry environment Industry themes BBVA’s strengths A well-diversified footprint with leading franchises Ability to generate capital organically Leading the change Global growth 1 Regulation 2 Banking industry transformation 3
  • 6.
    66 Mexico Spain Rest of Eurasia 2% USA BBVAhas a well-diversified footprint supported by dominant and quality franchises … Turkey (1) Pro-forma calculation including a 39.9% stake in Garanti. Figures exclude Corporate Centre. (2) Spain: Other domestic sector + Public sector data as of June, 2015 (BBVA+ Catalunya Banc (CX)); Mexico: data as of July, 2015; South America: data as of June, 2015: ranking considering only our main peers in each country; USA: as of June, 2015 considering only Texas and Alabama; Turkey: BRSA data for commercial banks as of September 2015. (3) Investment grade countries: Spain, USA, Mexico, Chile, Colombia, Peru, Uruguay, China, Turkey (except by S&P) and rest of Europe; Non-investment grade countries: Portugal, Argentina, Paraguay and Venezuela. BBVA Group’s 9m15 Net attributable profit Breakdown by country (1) Colombia Argentina Peru Chile South America 19% Other > 90% of net attributable profit coming from investment grade countries (3), mainly from Mexico and Spain Ranking (#) Mexico Spain Turkey South America (ex Brazil) 24.1% 14.7% 11.9% 10.4% Market share (%) USA (Sunbelt) 6.3% Market share and ranking by loans Detail by country (2) 1st 2nd 2nd 1st 4th 41% 19% 11% 9% 5% 5% 4% 3% 1% Net Attrib. Profit 9m15 (excl. Corp. Operations) € 2,815 Mn Risk ManagementGlobal Growth1
  • 7.
    7 … allowing BBVAto maintain resilient profits … BBVA’s operating income vs. provisions and impairment on non-financial assets (€ Bn) … even under stressed scenarios 9.6 10.5 12.3 11.9 10.6 11.1 10.2 10.4 8.5 -1.9 -3.0 -7.0 -5.2 -6.1 -9.1 -6.3 -4.8 -3.5 0 2007 2008 2009 2010 2011 2012 2013 2014 9m15 Operating Income Provisions and impairments on non-financial assets Risk ManagementGlobal Growth1
  • 8.
    8 Regulatory environment: despiteconsiderable increase in capital levels in recent years … Since 2007, banks have increased their capital ratios in a significant manner From Basel II … The focus is now on harmonization (CET1, RWAs), resolution and taxpayer protection … to Basel III ~ 6% %CET1 BIS II (2007) ≥ 10% %CET1 BIS III FL (2014)   (1) %CET1 average, including BBVA and its European Peer Group (BARC, BNPP, CASA, CS, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS and UCG). (1) (1) … still unclear impact of the implementation of new proposals Pillar II TLAC / MREL IFRS 9CET1 harmonization Basel IV (RWAs) TLAC/ MREL Regulation2 Risk ManagementRegulation2
  • 9.
    9 CET1 capital ratios 2014 quarterly average 1Q152Q15 3Q15 8 bps 11 bps 12 bps 11 bps Organic capital generation CET1 capital ratio fully-loaded BBVA Group >10 bps per quarter Solvency BBVA Group (Sept.15) Leverage Ratio Fully-loaded 5.7% Fully-loaded 9.8% Phased-in 11.7% Disciplined capital management as a key priority BBVA has a proven ability to generate capital organically Regulation2 Risk ManagementRegulation2
  • 10.
    10 RWAs / TotalAssets (%) Leverage ratio(%) (1) (1) CRDIV fully-loaded. Within the European Peers average for the leverage ratio, CASA e ISP do not publish their leverage ratio. European peer group: BARC, BNPP, CASA, CS, CMZ, DB, HSBC, ISP, LBG, RBS, SAN, SG, UBS and UCG. European peer data as of Jun.15 vs. BBVA as of Sept.15 53% 33% BBVA European Peers average 5,7% 4,3% BBVA European Peers average #1#1 BBVA stands out among its peers for the quality of its capital Well prepared for the harmonization process Regulation2 Risk ManagementRegulation2
  • 11.
