Banco Bilbao Vizcaya Argentaria SA
MAD:BBVA
Banco Bilbao Vizcaya Argentaria SA
Banco Bilbao Vizcaya Argentaria SA, commonly known as BBVA, is a Spanish multinational financial services group rooted in the rich banking traditions of Spain, yet keenly oriented towards the global marketplace. Emerging from the 1999 merger of Banco Bilbao Vizcaya and Argentaria, it has cultivated a strong presence not just in Europe, but also in Latin America and Turkey. The bank navigates the intricate tapestry of the finance world by offering a widespread array of services including retail banking, corporate lending, asset management, and investment advisory. BBVA has carved its niche by embracing digital transformation early on, aiming to seamlessly integrate tech innovations with customer-centric banking solutions.
At the heart of BBVA's revenue generation is its diversified business model. It derives a significant portion of its income from traditional banking operations like interest from loans and fees from a suite of other financial products such as credit cards and mortgages. However, it's the bank’s strategic focus on digital banking that sets it apart. BBVA leverages advanced analytics and tech-driven processes to enhance customer experience and drive operational efficiency, amplifying its competitive edge in the fintech era. This digital-first approach not only streamlines costs but also broadens its customer reach, allowing BBVA to better serve tech-savvy clients in rapidly developing markets. The bank’s adept balancing of reliable traditional banking methods with forward-looking digital innovations crafts a resilient business model capable of weathering economic shifts.
Earnings Calls
In the latest earnings call, the company reported a significant year-on-year decrease in segment profits, primarily driven by inventory losses totaling JPY 59.4 billion. Excluding these impacts, profit dropped to JPY 72.8 billion. However, an upward revision of JPY 60 billion for the earnings forecast was announced, now projecting net income of JPY 15 billion for the fiscal year. Sales of core fuel products surged by 98.8% as the market recovers from COVID-19, and a growth rate of 98.2% is expected in the upcoming quarter. The company is also focusing on ESG initiatives as part of its long-term strategy.
Management
Onur Genç is a prominent banking executive known for his role as the CEO of Banco Bilbao Vizcaya Argentaria (BBVA), a leading multinational financial services group based in Spain. He was appointed to the position in December 2018, succeeding Carlos Torres Vila. Genç was born in Turkey and pursued his education in engineering and business. He holds a bachelor's degree in Electrical Engineering from Boğaziçi University in Istanbul and an MBA from Carnegie Mellon University's Tepper School of Business in the United States. His educational background provided him with a strong foundation in analytical thinking and strategic management. Before joining BBVA, Onur Genç gained extensive experience in the banking sector, notably at Garanti Bank in Turkey, where he held several senior roles. His tenure at Garanti, Turkey's second-largest private bank, was marked by significant achievements, showcasing his capabilities in driving growth and digital transformation. As CEO of BBVA, Genç has focused on enhancing the bank’s digital capabilities and expanding its global reach, with a particular emphasis on innovation and customer experience. Under his leadership, BBVA has continued to strengthen its presence in strategic markets and has been at the forefront of embracing new technologies in the banking industry. Genç is recognized for his strategic vision and commitment to driving sustainable growth in a rapidly evolving financial landscape, positioning BBVA as a forward-thinking institution. His leadership style is characterized by a strong focus on digital transformation, customer-centric approaches, and operational efficiency.
Maria Luisa Gomez Bravo is a prominent figure in the financial sector, particularly known for her role at Banco Bilbao Vizcaya Argentaria SA (BBVA). She has held key leadership positions within the bank, contributing significantly to its strategic initiatives and financial operations. Gomez Bravo has an extensive background in banking, finance, and corporate strategy. Before joining BBVA, she accumulated valuable experience at various financial institutions, enhancing her expertise in areas such as investment banking, global markets, and risk management. At BBVA, she has served in pivotal roles, including but not limited to positions related to group finance and development. Her responsibilities typically include overseeing financial planning, capital management, and ensuring the alignment of financial strategies with the bank's broader objectives. Gomez Bravo is known for her analytical acumen and leadership skills, which have been instrumental in driving financial performance and facilitating transformation within the organization. Her journey in the banking sector is marked by a commitment to innovation and excellence, making her a respected leader at BBVA and in the global banking community.
