Letter from the Chairman of the Board of Directors
Being the leading bank in our country is no easy feat. We must stay on our toes year after year if our business is to remain successful and if we are to fulfill the responsibilities we have assumed with our customers and shareholders. We must also play our part in building a sustainable future that will allow us to overcome the new social, economic and environmental challenges in a timely and effective manner. Once again we faced a year of daunting challenges and major achievements in 2018; a year of change and of new realities for the country, for the financial system and for BBVA Bancomer.
The banking system continued to expand: total lending within the system was up 9.3% at year-end, similar to the growth reported in 2017, although by credit components we saw a mixed bag of results. Household financing revealed a slight slowdown with respect to the previous year, in line with the lower growth in consumer lending (6.8% vs. 8.5% in 2017), albeit offset by greater growth in mortgage lending (9.9% vs. 8.4%). Portfolio delinquency remained low across both segments, at 4.4% and 2.6%, respectively. Last but not least, growth in lending to businesses and government bodies was on par with the previous year (9.9%), with an equally stable NPL portfolio rate of 1.3%.
BBVA Bancomer increased its dynamism,
growing at a rate of 7.9%,
higher than in 2017 with 5.7%.
BBVA Bancomer’s own performance was particularly noteworthy, because while the system grew at the same rate as in the previous year, the Bank impressed by outperforming its own growth in 2017 (7.9% vs. 5.7%). Moreover, and unlike the wider system, BBVA Bancomer either maintained or improved its performance across all its credit components while reporting a reduction in non-performing loan ratios. A prime example of this was lending to households, which closed the year with growth of 6.4%, up on the 5.7% observed in 2017, and with an NPL ratio of 3.1%, an improvement on the 3.6% reported within the system. Lending to businesses and government bodies performed even better, climbing from 5.6% growth at the end of 2017 to 9.1% in 2018 and with an NPL portfolio rate of 1.2%. At BBVA Bancomer our risk assessment mechanisms are among the best in the world, allowing us to achieve these healthy growth rates in our loan portfolio.
Our strong performance in 2018 —all the more remarkable given the complicated political and economic backdrop both at home and abroad— will ultimately make the Bank more able to implement the changes that society and the economic environment will surely demand in the years to come.
BBVA Bancomer has adopted a model of Responsible Banking, an innovative approach to attaining our purpose of “Bringing the age of opportunity to everyone”. This is to be achieved through the following six pillars, all designed to responsibly manage the impact our activities have on society: enhancing the customer’s unique experience, championing sustainable financing mechanisms, committing to programs that have a positive impact on the community (focusing on financial inclusion), improving reputation by strengthening relations with our stakeholders, generating a responsible commitment to our employees and embracing the strategy of different initiatives to cement our position as a leading company within the sector.
BBVA Bancomer has adopted
a model of Responsible Banking,
an innovative approach to attaining
our purpose of “Bringing the age of
opportunity to everyone”.
We believe that banking plays an important role in promoting sustainable development and in combating climate change by mobilizing resources to provide innovative solutions that contribute to a greener and more efficient economy. One of the challenges we have set ourselves on a global scale is to mobilize 1 billion euros by 2025 to combat climate change and to help fulfil the Sustainable Development Goals of the United Nations. Meanwhile, BBVA has continued to implement its third Global Eco-efficiency Plan, which aims to make the Bank one of the world’s most eco-friendly companies by 2020. Targets here include a 5% reduction in electricity consumption and an 8% reduction in CO2 emissions, as well as similar reductions in the consumption of water and paper and waste generation. Please be sure to learn more about BBVA’s actions, our progress in 2018 and the targets set for 2019 as we all contribute towards the UN Sustainable Development Goals.
In Mexico, where BBVA Bancomer has become a benchmark for its commitment to sustainability —adhering to the UN Global Compact in 2003 and earning the Socially Responsible Company Award on 18 separate occasions— in 2018 we successfully placed the first Green Bond to be issued by a private bank in Mexico, for a total of seven billion pesos.