    11 BBVA ahead ofits peers in the industry transformation process A first class workforce Unrivaled efficiency Optimize capital allocation New business models Drive digital sales New standard in customer experience Strategic Priorities: Customer at the center of all strategic decisions Global approach Ready to benefit from the investment in technology 1 2 3 4 5 6 Top Management commitment Industry transformation3
  • 12.
    12 Index 2 BBVA Spain:Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
  • 13.
    13 Economic growth: Spainwill continue growing more than Eurozone Source: BBVA Research GDP Growth (%) -1,2% 1,4% 3,2% 2,7% -0,4% 0,9% 1,5% 1,9% 2013 2014 2015e 2016e Spain Eurozone The recovery of domestic demand key for new loan production growth Strong contribution of internal demand, highlighting the recovery of investment in machinery and equipment Expansionary monetary and fiscal policies, and low oil prices support Spanish recovery EUR/USD depreciation benefits exports
  • 14.
    14 Challenges and opportunitiesin the new banking business environment Early signs of demand recovery Regulation Historically low Interest rates Competitive landscape New customer expectations and behaviours New competitors with new value propositions Euribor 12 month rate % New loan production in Spain 9M15 vs 9M14 16,3% 14,6% 26,3% Total loans Commercial loans Retail loans  Banks’ focus on capturing solvent demand impacting customer spreads  Impact on future profitability still unclear  Fintech start-ups disaggregating the value chain  Digital players  Mobile & internet transforming society Source: Bank of Spain 0,0 1,0 2,0 3,0 4,0 5,0 6,0 Source: Bloomberg Oct ’15 0.142%
  • 15.
    15 BBVA Spain wellpositioned to benefit from the new environment Transformation Risk management Profitable growth 3 9M14 9M15 16.3% 8.3% (1) Market share considering the following peers: CABK, SAN (Spain + RE), SAB, POP, BKIA and BKT Above BBVA’s business volume market share BBVA Spain management priorities Net attributable profit market share (1) BBVA Spain Banking Activities + Real Estate 2 1
  • 16.
    16 In the newenvironment, banks need higher market share to be profitable 2011 2012 2013 2015 +40pbs +40pbs +30pbs +70pbs +180pbs 12.9% 12.1% 1.8% 1.8% Gross loans Customer funds 13.9% 14.7% Source: Gross Loans (Other domestic sector+Public Sector Loans) and customer funds (deposits, mutual and pension funds) based on Bank of Spain data as of June 2015. Source: FRS Inmark, first supplier share. Unnim acquisition Catalunya Banc acquisition 10.7% 11.1% 11.8% 12.2% 14.1% BBVA has gained market share organically and through acquisitions … … being one of the leaders in the Spanish banking industry 2014 12.3% +10pbs 10.4% Profitable growth1 Retail customer market share Catalunya Banc (CX) BBVA
  • 17.
    17 Deleveraging process comingto an end Slight loan decrease explained by public sector and residential mortgages Gross loans evolution (1) BBVA Spain Banking Activity, ex-CX New loan production by segment Monthly average ex-CX (€ Bn) Consumer loans Residential mortgages Small businesses Retail banking: strong new loan production growth Commercial banking already growing the stock Gross loans evolution YTD evolution Sept 15, ex-CX 0,3% 1,1% SMEsLarge companies -1,5% -8,8% -3,7% -2.3% 2012- 2013 2013- 2014 YTD Sept 15 66 86 120 9M13 9M14 9M15 161 167 239 9M13 9M14 9M15 442 512 698 9M13 9M14 9M15 +83% +49% +58% (1) Gross loans excluding Repos Excl. Public Sector Loans Profitable growth1
  • 18.
    18 A more profitablemix of customer funds 77,6 62,1 63,8 72,8 28,5 31,1 Sept 14 Sept 15 Mutual funds Demand deposits Time deposits 20% 9% 14% 169.8 166.1 Customer funds evolution, ex-CX BBVA Spain Banking Activity (€ Bn) -2% Cost of time deposits, ex-CX Average cost on the last month of the quarter (%) 1,61 1,41 1,27 1,12 0,93 0,74 Jun 14 Sept 14 Dec 14 Mar 15 Jun 15 Sept 15 New time deposits 26bps (Sept 15) Average fee on mutual funds, ex-CX Quarterly average (%) 1,03 1,06 1,07 1,12 1,16 1,15 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Profitable growth1
  • 19.