Francisco Javier Rodríguez Soler is a notable figure in the banking and financial industry, particularly associated with Banco Bilbao Vizcaya Argentaria (BBVA), one of Spain's largest banks. Rodríguez Soler has held various significant roles within the BBVA Group, contributing strategically and operationally to its growth and success. He is notably recognized for his position as the Global Head of Sustainability at BBVA. In this role, Rodríguez Soler is responsible for steering the bank’s sustainability strategy, focusing on aligning financial profitability with socially responsible practices and environmental sustainability. This role reflects BBVA's commitment to sustainable finance and its integration into the bank's core business, which underscores the global shift towards responsible banking and green financing. Rodríguez Soler’s career at BBVA has been marked by his extensive expertise in finance, strategy, and management. Throughout his tenure, he has played a pivotal role in various strategic initiatives, fostering innovation and adaptation to the rapidly changing dynamics of global finance. He has been instrumental in driving the bank’s efforts to integrate digital transformation and sustainability into its business model, ensuring that BBVA remains at the forefront of banking trends. His educational background and professional experience have equipped him with a comprehensive understanding of the financial sector, making him a respected leader within the industry. As part of BBVA's executive committee, Rodríguez Soler continues to influence the strategic direction of the bank, emphasizing the importance of sustainable practices in financial decision-making. His leadership and vision are vital to BBVA as the bank navigates the challenges and opportunities presented by the global emphasis on sustainable development, making him a key player in the future of banking and finance.
María Jesús Arribas de Paz is known for her role as an executive at Banco Bilbao Vizcaya Argentaria (BBVA), one of Spain's leading financial institutions. She has played a significant role in the bank's legal department, bringing her extensive expertise and leadership skills to the organization. Arribas de Paz has contributed to various strategic projects and regulatory matters, supporting the bank's compliance and governance framework. Her work involves ensuring that BBVA navigates the complex legal landscape of the banking industry effectively, as well as aligning with international standards and best practices. Her influence extends to guiding BBVA through legal challenges while fostering a culture of transparency and ethical practices within the institution.
Jaime Saenz de Tejada Pulido has been a prominent figure in the banking industry, particularly known for his significant contributions at Banco Bilbao Vizcaya Argentaria SA (BBVA). He served as the Chief Financial Officer (CFO) at BBVA, where he played a critical role in managing the bank's financial strategy. His responsibilities included overseeing financial operations, managing risk, and ensuring the bank's financial stability and compliance with regulatory requirements. Saenz de Tejada's tenure at BBVA was marked by his efforts to navigate complex financial environments and adapt to rapid changes in the banking sector, including the integration of digital technologies and advancements in financial services. His leadership and strategic vision have been instrumental in driving BBVA’s financial performance and growth on a global scale. With a background that combines strong financial expertise and a deep understanding of the global banking landscape, Saenz de Tejada has contributed to shaping the bank's strategic direction and financial health. His work has been acknowledged for enhancing BBVA’s operational efficiency and reinforcing its position as a leading financial institution. His comprehensive approach and focus on innovation have been pivotal in maintaining the bank's competitive edge in the financial industry.
Paul G. Tobin is recognized for his significant contributions to Banco Bilbao Vizcaya Argentaria (BBVA), one of the largest financial institutions globally, based in Spain. At BBVA, Tobin has been instrumental in shaping the bank's strategic direction and operations, particularly in areas concerning finance and risk management. Tobin's role typically involves overseeing financial planning and analysis, ensuring effective risk management frameworks, and contributing to strategic decision-making processes that align with the bank's long-term goals. His expertise in financial markets and risk assessment has been invaluable in navigating the complex financial landscapes that BBVA operates within. He is known for his leadership skills and his ability to foster innovation and efficiency within the bank, supporting BBVA's mission to enhance its digital transformation and customer-centric service offerings. Tobin's leadership has been a driving force in BBVA's efforts to adapt to the evolving financial industry, emphasizing sustainability and technological advancement. Under his guidance, BBVA continues to advance its position as a leader in banking, striving to meet the changing needs of its global customer base while upholding a commitment to ethical and sustainable business practices.
David Puente Vicente is a notable executive at Banco Bilbao Vizcaya Argentaria (BBVA), where he has played a significant role in driving the bank's digital transformation. He has been associated with BBVA in positions that focus on innovation and leveraging technology to enhance banking services and customer experiences. As an advocate for digital banking, Puente Vicente has overseen various initiatives aimed at integrating cutting-edge technologies into financial services, improving operational efficiency, and expanding the bank's digital footprint. His contributions have been integral to BBVA's reputation as a leader in digital banking solutions.
Jorge Sáenz-Azcunaga Carranza is a prominent executive at Banco Bilbao Vizcaya Argentaria (BBVA), one of Spain's leading financial institutions. He has held various significant roles within the bank, where his expertise in strategy, finance, and business development has been instrumental in BBVA's operations. Over the years, Sáenz-Azcunaga Carranza has contributed to the bank's growth both in Spain and internationally. He is known for his in-depth understanding of the banking sector and has participated in various projects aimed at enhancing BBVA's technological and financial capabilities. His leadership style emphasizes innovation and customer-centric approaches, aligning with BBVA's commitment to digital transformation and sustainable banking. Sáenz-Azcunaga Carranza's career at BBVA showcases a trajectory marked by progressive responsibility and success in diverse areas of banking, highlighting his role as a key figure in the organization's continuous evolution in the competitive global market.
