BBVA - BBVA USA reports fourth quarter and full-year 2019 results

HOUSTON, Jan. 31, 2020 /PRNewswire/ -- BBVA USA Bancshares, Inc., a Sunbelt-based bank holding company (BBVA USA), reported today a net loss of $331 million for the fourth quarter of 2019. Included in fourth quarter 2019 results is goodwill impairment (non-cash charge) totaling $470 million. Excluding the impact of this non-cash charge, adjusted net income¹ for the quarter was $139 million, a 29 percent decrease from the $196 million earned in the fourth quarter of 2018. Return on average assets and return on average tangible equity¹ for the fourth quarter of 2019 were (1.37) percent and (14.46) percent, respectively. On an adjusted basis, return on average assets¹ was 0.58 percent and return on average tangible equity¹ was 6.09 percent.

Net income for the full-year of 2019 totaled $153 million. Excluding the impact of the non-cash charge, adjusted net income¹ was $623 million, an 18 percent decrease from the $763 million earned for the full-year of 2018. Return on average assets and return on average tangible equity¹ for the full-year of 2019 were 0.16 percent and 1.73 percent, respectively. On an adjusted basis, return on average assets¹ was 0.66 percent and return on average tangible equity¹ was 7.03 percent.

The following table summarizes the impact of the goodwill impairment charge on fourth quarter and full-year 2019 results.

"Despite the challenging interest rate environment, we were able to post positive revenue growth, control expenses and achieve record operating income¹ of $1.3 billion in 2019," said Javier Rodríguez Soler, president and CEO of BBVA USA. "While fourth quarter results were impacted by goodwill impairment caused by the decline in interest rates, this non-cash charge had no impact on our liquidity position, regulatory capital ratios, and the operations of our company or our ability to meet our customers' needs."

"As we look ahead, we are encouraged by the positive momentum experienced in the fourth quarter in terms of loan and deposit growth. Our digital transformation efforts also met with continued success and our mobile banking capabilities received further accolades, including recognition as an industry leader. Continuing to enhance our product offerings to meet our customers' needs while striving to deliver an amazing customer experience are key components to our plans in the year ahead."

Total revenue for the quarter was $896 million, down 6 percent from fourth quarter 2018 levels primarily as a result of a 9 percent decrease in net interest income offset, in part, by a 1 percent increase in noninterest income. The percent net interest margin in the fourth quarter of 2019 was 2.96 percent compared to 3.37 percent in the fourth quarter of 2018. For the full-year of 2019 total revenue (excluding securities gains) totaled $3.7 billion, up 1 percent from the prior year, as net interest income increased less than 1 percent and noninterest income (excluding securities gains) increased 5 percent. The percent net interest margin for 2019 was 3.17 percent compared to 3.30 percent for the full-year of 2018.

Noninterest income for the quarter totaled $273 million, a 1 percent increase from the fourth quarter of 2018. For the full-year of 2019, noninterest income (excluding securities gains) totaled $1.1 billion, up 5 percent from the full-year of 2018. Most of our fee-based business experienced positive growth including, card and merchant processing fees (+13 percent), investment banking and advisory fees (+8 percent), money transfer income (+8 percent), service charges on deposit accounts (+6 percent), mortgage banking income (+5 percent), asset management fees (+4 percent) and investment services sales fees (+2 percent). Gains on the sales of investment securities in 2019 totaled $30 million.

Maintaining strong expense controls continued to be a key area of strength during the year. Total noninterest expense, excluding the non-cash charge, during the quarter increased a modest 2 percent compared to a year ago and for the full-year of 2019 total noninterest expense, excluding goodwill impairment, was also up a modest 2 percent. The increase in revenue and focus on expense management resulted in record operating income¹ for the year of $1.3 billion, a 3 percent increase over that obtained in the full-year of 2018.

Total loans at the end of the fourth quarter of 2019 were $64.1 billion, down 2 percent from $65.3 billion at the end of the fourth quarter of 2018. During the second quarter of 2019, approximately $1.1 billion of commercial loans held for sale were sold. Adjusting for the sale of these loans, the year-over-year decrease in total loans was less than 1 percent. While overall loan growth in the year was muted, during the fourth quarter total loans were up 4 percent (annualized) compared to third quarter 2019 levels.