    19 Net interest incomegrowth driven by improvement in customer spread … 2,860 2.834 9M14 9M15 3,000 +0.9% +5.8% incl. CX CX Contribution Net Interest Income evolution BBVA Spain Banking Activity (€ Bn) Customer spread evolution BBVA Spain Banking Activity (in %) 1,77 1,83 1,92 1,94 1,93 1,96 1,98 1,88 1,83 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 BBVA incl. CX (1) BBVA standalone (1) Customer spread including CX since integration in April 24th ... loan demand recovery as the next key variable Profitable growth1
  • 20.
    20 Revenue diversification ina low interest rate environment CX Contribution 1.150 1.086 9M14 9M15 1,219 +5.9% +12.3% incl. CX 5.147 4.879 9M14 9M15 5,386 +5.5% +10.4% incl. CX Net Fees and Commissions BBVA Spain Banking Activity (€ Bn) Gross Income BBVA Spain Banking Activity (€ Bn) CX Contribution Profitable growth1
  • 21.
    21 Ongoing cost controlimprovement 52.3% 52.0% 9M14 9M15 Efficiency ratio excluding Net Trading Income BBVA Spain Banking Activity (%) Reallocation of expenses from the Corporate Center to Spain in 2015 Catalunya Banc consolidation in 2015 Efficiency improvement despite: CX integration allows for additional cost savings - 37 bps Profitable growth1
  • 22.
    22 Loan Loss Provisionsand Cost of Risk Spain Banking Activity + RE (€ Bn, ex-CX) Risk indicators continue to evolve favorably NPLs Spain Banking Activity + RE (€ Bn, ex-CX) 19,8 17,2 Sept 14 Sept 15 -13.1% Cost of risk normalization as the key P&L driver 1.974 2014 2015e 2017e 103 bps ~ 50 bps Cost of risk 80-85 bps Risk ManagementRisk Management2
  • 23.
    23 10 15 20 25 30 Improving dynamics inthe Spanish Real Estate market Housing prices have bottomed-out Demand is growing from very low levels House price evolution YoY (%) Residential homes sales Quarterly moving average (in thousands of units) Source: BBVA estimates based on Ministry of Public Works and Transport data. Source: BBVA and INE. Reduction of unsold stock continues thanks to demand recovery in the absence of new home building -15% -10% -5% 0% 5% 10% 15% Mar 06 Jun 08 Sept 10 Dec 12 Mar 15 Jun 17 Risk ManagementRisk Management2
  • 24.
    24 - 636 - 407 9M149M15 -36.0% BBVA gradually decreasing its Real Estate exposure … BBVA’s Real Estate Net exposure (1) (€ Bn) BBVA’ Real Estate Net Attributable Profit (€ Mn) (1) Net of provisions exposure based on Bank of Spain transparency criteria (Circular 5-2011). Data include developer loans and foreclosed assets. … while significantly improving the P&L contribution 11,8 13,3 12.8 Sept 14 Sept 15 -11.3% -3.2 incl. CX CX Contribution Risk ManagementRisk Management2
  • 25.
    25 BBVA Spain: improvingP&L dynamics BBVA Spain Banking Activity 9M15 € mn Growth 9M15 vs 9M14 Abs. % Net Interest Income 3,000 + 165 5.8% Gross Income 5,386 + 507 10.4% Costs -2,375 - 238 11.1% Operating Income 3,010 + 269 9.8% Income Before Tax 1,565 + 383 32.4% Net Attributable Profit Spain Banking Activity 1,101 + 267 32.0% Net Attributable Profit Spain Real Estate -407 + 229 -36.0% Net Attributable Profit SPAIN Banking Activity + RE 694 + 496 250.5%
  • 26.
    26 Ne Banks must adaptto the new landscape Fintech startups Digital Players New customer expectations and behaviors 1 3 e New industry players Risk ManagementTransformation3 BBVA’s transformation plan based on 4 pillars:
  • 27.
