BBVA: DELIVERING GROWTH

Transcription

1 BBVA: DELIVERING GROWTH ABN AMRO Banking Conference Expanding Horizons London, 21 st April 2004

2 Disclaimer This docum ent 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 aforem entioned com panies. A ny decision to buy or invest in securities in relation to a specific issue m ust be m ade solely and exclusively on the basis of the inform ation set out in the pertinent prospectus filed by the com pany in relation to such specific issue. N obody w ho becom es aw are of the inform ation contained in this report m ust regard it as definitive, because it is subject to changes and modifications. This docum ent contains or m ay contain forward looking statements (in the usual m eaning and within the m eaning of the U S Private Securities L itigation A ct of 1995) regarding intentions, expectations or projections of BBVA or of its m anagem ent on the date thereof, that refer to m iscellaneous aspects, including projections about the future earnings of the business. The statem ents contained herein are based on our current projections, although the said earnings may be substantially modified in the future by certain risks, uncertainty and others factors relevant that may cause the results or final decisions to differ from such intentions, projections or estim ates. T hese factors include, w ithout lim itation, (1) the m arket situation, m acroeconom ic factors, regulatory, political or governm ent guidelines, (2) dom estic and international stock m arket m ovem ents, exchange rates and interest rates, (3) com petitive pressures, (4) technological changes, (5) alterations in the financial situation, creditw orthiness or solvency of our custom ers, debtors or counterparts. T hese factors could condition and result in actual events differing from the inform ation and intentions stated, projected or forecast in this docum ent 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 stated strategies and intentions. The contents of this statem ent m ust be taken into account by any persons or entities that m ay have to m ake decisions or prepare or dissem inate opinions about securities issued by B B V A and, in particular, by the analysts w ho handle this docum ent. T his docum ent m ay contain sum m arised inform ation or inform ation that has not been audited, and its recipients are invited to consult the docum entation and public information filed by BBVA with stock market supervisory bodies, in particular, the prospectuses and periodical inform ation filed w ith the Spanish Securities Exchange Com m ission (CN M V ) and the A nnual R eport on form 20-F and inform ation on form 6-K that are disclosed to the U S Securities and Exchange Com m ission. 2 Distribution of this document in other jurisdictions m ay be prohibited, and recipients into whose possession this docum ent com es shall be solely responsible for inform ing them selves about, and observing any such restrictions. By accepting this docum ent you agree to be bound by the foregoing restrictions.

3 Index BBVA Overview Key growth drivers for BBVA Improving capital allocation: acquisition of BBVA Bancomer minorities Mexico: expanding horizons Conclusions 3

4 BBVA has successfully met the strategic plan it drew up in 2002 Jan 02 New Group Vision Strengthening the Group Risk management Productivity Structural Transformation Corporate Culture Organisational Structure Management Team Diversification Growth Value Growth Today BBVA is well placed to deliver superior growth

5 Showing an increasing performance of net attributable income in 2003 Attributable net income m 1,739 2,227 1,719 1,167 1, , Q1 H1 9mth 12mth 5 surpassing its commitment to the market ( 2.15bn)

6 with gains in efficiency, profitability and solvency EFFICIENCY % ROE (%) BIS RATIO (%) Tier I

7 ... low NPLs and high coverage ratios NPL Entries ( m) NPL and coverage ratios (%) Like-for for-like Group COVERAGE RATIO NPL RATIO 1.31 H103 H203 Dec 02 Dec 03 7

8 ... placing BBVA Group at the top of the banks in the Eurostoxx PRODUCTIVITY PROFITABILITY RISK MANAGEMENT RATING Best in Cost/Income ratio Best in Coverage rd best NPL ratio 3 rd 2 nd nd in ROE AA- / Aa2 With EPS increasing 29.5% 8

9 Index BBVA Overview Key growth drivers for BBVA Improving capital allocation of BBVA Bancomer minorities allocation: acquisition Mexico: expanding horizons Conclusions 9

