BBVA Compass reports fourth quarter results

PRNewswire 1-Feb-2019 9:32 AM

HOUSTON, Feb. 1, 2019 /PRNewswire/ --

• Fourth quarter net income of $196 million brings full-year total to a record $763 million
• Net income up 13 percent¹ from a year ago and 31 percent¹ on a year-to-date basis after adjusting for a $121 million non-cash charge in the fourth quarter of 2017 related to the revaluation of net deferred tax assets mandated by the Tax Cuts and Jobs Act.
• Return on average assets and return on average tangible equity² for the quarter were 0.85 percent and 9.27 percent, respectively
• Total revenue reaches all-time high; up 6 percent from prior year levels and 9 percent on a year-to-date basis
• Net interest income increases $79 million or 13 percent from year ago levels and $276 million or 12 percent on a year-to-date basis
• Percent net interest margin (FTE) up 15 basis points from year ago quarter, 10 basis points from third quarter 2018 levels and 20 basis points for the full-year of 2018
• Noninterest expense growth well contained at 2 percent in 2018, including a 2 percent decrease in the fourth quarter of 2018
• Revenue growth coupled with strong focus on expense management results in record operating income² of $351 million in the quarter and $1.3 billion for the year, both represent a 23 percent increase
• Balance sheet activity supported by solid loan and deposit generation
• Total loans rise to $65.3 billion, up 6 percent year-over-year
• Newly funded customer loans of $5.6 billion in the quarter bring full-year total to a record $21.7 billion in 2018, up 18 percent from the prior year
• Total deposits of $72.2 billion, up 4 percent from a year ago levels
• Credit quality metrics remain sound; allowance to loan ratio steady at 1.36 percent
• Nonperforming loan ratio ended the year at 1.24 percent
• Net charge-off ratio for 2018 at 51 basis points compared to 47 basis points in 2017
• Provision expense for the year exceeded net charge-offs by more than $42 million

BBVA Compass Bancshares, Inc., a Sunbelt-based bank holding company (BBVA Compass), reported today net income of $196 million for the fourth quarter of 2018, a 276 percent increase from the $52 million earned during the fourth quarter of 2017. Included in fourth quarter 2017 results is income tax expense of approximately $121 million related to the revaluation of net deferred tax assets at the lower statutory tax rate mandated by the Tax Cuts and Jobs Act (non-cash charge). Excluding the impact of this item, the year-over-year increase in net income for the fourth quarter of 2018 compared to adjusted net income¹ of $173 million for the fourth quarter of 2017 was 13 percent.

Net income for the full-year 2018 totaled $763 million, an increase of 66 percent from the $461 million earned during the full-year of 2017. Excluding the impact of the non-cash charge, the year-over-year increase in net income for the full-year of 2018 compared to adjusted net income¹ of $582 million for the full-year of 2017 was 31 percent. The following table summarizes year-over-year comparisons on a reported and adjusted basis for certain key performance measures.

"In 2018 BBVA Compass delivered record performance in many key financial metrics including new loan originations, total revenue, operating income and net income," said Javier Rodríguez Soler, incoming president and CEO of BBVA Compass. "Equally important, this performance was accomplished while making great strides in our digital transformation efforts designed to drive new industry-leading product offerings, increase our digital sales capabilities and improve the customer experience. As we enter 2019 against a backdrop of economic uncertainty, we are confident that our vision and the culture we have instilled in our team members that empowers them to move our transformation forward will serve us well during various business cycles."

Total revenue for the quarter was a record $953 million, an increase of 6 percent from fourth quarter 2017 levels. For the full-year 2018, total revenue was $3.7 billion (also a record), an increase of 9 percent from $3.4 billion in 2017. Fueling the growth was net interest income which totaled $682 million, up 13 percent  from the fourth quarter of 2017 and 15 percent (annualized) on a linked quarter basis. The percent net interest margin in the fourth quarter was 3.37 percent, up 15 basis points from the fourth quarter of 2017 and 10 basis points from the third quarter of 2018. On a full-year basis, the percent net interest margin was 3.30 percent in 2018, an increase of 20 basis points from the comparable period in 2017.

