BBVA USA reports second quarter results

HOUSTON, July 31, 2019 /PRNewswire/ -- 

• Revenue: Total revenue increased 3 percent from a year ago. Growth was balanced as net interest income increased 3 percent and noninterest income increased 5 percent
• Efficiency: Noninterest expense growth well contained at 3 percent and, coupled with revenue growth, resulted in positive operating leverage with operating income¹ rising 4 percent and the efficiency ratio¹ improving to 62.50 percent
• Credit quality: Nonperforming loan ratio at 1.26 percent and coverage ratio at 123 percent. Net charge-offs at 90 basis points in the quarter primarily as a result of three commercial credits and continued seasoning in select consumer portfolios. Provision expense exceeds net charge-offs and allowance to loans ratio remains stout at 1.54 percent 
• Capital and liquidity: The CET1 ratio rose 60 basis points to 12.57 percent² while the Liquidity Coverage Ratio (LCR) ended the quarter at 144 percent

BBVA USA Bancshares, Inc., a Sunbelt-based bank holding company (BBVA), reported today net income of $160 million for the second quarter of 2019 compared to earnings of $184 million in the second quarter of 2018. Return on average assets and return on average tangible equity¹ for the second quarter of 2019 were 0.69 percent and 7.34 percent, respectively.

Net income for the first six months of 2019 totaled $301 million compared to earnings of $393 million for the first six months of 2018. Return on average assets and return on average tangible equity¹ for the first six months of 2019 were 0.65 percent and 7.00 percent, respectively.

"Our results for the second quarter reflect top-line revenue growth and well managed cost containment that enabled us to achieve another quarter of positive operating leverage," said Javier Rodríguez Soler, president and CEO of BBVA USA. "The flattening of the yield curve, market volatility and expectations that the Federal Reserve will take actions to lower interest rates this year continue to place pressure on net interest margin and we have taken steps to better position ourselves for this type of environment. While certainly challenging, we remain focused on executing our digital transformation strategy aimed at building our capabilities, expanding our product offerings, using technology to improve efficiency and delivering an amazing customer experience to our customers."

Total revenue for the quarter was $944 million, an increase of $31 million or 3 percent from second quarter 2018 levels and $12 million or 5 percent (annualized) from first quarter 2019 levels, excluding securities gains. Net interest income totaled $660 million, up $16 million or 3 percent from $643 million from the second quarter of 2018 while declining $23 million on a linked quarter basis. The percent net interest margin in the second quarter of 2019 was 3.24 percent, a decline of 6 basis points from the second quarter of 2018 and 17 basis points on a linked quarter basis.

Noninterest income for the quarter totaled $284 million, up $14 million or 5 percent from the second quarter of 2018 and up $27 million compared to the first quarter of 2019. The increase in fee income was broad based, driven by card and merchant processing fees (+14 percent), asset management fees (+8 percent), money transfer income (+6 percent), service charges on deposit accounts (+5 percent) and investment services sales fees (+5 percent). On a linked quarter basis, each of these fee-based businesses experienced positive growth, while increased activity during the quarter resulted in a rebound in investment banking and advisory fees and mortgage banking income.

A focus on maintaining strong expense controls continued in the quarter with noninterest expenses rising 3 percent year-over-year and 3 percent on a year-to-date basis. Positive operating leverage resulted in operating income¹ of $346 million in the quarter, a 4 percent increase compared to the second quarter of 2018, while operating income¹ on a year-to-date basis is up 8 percent. The efficiency ratio¹ in the quarter improved to 62.50 percent and on a year-to-date basis has improved 75 basis points to 62.04 percent.

With respect to the balance sheet, total loans for the second quarter of 2019 were $63.4 billion compared to $63.3 billion at the end of the second quarter of 2018. During the first quarter of 2019, approximately $1.2 billion commercial loans were transferred to loans held for sale and the sale was completed during the second quarter. Adjusting for the sale of these loans, the year-over-year increase in total loans was 2 percent, reflecting tempered activity in both the commercial and consumer portfolios.

Total deposits at the end of the second quarter of 2019 were $72.6 billion, a 3 percent increase from the $70.1 billion at the end of the second quarter of 2018. Noninterest bearing demand deposits declined 4 percent, reflecting customers continuing to shift from demand deposits into interest bearing accounts. Conversely, interest bearing transaction accounts (savings, money market and interest bearing checking accounts) increased 8 percent compared to a year ago. At the end of the second quarter of 2019, the loan to deposit ratio stood at 87.34 percent while the Liquidity Coverage Ratio (LCR) was 144 percent, well above and fully compliant with the regulatory requirement.