10 Key growth drivers for BBVA 1 2 The upturn in Good performance domestic of Wholesale & Retail Banking Investment Banking 3 Higher earnings from Latin America 10

11 1 The three pillars of the improvement in retail banking 1. A steady mortgage demand Individuals +25%, developers +14% With a 35% increase in production in 2H03 2. Accelerating volumes from SMEs +13% increase in SME s +17% increase in businesses 3. Increase in off-balance sheet funds % increase Gaining market share

12 This positive evolution results from the strategic development of our retail franchise Personal Financial Services Commercial Financial Services Special Financial Services 12 Focus on individuals (8.5 m customers) Client Focus Advisory Focus on SME s and businesses (one in three of all Spanish SMEs are BBVA customers) Cross-selling selling A steady growth potential for financial services in Spain Internet banking & Consumer finance Profitability and convenience

13 Personal Financial Services: Progress in Branch trasformation: 268 branches adapted 2. A new sales oriented structure: 50% increase in the sales force, 40% back-office reduction ,000 new active customers. 3.8 products per customer (3.6 in 2002) 4. Customer personalisation: 20% of the client base 5. Advisory capabilities: training 2,500 people 6. New tools to manage customers A sales-oriented organisation based on advisory and customer needs

14 Commercial Financial Services represents a great opportunity for BBVA Market share First provider SME s Small businesses Serviced through specialised networks 14 Source: FRS Inmark Ibérica 2002.

15 ... With good results in the first year Evolution of active customers customers (thousands thousands) SME s Businesses % increase in customers 4.7 products per customer 0.84% NPL ratio dec-02 dec-03 Cross-selling selling supported by a broad product range 15

16 Key performance indicators: higher targets for 2004 Loans/Funds Growth above the market Gaining market share Personal Financial Services Active customers 8,500,000 8,900,000 Products per customer SME s Active Customers 117, ,000 Products per customer

17 2 Good performance of Wholesale Banking Net attributable profit ( m) % T 1S 9M 12M % increase in operating income for 2003

18 The first franchise in wholesale banking in Spain Corporate Banking Institutional Banking Global Markets and Distribution 88% of the largest Spanish companies are BBVA customers 35% market share in loans to the Spanish Public Sector Spanish leadership, expansion in Latin America 18

19 with a clear set of objectives To export our global model to Latin America: Wholesale banking and markets To reinforce our leading market position With large corporations in Spain and Latin America Financial markets Spain and Latin America Spanish public sector and European institutions 19

20 3 The Americas show growing levels of activity... Constant Total Americas Lending year-on on-year chg. Customer Funds YoY chg. (Balance sheet + M&P Funds) 8.8% 10.8% 11.5% 7.9% 20 Dec.02 Dec.03 Dec.02 Dec.03

21 with generalised gains in market share Customer funds Mkt. share and chg.. in b.p. Lending Mkt. share and chg.. in b.p. MEX 28.8 (+70) MEX 25.4 (=) CHI 7.7 (+118) CHI 7.1 (+67) PRICO 6.4 (-137) PRICO 6.9 (-90) VEN 15.6 (+115) VEN 13.3 (-291) COL 7.7 (+47) COL 7.0 (+30) PER 23.2 (+188) PER 17.5 (+190) ARG 10.1 (+94) ARG 6.0 (-56) 21 Greater emphasis on customer funds

22 ... improvement in recurrency and efficiency ratios... Fees/Expenses Ratio Cost/Income Ratio 80.1% 73.8% 46.1% 44.1%

23 ... resulting in higher Net Attributable Profit for BBVA America Net Attributable Profit (constant ) 2003/ % Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Up 6% in including currency hedges

24 Index 24 BBVA Overview Key drivers to BBVA growth Improving capital allocation: acquisition of BBVA Bancomer minorities Mexico: expanding horizons Conclusions

25 Leveraging our exposure to high growth markets Acquisition of BBVA Bancomer minorities: 99.6% 25 Strategic fit BBVA consolidates its position in Bancomer Leader in Mexico Greater management flexibility BBVA s risk profile not affected Growth potential Value creation EPS and cash EPS accretion from 1st year Appropriate timing more profitable investment Favourable financing: More efficient capital allocation Positive tax effect Successful capital increase

