Spain’s BBVA Group has reported a Q4 2019 net interest income of €4.72 billion, up from its Q4 2018 figure of €4.69 billion while its overall net interest income (NII) for 2019 stands at €18.20billion, a 3.5% jump from the previous year.

The Spanish bank reported that 2019 was a less than stellar macroeconomic environment with global growth deceleration at slightly under three percent during the second half of the year in comparison to 3.6% the previous year. Political risks along with increased trade protectionism negatively impacted the economy specifically on the import/export front.

SRP data shows that BBVA is the product manufacturer of 922 live products listed in the UK, Spain, Peru, Mexico and Ireland. The tranche-based investments are wrapped in multiple instruments such as structured bonds, medium term notes, money market capital-protected funds, warrants and Spanish pension products. Underlyings include the Swiss Market Index, TIIE IRS, TIIE 28, Stoxx Global ESG Leaders Select 50 EUR Index and SPDR S&P500 ETF Trust.

“During 2019, BBVA continued to increase its product capabilities and expand into new geographies by signing distribution agreements with different counterparties, mainly in Eastern European countries,” BBVA’s head of global structured solutions, Jacobo Lamas, told SRP.

Non-capital guaranteed products have become the norm - Jacobo Lamas

According to Lamas, the most notable trend seen during 2019 has been the outburst in demand for green and ESG-linked investment products. “BBVA was the first bank to issue a sustainable financial contract in Spain,” said Lamas.

The product was distributed through BBVA's retail network and included two sustainable features.

The first feature allows the bank to use the proceeds to invest in sustainable assets ('traditional' feature used in green bonds). On the other hand, the product has a payoff linked to the performance of three equity shares belonging to the DJ Sustainability Index with a score above 90 over 100.

“This feature is catching on both in equity and credit linked payoffs with the underlying view from investors that sustainable companies’ shares are both more likely to outperform and that those companies are less likely to default. We expect this trend to continue during 2020 and beyond,” said Lamas.

The bank also highlighted that interest rate linked products continue to suffer from a lack of demand partially influenced by the low rate environment. That in turn, coupled with the tightness of credit markets is driving investors to include a higher leverage on their products. From an equity perspective, non-capital guaranteed products have become the norm while index-linked tranches have become the leading product in terms of credit.

Index-linked tranches have become the leading product in terms of credit - Jacobo Lamas

Overall, risk-weighted assets soared by approximately €16.1 billion in 2019 which BBVA attributes to growth in emerging markets and the incorporation of regulatory impacts (the application of IFRS 16 standard and TRIM-targeted review of internal models)

RWAs in Spain saw minimal growth reaching about €104.93 billion in 2019 up from €104 billion the previous year. The US followed suit with a number of €65 billion up from €64 billion.

Spain experienced a surge in GDP despite its eventual stagnation having decreased to 1.9% in terms of growth as of January 2020 from 2.4% in December 2019. This reflects a moderation in domestic demand in relation to both investment and private consumption.

The US remained stable in terms of growth slightly wavering from 2.8% in December 2019 to 2.3% in January 2020. It fell prey to political uncertainty and a poor performance of net exports.

NII for Spain fell to €3.65 billion in 2019 from its 2018 value of €3.7 billion while the US division reported stronger results of €2.4 billion up from €2.3 billion.

BBVA maintains operations in Spain, US, Mexico, Turkey, Argentina, Colombia and Peru.

Click here to view the Q4 2019 report.