In 2018 we successfully placed the first
Green Bond to be issued by a private
bank in Mexico, for a total of 7 billion pesos.
In the wake of the 2017 earthquakes, we embarked on a school reconstruction campaign alongside our allies, allowing us to deliver nine schools in 2018 to benefit a total of four thousand students. Looking ahead to 2019, our goal is to deliver 25 rebuilt schools, ultimately benefitting more than sixteen thousand pupils.
BBVA Bancomer has channeled upwards of four billion, eight hundred million pesos into promoting education and culture within the country. Since 2002, the BBVA Bancomer Foundation has awarded 278,000 grants for secondary, high school and university students to support the development of young Mexican talent.
Meanwhile, the BBVA Bancomer Financial Education program has been working for 10 years to help people better understand and use financial products and services to improve their quality of life. This takes the form of a completely free service, which in 2018 aided more than 30,000 people through face-to-face workshops; more than 20,000 beneficiaries of federal social programs that include financial education modules; more than 17,000 people via the social service available to young students through agreements with their universities; half a million children between the ages of four and 12 through recreational activities; and through the digitization strategy we integrated value propositions into 64 unique products such as apps and digital products.
Last but not least, and as a further show of our tireless commitment to the country, I am proud to announce that from 2019 Bancomer will double its contribution to the BBVA Bancomer Foundation, which will allow us to make an even greater contribution to the country’s inclusive development.
Despite the prevailing uncertainty surrounding the global economy, growing competition across the financial markets and an increasingly demanding and participative society, I am convinced that the strengths that have made us the country’s leading bank are the same strengths that will keep us at the top and allow us to climb even higher by increasing our value proposition across all segments, for the ultimate benefit of our customers, shareholders and the country.
Letter from the Deputy Chairman of the Board of Directors and CEO
We came up against many challenges in 2018, with both domestic and external events generating episodes of volatility within the country.
Against this backdrop, Grupo Financiero BBVA Bancomer S.A. de C.V. (GFBB) showed just how committed it is to Mexico by fostering investment, job creation and the well-being of Mexican families and championing savings and credit. It achieved remarkable results, reporting significant growth across all lines of business.
The outstanding loan portfolio ended the year with a balance in excess of 1.1 trillion pesos, up 85,000 million pesos on 2017 and outgrowing the entire market in the process. This effectively reaffirmed the Group’s leadership by bringing its market share to 22.4%, according to public information released by the National Banking and Securities Commission (CNBV).
Within this portfolio, financing to productive segments (Corporate, Companies and SMEs) reached 658,507 million pesos. Lending to businesses was the most dynamic component in the year, with annual growth of 10%.
Lending to businesses was
the most dynamic component
in the year, with annual growth of 10%.
Financing to individuals and households in Mexico, in the form of consumer loans (credit cards, personal, payroll, auto) and mortgage loans, climbed to 483,667 million pesos, up 7% on the previous year. Notably, a total of 32,000 mortgage loans were awarded in 2018, for a total amount of 40,000 million pesos, making it a record placement for the Bank.
Lending growth has also been accompanied by sturdy risk quality indicators. The NPL ratio stood at 2.0% at year-end 2018 and the risk premium improved by falling from 3.2% in December 2017 to 2.9% in December 2018. Meanwhile, the coverage ratio ended the year at 137.0%.
Customer funds managed by the Bank came to 1.6 trillion pesos, including demand deposits, term deposits, credit securities issued, global non-movement deposits account and assets managed in mutual funds.
Fostering savings among the population is a key priority for BBVA Bancomer and this is shown by the growth reported in term deposits, which were up 11% on 2017. Meanwhile, assets managed in mutual funds ended 2018 in excess of 400,000 million pesos, maintaining BBVA Bancomer’s status as one of the largest fund managers operating in the Mexican market with a share of 19%, according to data released by the Mexican Association of Stock Market Intermediaries (AMIB).
Increased levels of lending and fund gathering activity allowed the Bank to report a financial margin of 132,650 million pesos, revealing annual growth of 8.2%.