26 Active management of industrial and financial portfolio Disposals of industrial portfolio Market value Core capital generated Capital gains Disposals of non-core financial holdings Market value Core capital generated Capital gains million 1, million

27 A more efficient capital allocation OTHER INDUSTRIAL PORTFOLIO WHOLESALE BKG ASSET MGT. & PRIV. BK. RETAIL AMERICA EXMEX RETAIL MEXICO RETAIL EUROPE 25% 10% 10% Pre- Transaction Post- Transaction 9% 9% 16% 9% 25% 10% 17% 30% 30% ROE N.M. 16% 23% 19% 28% 31% The transaction improves the future earnings capacity of BBVA through a more efficicient capital allocation and a better business mix 27

28 Index 28 BBVA Overview Key growth drivers for BBVA Improving capital allocation of BBVA Bancomer minorities allocation: acquisition Mexico: expanding horizons Conclusions

29 Mexico: expanding horizons 1 2 The Mexican economy BBVA Bancomer: the leading financial franchise 3 Growth opportunities in Mexico 29

30 1 Mexico: a sizeable economy GDP (BN USD) GDP per capita (US$) Spain Mexico Emerging Eur G10 (1) MEX CHI VEN BRA COL... with with similar population (approx. 100 mn.) 30 Emerg. Eur. G10: Group of 10 emerging countries in Eastern Europe, with 100 M inhabitants: Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia.

31 and safe economy Sovereign spread Public debt / GDP (%) /08/ /08/ /09/2003 Source: BBVA Sovereign Spread (bp) 30/09/ /10/ /11/ /11/ /12/ /12/2003 Chile (Left) México (Drive) 20/01/ /02/ /02/ /03/ /04/ /04/ Bra Col Per* Ven* Mex Chi *Data from 2002 in Peru and Venezuela Low risk perception and solid public financing

32 ... which remains competitive in an increasingly globalized world % U.S. total imports (excl. oil) jun Canada Mexico China Japan Mexico has held on to its market share of US imports despite China

33 ...entering a growth phase GDP Growth (1) (% y-o-y y y change) e 2005e (1) Source: Global Insight 33

34 2 BBVA Bancomer is the leading franchise in Mexico Leader in banking business and in non-banking business Number 1 Market share Loans: % Customer Funds:.28.8% Number 1 Bancassurance % Annuities % Transfers % Number 2 Market Share AFORE % 34...and more than 9 million customers

35 ... with outstanding commercial success Var. % Credit cards (million) Debit cards (million) New accounts El Libretón 7 million in 3 years Afore affiliates (million) Insurance customers (thousand) 851 1, Electronic banking (thousand)

36 Drivers for BBVA Bancomer results Until now: Reduction in costs (integration integration) Price management and business growth in a falling interest rates environment Fees 2004 and following years: Increase in credit demand Fees Interest rates already at very low levels Asset quality to start improving A very strong, integrated and well organized bank with ample room to grow in a non- emergent country 36

37 Net interest income boosted by improving the asset mix... December 2002 December 2003 Legacy portfolio 26% Manageable lending Legacy portfolio 23% Manageable lending 74% 77% 37 Yoy growth (%) Loan portfolio 10.6 SME s 19.3 Consumer 24.2 Mortgages 1.9 Legacy portfolio -12.6

38 ...and strong growth in the most profitable segments (2003) % lending % Customer Funds Total Lending Consumer & credit cards Total Cust. Funds Current accounts 38

39 Improvements in asset quality and good NPL coverage NPL Ratio (%) (Local) Coverage of NPL (%) (Local)

40 Significant advances in productivity and efficiency Fees / Expenses (%) Cost / Income (%)

41 Attributable profit showing an upward trend 117 Attributable Profit Constant m Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Attaining record levels: : 2003 attr. profit grew +24% 41