Nonperforming loans as a percentage of total loans ended the quarter at 1.26 percent compared to 1.34 percent at the end of the first quarter of 2019 and 1.11 percent at the end of the second quarter of 2018. The decrease in nonperforming loans during the quarter was primarily due to the charge-off of three commercial credits. Net charge-offs as a percentage of average loans were 90 basis points in the quarter compared to 63 basis points in the first quarter of 2019 and 40 basis points in the second quarter of 2018. The increase in net charge-offs reflects the aforementioned commercial credits as well as continued charge-offs in certain consumer loan portfolios, as expected, where corrective action has been taken to mitigate future losses. Provision expense in the quarter was $155 million, exceeding net charge-offs by $12 million. The allowance for loan losses as a percentage of total loans ended the quarter at 1.54 percent, up from 1.52 percent at the end of the first quarter of 2019 and 1.36 percent at the end of the second quarter of 2018. The coverage ratio of nonperforming loans ended the quarter at 123 percent.

Total shareholder's equity at the end of the second quarter of 2019 totaled $13.9 billion, a 5 percent increase from the $13.2 billion at the end of the second quarter of 2018. The CET1 ratio stood at 12.57 percent² at the end of the second quarter of 2019, up 23 basis points from the end of the first quarter of 2019 and 60 basis points from the end of the second quarter of 2018. All of BBVA's regulatory capital ratios² continue to significantly exceed the requirements under "well capitalized" guidelines.

During the second quarter, BBVA Compass RealTime ARP™ was named the 2019 Innovator in Cash Management by Global Finance Magazine as part of the publication's annual The Innovators 2019 awards. The award comes less than a year from when the product was initially launched in July 2018. The launch also included the introduction of BBVA Compass RealTime Positive Pay™, another milestone in the bank's digital narrative.

BBVA was recognized once again by Javelin Strategy & Research with the independent research firm naming the bank's mobile banking app and online banking service as a leader in its 2019 Mobile and Online Banking Scorecards. In Mobile Banking, the app was named a leader in both the Customer Service and Ease of Use categories. For the online banking scorecard, BBVA earned an award as a 'Leader' in the Financial Fitness category. For the U.S. unit's mobile banking app, this year's result marks the sixth year in a row the app has been honored, while its online banking service was previously honored - again as a leader in Financial Fitness - in Javelin's 2017 scorecard.

¹ Return on average tangible equity, operating income and efficiency ratio are Non-GAAP financial measures we believe aid in understanding certain areas of our performance. The calculation of these measures is included on the page titled Non-GAAP Reconciliation.

² Regulatory capital ratios at June 30, 2019, are estimated.

For more BBVA news visit, www.bbva.com and the U.S. Newsroom.

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For more financial information about BBVA in the U.S., visit bbvausa.investorroom.com.

About BBVA

BBVA Group
BBVA (NYSE: BBVA) is a customer-centric global financial services group founded in 1857. The Group has a strong leadership position in the Spanish market and is the largest financial institution in Mexico. It has leading franchises in South America and the Sunbelt Region of the United States. It is also the leading shareholder in Turkey's BBVA Garanti. BBVA's purpose is to bring the age of opportunities to everyone, based on our customers' real needs: provide the best solutions, helping them make the best financial decisions, through an easy and convenient experience. The institution rests in solid values: Customer comes first, we think big and we are one team. BBVA's responsible banking model aspires to achieve a more inclusive and sustainable society.

On March 28, 2019, BBVA filed its annual report on Form 20-F for the year ended December 31, 2018, with the U.S. Securities and Exchange Commission. A copy can be accessed on the BBVA website at https://shareholdersandinvestors.bbva.com/the-share/adrs-english/. Holders of BBVA's American Depositary Receipts (ADRs) may request a hard copy of the Form 20-F for the year ended December 31, 2018, including complete audited financial statements, free of charge. To request a copy, contact Ed Bilek at [email protected].

BBVA USA
In the U.S., BBVA is a Sunbelt-based financial institution that operates 642 branches, including 330 in Texas, 89 in Alabama, 63 in Arizona, 61 in California, 45 in Florida, 37 in Colorado and 17 in New Mexico. The bank ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (6th). In the U.S., BBVA has been recognized as one of the leading small business lenders by the Small Business Administration (SBA) and ranked 8th nationally in terms of dollar volume of SBA loans originated in fiscal year 2018.

Forward-Looking Statements
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