Rafael Domenech Vilarino is an influential figure at Banco Bilbao Vizcaya Argentaria SA (BBVA), a prominent multinational banking group based in Spain. He is recognized for his expertise in economic analysis and strategic insights into global and regional economic trends. As an executive at BBVA, Domenech has contributed significantly to the bank's research and wealth management areas. He serves as the Head of Economic Analysis within the BBVA Research department. In this role, he is responsible for overseeing economic research that supports the bank's strategic decision-making and provides valuable insights to its clients. Domenech's work involves analyzing macroeconomic trends, conducting economic forecasting, and offering policy recommendations. His insights are highly regarded in the financial sector, often featured in economic publications and at international conferences. Rafael Domenech holds a strong academic background, with advanced degrees in economics that underpin his expertise. He is actively involved in economic discourse, contributing to discussions on crucial topics like fiscal policy, economic growth, and financial markets. His contributions at BBVA and beyond reflect his commitment to advancing economic understanding and fostering informed decision-making in the financial industry.
As of the latest available information, Ana Rubio is a prominent figure associated with Banco Bilbao Vizcaya Argentaria SA (BBVA). She serves as the Chief Economist for Regulation and Public Policies. In this role, she is responsible for analyzing and influencing regulatory frameworks and public policies that impact the banking sector. Ana Rubio's work involves strategic planning and developing insights that align with both regulatory requirements and the bank's objectives. Her expertise is integral to navigating the complex economic landscape and ensuring BBVA's compliance and competitive positioning in the global financial market. She is recognized for her contributions to economic research and policy development within the banking industry.
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My name is Sakai. I would like to explain our financial results using our presentation materials.
The first slide is a summary of our financial results. Segment profits in the third quarter of financial year 2020 decreased by JPY 74.1 billion year-on-year to JPY 13.4 billion. The significant remaining inventory impact losses of JPY 59.4 billion were a major factor in the year-on-year decrease. Profit, excluding inventory impact, decreased by JPY 23.9 billion year-on-year to JPY 72.8 billion due to reduced income from the resources segment, among other factors. We also reported a significant year-on-year decrease in net income to a net loss of JPY 7.5 billion.
This slide shows our forecast for the fiscal year. This time, we revised our crude oil price assumption upward to $51 in light of the recent uptrend and performed a review of our operating environment. And as a result, we revised our earnings forecast upward by JPY 60 billion.
The profit forecast, excluding inventory impact, was revised upward by JPY 20 billion to JPY 65 billion. No change has been made to the interim and fiscal year dividend forecast of JPY 60 per share each for a total annual dividend of JPY 120 per share.
The next slide provides additional information on inventory impact. Price trends of Arabian light oil are shown. The crude oil price remained basically flat from second quarter to third quarter. And third quarter inventory impact losses of JPY 59.4 billion were also similar to the level reported in second quarter. As a result of the increase in the crude oil price in fourth quarter, inventory impact losses for the full fiscal year are expected to decrease to JPY 10 billion.
I would now like to move on to our key topics for the fiscal year. First is the impact of COVID-19. Third quarter sales of the 4 core fuel oil products increased relative to the first half due to recovery from COVID-19 effects with a growth rate of 98.8%. Continued recovery from COVID-19 is expected in fourth quarter with an expected growth rate of 98.2%. Jet fuel is forecasted to continue to face a difficult environment.
In other segments, demand for some functional materials and resource prices are recovering due to recovery in automotive production, in line with economic normalization in various countries worldwide. On the other hand, the international markets for petroleum and basic chemicals remain extremely challenging.
At NSRP, refinery utilization continues to be stable. However, earnings performance continues to struggle due to weak product markets in Singapore as well as time lags in inventory impact from the sharp fall in the crude oil price in January-March 2020.
Please turn to the next slide. Other topics include the planned launch of the new service station brand, apollostation in 2021, and the construction of a new high-efficiency naphtha cracking furnace at Tokuyama plant, which is set to commence operations in February 2021.
In December 2020, we were selected to become part of MSCI Japan ESG Select Leaders Index, which is a stock index for ESG investments. We will continue to strengthen our ESG initiatives in order to contribute to a sustainable society going forward.
The operating environment is summarized on the next slide. Crude oil price, Australian coal spot price and exchange rates are shown here. The current year is shown in red, while the previous year is shown in gray. Please refer to this slide at a later time.