    27 BBVA moving aheadin the transformation of its distribution model Dependent branch Remote advisor CBC Retail Banking Center (RBC) Digital Sales 31% 79% Dec 13 Sept 15 BBVA Spain: % of Retail Banking Centers with >5 branches under its influence 344 280 Dec 13 Sept 15 BBVA Spain: Number of Retail Banking Centers -19%  Ongoing transformation of branch network: Hub & Spoke model  RBCs managing the new relationship model: integrating face-to-face, remote advisors and digital sales  RBCs manager responsible for the customer flow management: improving convenience and efficiency … RBCs: larger branches with higher critical mass and more functionalities New distribution model Note: Retail Banking Centers in urban areas Distribution Model Evolution Risk ManagementTransformation3
  • 28.
    28 New customer experience:mobile as the key relationship device BBVAWallet Added Value offer … Digitalproducts signing Digitalservicing Retail Banking Center (RBC) From a face-to-face approach to an Omnichannel vision New customer experience Mobile commercial campaigns Risk ManagementTransformation3 Transformation of the added value offer: Increasing the catalogue of non face-to- face products and solutions
  • 29.
    29 1,8 2,2 2,6 2,8 2012 20132014 Sept 15 Digital Customers BBVA Spain – in millions Mobile Customers BBVA Spain – in millions x 1.6 0,6 1,1 1,5 1,7 2012 2013 2014 Sept 15 x 2.7 Client digitalization, driver of digital sales growth Increase the number of digital clients Digitize current existing customers through Retail Banking Centers Boost client acquisition through digital channels Digital sales   Transformation3
  • 30.
    30 Digital sales asan additional source of business 15,7 15,9 15,7 20,5 17,2 25,6 23,7 23,5 9,3 10,3 17,9 23,7 Jan.15 Mar.15 Jun.15 Consumer loans % of new loans through digital channels (in number of loans) Sept.15 Jan.15 Mar.15 Jun.15 Sept.15 Jan.15 Mar.15 Jun.15 Sept.15 65,7 70,5 65,7 67,7 Jan.15 Mar.15 Jun.15 Sept.15 (1) Include equities, warrants, and ETFs Digital sales Transformation3 Contributions to pension funds % contributions through digital channels (in number of contributions) Contributions to mutual funds % of contributions through digital channels (in number of contributions) Purchase and sale of domestic equities (1) % of operations through digital channels (in number of operations)
  • 31.
    31 Outstanding customer satisfaction (1)Source: FRS Inmark Report 2015. Reference group: BKIA, CABK, POP, SAB, SAN. (2) General Satisfaction Index as the average of customer interviews ranking their satisfaction from 0 to 10. (3) Source: Bank of Spain. 2014 report. Peers include: SAN, CABK, BKIA, POP, SAB, CX, Unicaja, Marenostrum and Caja España Note: All data in this page refer to BBVA excluding Catalunya Banc. Online banking customer satisfaction BBVA Spain vs. peer group (1) Mobile banking customer satisfaction BBVA Spain vs. peer group (1) 81% 79% 76% 75% 70% 66% Peer1 BBVA Peer 2 Peer 3 Peer 4 Peer 5 #2 78% 74% 73% 69% 63% 58% BBVA Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 #1 Customer satisfaction: General Satisfaction Index (2) BBVA Retail Banking Number of claims in Spain Yearly claims (3) 8,07 8,32 8,50 8,58 8,61 2011 2012 2013 2014 9M15 3.666 2.081 1.801 1.3311.238 1.076 1.009 816 765 548 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 BBVA Claims market share: 2.6% Digital clients Total retail clients Superior quality of service Transformation3
  • 32.
    32 Index 2 BBVA Spain:Management priorities 1 BBVA Group: Strengths in the new environment 3 Takeaways
  • 33.
    33 BBVA has builta sustainable competitive advantage, not easily replicated Resilient growth thanks to a well-diversified footprint with leading franchises High quality capital and sustainable organic generation Leading the industry transformation, placing customers at the center of our strategy BBVA Spain, increasing contribution to the Group’s P&L  Deleveraging process coming to an end  Cost of Risk normalization as the main P&L driver  Transformation of the distribution model to offer the best customer experience
  • 34.
    34 SG Premium ReviewConference Paris, December 3th, 2015 BBVA Spain: Management Priorities in the New Environment Ángel Reglero, BBVA Spain Chief Financial Officer