Total deposits at the end of the fourth quarter of 2019 were $75.0 billion, a 4 percent increase from the $72.2 billion at the end of the fourth quarter of 2018 and an increase of 8 percent (annualized) on a linked quarter basis. Growth in lower cost deposits outpaced overall deposit growth with interest bearing transaction accounts (savings, money market and interest bearing checking accounts) up 13 percent compared to a year ago. At the same time, noninterest bearing deposits grew 8 percent compared to a year ago, while growth on a linked quarter basis was even more robust at 16 percent (annualized).The loan to deposit ratio ended the quarter at 85.43 percent compared to 90.42 percent at the end of 2018, and the LCR was 145 percent compared to 143 percent a year ago.

Nonperforming loans as a percentage of total loans ended the quarter at 1.06 percent compared to 1.14 percent at the end of the third quarter of 2019 and 1.24 percent at the end of the fourth quarter of 2018. Net charge-offs as a percentage of average total loans were 87 basis points in the quarter compared to 110 basis points in the third quarter of 2019 and 68 basis points in the fourth quarter of 2018. For the full-year of 2019, net charge-offs as a percentage of average total loans was 88 basis points compared to 51 basis points for the full-year 2018.

Provision expense in the quarter was $120 million compared to $141 million in the third quarter of 2019 and $122 million in the fourth quarter of 2018. The allowance for loan losses as a percentage of total loans ended the quarter at 1.44 percent compared to 1.49 percent at the end of the third quarter of 2019 and 1.36 percent at the end of the fourth quarter of 2018. The coverage ratio of nonperforming loans was 136 percent at the end of the quarter compared to 131 percent at the end of the third quarter of 2019 and 109 percent at the end of the fourth quarter of 2018.

Total shareholder's equity at the end of the fourth quarter of 2019 totaled $13.4 billion, a 1 percent decrease from $13.5 billion at the end of the fourth quarter of 2018. The CET1 ratio² stood at 12.49 percent at the end of the fourth quarter of 2019, down 40 basis points from the end of the third quarter of 2019 and up 49 basis points from the end of the fourth quarter of 2018. The decrease in shareholder's equity primarily reflects dividend payments to its sole shareholder offset, in part, by an increase in retained earnings and accumulated other comprehensive income. The decrease in the CET1 ratio² on a linked quarter basis primarily reflects a dividend payment during the quarter as goodwill impairment had no impact on regulatory capital and regulatory capital ratios.

During the fourth quarter, Business Insider named BBVA USA as a leader in its Business Insider Intelligence 2019 Mobile Banking Competitive Edge study, the third year the financial and business news company has conducted the proprietary research and the second year BBVA USA has been evaluated. BBVA USA was one of just five banks named as an overall leader in the research, which evaluated the banking features of the top 20 US banks. BBVA USA's mobile offering garnered the designation of Leader in Offering Desirable Mobile Banking Features, a title reserved for the top five. The bank's mobile app also came in first in the sub-categories of Account Management and Transfers, with titles that include Most Desirable Mobile Banking Features for Account Management and Most Desirable Mobile Banking Features for Transfers, respectively.

BBVA USA also pledged to put nearly $15.5 billion in lending, investments and services toward supporting low- and moderate-income individuals and neighborhoods in the US over the next six years, renewing its 2014 5-year $11 billion commitment to boost economic development across all the communities in its footprint.

Over the next six years, the bank plans to originate $3 billion in mortgage loans to low- and moderate-income (LMI) homebuyers and in LMI neighborhoods, nearly $7.3 billion in small business lending, $4 billion in community development lending, and to make more than $1.1 billion in community development investments. The plan was developed with input from stakeholders on the bank's 20-member advisory board, established in 2014 to provide input, guidance and feedback on its community giving initiatives.

¹ Operating income, adjusted net income, return on average tangible equity, adjusted return on average assets and adjusted return on average tangible equity 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 December 31, 2019, are estimated.

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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 ed.bilek@bbva.com.

BBVA USA
In the U.S., BBVA is a Sunbelt-based financial institution that operates 641 branches, including 330 in Texas, 89 in Alabama, 63 in Arizona, 61 in California, 44 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.

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