Level of investment was a particular highlight within the Bank’s results, growing 10% on the previous year to climb past 5,000 million pesos. This investment was used mainly for technological renovation and upgrades and to maintain the largest infrastructure to be found within the banking system.
However, GFBB has continued to grow its business activity while maintaining high levels of investment, making it most efficient institution operating within the Mexican financial system, with a cost-to-income ratio of 37.2%.
GFBB maintains its position as the most
efficient institution operating within the
Mexican financial system, with a
cost-to-income ratio of 37.2%.
The product of this was net profit of 52,638 million pesos, which meant an annual variation of 15.4%. This result has been achieved with a solid capital base and a set of indicators comfortably clear of the minimum regulatory requirements (capitalization index of 15.3%). Aside from the excellent financial performance, 2018 was a year of major milestones in terms of the Group’s strategy.
For some years now, GFBB has made it a strategic priority to offer the best customer experience. In 2018, it continued to progress further along this path by making customer interaction with the bank more efficient across all points of contact.
The customer service model was transformed at the Bank’s branches, with priority given to advisory services; the voice portal and ‘First Contact Solution’ were implemented within the IVR to deal with charges and debits not recognized by customers; and the browsing experience was redesigned and new functionalities added to the self-direction facility (ATMs and Practicajas), such as the option to deposit checks. These changes in the physical range of products and services is enhanced and supplemented by an innovative range of digital products and services and the Group is now spearheading the digital transformation of the banking sector by literally putting the bank in the hands of its customers.
More and more customers are relying on digital/mobile banking and all it has to offer. In 2018, GFBB’s digital customers climbed to 7.2 million, 36% more than in 2017, while customers using the mobile banking service were up 49% on the previous year to reach 6.5 million.
In 2018, GFBB’s digital customers
climbed to 7.2 million, 36% more
than in previous year.
Customers perceive these changes and once again they ranked the Bank as the leading institution, according to the Net Promoter Score (NPS). Meanwhile, the Bank has been working hard to increase its appeal to new customers and its efforts have paid off, because when it comes to payroll portability requests 64 out of every 100 payroll holders who decide to change banks choose GFBB.
With these results, GFBB has cemented its leadership in one of the country’s key sectors and has assumed, through a raft of concrete actions, a huge role in shaping Mexico’s growth and development. Acting through the BBVA Bancomer Foundation, it views education as the best way to support Mexico; from 2002 to 2018 it awarded 278,000 grants for a grand total of 4,800 million pesos, helping some 108,000 beneficiaries complete their secondary, preparatory and university studies.
In the wake of the 2017 earthquakes, the Bank rapidly joined the emergency response to support affected schools, providing seed capital of 180 million pesos and inviting GFBB’s own ecosystem (customers, employees and allies) to join in, effectively raising the total amount to 350 million pesos. These funds will be used to build/renovate 25 schools, benefitting over 16,000 pupils by providing safer and better equipped facilities.
Grupo Financiero BBVA Bancomer is convinced that there is still much to be done and that is why it has decided to raise its annual donation to the Foundation from 2019 onward, which will climb from 400 million pesos to 1 billion pesos a year, the aim being to enhance the grants and scholarship program and continue rehabilitating those schools in need of attention. This will allow the Foundation to generate a positive impact over the coming five years that is similar in scale to the impact it has managed to achieve over past 16 years. GFBB is seeking to become the country’s main ally in making an inclusive Mexico; the best Mexico for everyone.
Before I finish, I would like to thank the fantastic team of collaborators of the BBVA Bancomer Financial Group for all their hard work and dedication in helping to build this Bank. They really are what sets us apart from the crowd. Thanks also to our customers for their loyalty and trust. We will certainly continue in our tireless search to improve their experience. Last but not least, thanks to the members of our Board of Directors, who have brought their experience and sound judgment to bear to continue strengthening our Bank. 2018 was a great year, but I am sure that the best years are yet to come.