42 Better recurrent results than peers Recurrent operating profit (*) 2003 (MM Ps) and annual change (%) +31% % 7.5 n.m. -8% % BBVA BANCOMER BANAMEX HSBC (*) Recurrent operating profit (NII + fees) general administratives expenses. Source CNBV SAN SERFIN BANORTE Mexico: : a great opportunity for BBVA

43 3 What are BBVA Bancomer s medium and long term growth opportunities? A Low banking penetration B Credit expansion C Hispanic population in USA 43

44 A 41.6 Potential growth and efficiency going forward Loans / GDP (%) Tequila Crisis Given the low penetration of banking products, growth in financial revenues can outstrip GDP Profitability of current 20 million banked clients Potential market - estimated at 30 million Integration of informal economy Stabilization of macro outlook for credit activity

45 Financial system transformation resulting in higher ROEs 45 Regulation benchmarked to international standards Stricter risk modeling and taking procedures Adequate capitalization Improved technology Better knowledge of customer credit history Improved legal framework Increased consolidation ROE (nominal) Inflation ROE (real) Brazil Chile Mexico Mexico s banking sector ROE (inflation adjusted) is the highest in the region

46 B Credit expansion: consumer loans have been the first to take off Banking Non-Banking Banks have successfully regained market share 46 Figures in billions of pesos as of March 2003

47 SME s: very low penetration, very high growth potential Deposits & Loans ( m) 3,260 Deposits 25,776 Clients 1,702 Loans 55,030 Business model: focus on clients, not on products Dedicated networks 114 branches for the middle-market market For small businesses, 415 retail branches, with especialized executives 47 Mexico Spain Only 7% of the customer base in this segment has an outstanding loan (vs ( 70% in BBVA Spain)

48 Wholesale and Investment banking: Bancomer is the leader BBVA Bancomer Citi Banamex Source: Brain Magazice First bank Second bank 38% 40% 32% 26% Almost 80% of large Mexican corporates area clients of Bancomer Traditional credit is decreasing in favour of securities issuance Pesos Bn Securities issuance Loans Bancomer is the leader in securities issuance

49 Mortgage market: a short term priority 378 Mortagage penetration Mortagage Financing BN Pesos Sofoles 12% Infonavit 63% Banks 25% 49 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-03 Banking Non-Banking Bancomer s market share in mortgage stock is 25% and only 10% in new origination

50 and a long term opportunity % Affordability Ratio 25% Defined as Affordability Boundary 75 63% 63% 62% 50 45% 39% 25 28% 20% 0 96A 97A 98A 99A 00A 01A 02A 03A Affordability Boundary: 25% of Household Income 50 How big is the potential mortgage pool? (Next 10 years): Mortgage / GDP from 5% to 10% Additional mortgage system volume: : $31.7Bn BBVA Bancomer mortgage loans would go up 8 times to $8 Bn * Spanish penetration 38% GDP (2002 data) Source: Merrill Lynch

51 C Hispanic population in the USA: Bancomer Transfer Services Maintaining leadership Hispanic market in USA Market share of electronic funds transfer Population: 37 million Population with earnings: 22 million Average earnings: $22,000 Other (49%) BBVA Bancomer (51%) Bancomer is the largest player in this business: 15 million transactions in 2003 (+19% vs 2002) Transfers worth $ 6 bn 2003 (+17% vs 2002) 51

52 Index 52 BBVA Overview The keys of BBVA growth Improving capital allocation of BBVA Bancomer minorities allocation: acquisition Mexico: expanding horizons Conclusions

53 Summarising, in We have completed an important internal transformation The Group has improved its activity and results in all the business areas BBVA consolidates its presence in México, with a value creating transaction, enhancing future profits 53

54 In NII: Volumes will be the key, with sustainable margins prospects Fees: : A clear recovery in Spain and continous improvement in Latin America Costs: under control Active management of interest rates and forex risk Provisioning effort: stable in Spain ( Focei Focei ) and declining in Latin America On course to deliver a good evolution of results 54

55 BBVA: DELIVERING GROWTH ABN AMRO Banking Conference Expanding Horizons London, 21 st April 2004