Our income statement is summarized on Page 8. Net sales decreased by JPY 1,349.4 billion year-on-year, mainly due to a fall in the Dubai crude oil price. With respect to changes in operating plus equity income, which was explained at the beginning, NSRP played a major role in the JPY 15.2 billion year-on-year decrease in equity income. Extraordinary income decreased by JPY 20.5 billion year-on-year to a loss of JPY 9.1 billion, mainly due to reversal of step acquisition gains from the business integration.
Segment information is provided on the next slide. Specific figures are as shown here.
Page 10 shows a step chart. A breakdown of changes in each segment is provided in the next several slides.
First is the petroleum segment. The bar graph on the left represents sales volume. Sales volume decreased by about 1.8 million kiloliters in the first half on a year-on-year basis, for a total impact of JPY 19.8 billion. The right graph shows refining margins, with margins, including impact of time lag shown in red and excluding such impact shown in gray. A year-on-year improvement of JPY 0.9 per liter was observed for a positive impact of JPY 20.7 billion.
Other factors, including synergies and affiliates had a positive impact of JPY 38 billion. A breakdown is provided as follows: JPY 9.7 billion increase from integration synergies; JPY 15.5 billion increase from affiliates; JPY 11.2 billion decrease from equity income; JPY 16.5 billion decrease from reduced jet fuel sales volume; and JPY 40.5 billion increase from internal fuel costs, et cetera. Internal fuel costs can be further broken down into JPY 19.6 billion from a decrease in internal fuel costs due to a decrease in oil prices and JPY 18.7 billion from cost reductions.
Next is the basic chemicals segment. Income from basic chemicals decreased by JPY 19 billion year-on-year, mainly due to pricing factors resulting from reduced margins. Margins for each product are as shown here.
The functional materials segment reported a JPY 10.7 billion decrease, mainly due to reduced lubricant demand due to the COVID-19 pandemic and a decrease in polycarbonate margins.
Power and renewable energy reported a JPY 1.2 billion decrease, mainly due to reduced sales in the solar business and pricing factors.
Please turn to the next slide. Profits from oil exploration and production fell by JPY 7 billion. The decrease was mainly due to the JPY 10.5 billion decrease from the fall in the Brent crude oil price and time lags relating to sales volume.
Profits from coal decreased by JPY 23 billion, mainly due to a JPY 19.2 billion negative impact from the fall in the coal price.
Our balance sheet is provided on Page 14. Total assets decreased by JPY 15.7 billion year-on-year to JPY 3,871.2 billion. Net assets decreased by JPY 46.8 billion due to net losses and dividend payments, amid a decrease in working capital due to decreases in accounts receivable and inventory as a result of a fall in the crude oil price.
The decrease in interest-bearing debt only fell by JPY 8.3 billion as increases from dividend payments and working capital provided to NSRP were offset by a decrease in working capital from a decrease in the crude oil price.
Our summary of earnings forecast begins on Page 15. We increased our Dubai crude oil assumption to $51.5 from January onward. The foreign exchange rate assumption remains unchanged at JPY 105 to the dollar.
Next is the income statement. The net sales forecast was revised upward by JPY 200 billion to JPY 4.5 trillion. The operating income forecast is JPY 95 billion, while forecasted inventory impact was reduced by JPY 40 billion to a loss of JPY 10 billion.
As equity losses are forecasted at JPY 40 billion, segment income has been revised upward by JPY 60 billion to JPY 55 billion, which amounts to an upward revision of JPY 20 billion when excluding inventory impact.
Extraordinary loss was revised downward by JPY 18 billion, factoring in impairment losses in the resources segment, resulting from a review of long-term price assumptions. As a result of the above, net income was revised upward by JPY 35 billion to JPY 15 billion.
The next slide shows profits by segment. An overview of changes in each segment will be explained using the step chart on Page 17. Segment income in the petroleum segment was revised upward by JPY 23 billion, excluding inventory impact.
First, a review of forecasted sales volume led to a JPY 2.6 billion increase. Affiliates expenses and other factors led to a JPY 20.4 billion increase. This can be broken down into JPY 11.3 billion from cost reductions, JPY 5.6 billion from upward revision of affiliates profits and the remainder from an increase in jet fuel sales volume, et cetera.
Basic chemicals was revised upward, mainly due to expected expansions of SM margins, while functional materials was revised upward by JPY 1 billion due to anticipated recovery in demand for performance chemicals, particularly from automotive production.
On the other hand, power and renewable energy was revised downward by JPY 7 billion due to a surge in GE PX prices following a crunch in power supply.
No revisions have been made to the forecast in the oil exploration and production and coal segments.
That concludes our overview for our third quarter results and earnings forecasts. Thank you for your attention.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]