Noninterest income for the quarter totaled $271 million, down 9 percent compared to the $297 million recorded in the fourth quarter of 2017. For the full-year of 2018, noninterest income totaled $1.1 billion, up 1 percent from prior year levels as several of our major fee-based businesses recorded positive performances. Particularly noteworthy were card and merchant processing fees (+37 percent), corporate and correspondent investment sales (+36 percent) and mortgage banking income (+87 percent). Conversely, weaker demand and economic conditions impacted investment banking and advisory fees (-25 percent) and money transfer income (-10 percent). Other income also recorded a decline in the quarter and for the year due in part to a decrease in syndication fees and other miscellaneous fees coupled with certain interchange fees  being reclassified to card and merchant processing fees in 2018.

Overall expense growth was well contained as noninterest expense totaled $602 million, down 2 percent compared to the prior year quarter, and for the full-year of 2018 was up 2 percent. Revenue growth combined with the strong focus on expense management resulted in record operating income² of $351 million in the quarter and $1.3 billion for the year, both represent a 23 percent increase over the respective prior year period.

Total loans at the end of the fourth quarter of 2018 were $65.3 billion, an increase of 6 percent from the $61.7 billion at the end of the fourth quarter of 2017.

"Loan production was brisk throughout our network as we funded a record $21.7 billion in customer loans during the year, an 18 percent increase over the prior year," said Rodríguez Soler. "This enabled us to offset increased payoff activity as total commercial loans increased 5 percent in the aggregate, led by an 11 percent increase in commercial mortgages, while double-digit increases in credit cards, direct consumer lending and indirect auto lending resulted in an 8 percent increase in our consumer loan portfolio."

Total deposits at the end of the fourth quarter of 2018 were $72.2 billion, a 4 percent increase from the $69.3 billion at the end of the fourth quarter of 2017. The loan to deposit ratio ended the quarter at 90 percent, up slightly from 89 percent a year ago.

"The overall health of our loan portfolio remains strong," noted Rodríguez Soler. "And we are steadfast in our commitment to maintaining sound underwriting standards and reserve levels that adequately reflect the make-up of our loan portfolio, as well as economic conditions."

Nonperforming loans as a percentage of total loans ended the year at 1.24 percent compared to 1.04 percent at the end of the third quarter of 2018 and 1.16 percent at the end of 2017. The uptick in nonperforming loans during the quarter was primarily due to three, unrelated commercial credits being placed on nonaccrual status. Net charge-offs as a percentage of average loans were 51 basis points for the full-year of 2018 compared to 47 basis points for the full-year of 2017. Provision expense for the year exceeded net charge-offs by more than $42 million while the allowance for loan losses as a percentage of total loans ended the year at 1.36 percent, relatively unchanged from prior year levels. Equally important, the coverage ratio of nonperforming loans at the end of the fourth quarter of 2018 was 109 percent compared to 117 percent at the end of the fourth quarter of 2017.

Total shareholder's equity at the end of the fourth quarter totaled $13.5 billion, a 4 percent increase from $13.0 billion at the end of the fourth quarter of 2017. The CET1 ratio stood at 12.00 percent³ at the end of the fourth quarter of 2018, up 20 basis points from the end of the fourth quarter of 2017. All of BBVA Compass' regulatory capital ratios³ continue to significantly exceed the requirements under "well-capitalized" guidelines. 

About BBVA Compass
BBVA Compass is a Sunbelt-based financial institution that operates 644 branches, including 331 in Texas, 89 in Alabama, 63 in Arizona, 61 in California, 45 in Florida, 37 in Colorado and 18 in New Mexico. BBVA Compass 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). BBVA Compass 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. Additional information about BBVA Compass can be found under the Investor Relations tab at bbvacompass.com, by following @BBVACompassNews on Twitter or visiting newsroom.bbvacompass.com.

About 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, is the largest financial institution in Mexico, it has leading franchises in South America and the Sunbelt Region of the United States; and it is also the leading shareholder in Garanti, Turkey's biggest bank for market capitalization. Its diversified business is focused on high-growth markets and it relies on technology as a key sustainable competitive advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best practices. More information about BBVA Group can be found at bbva.com.

On April 5, 2018, BBVA filed its annual report on Form 20-F for the year ended December 31, 2017, 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, 2017, including complete audited financial statements, free of charge. To request a copy, contact Ed Bilek at ed.bilek@bbva.com.

Forward-Looking Statements
Certain statements in this press release may contain forward-looking statements about BBVA Compass Bancshares, Inc. (the "Company") and its industry that involve substantial risks and uncertainties. The use of "we," "our" and similar terms refer to the Company. Statements other than statements of current or historical fact, including statements regarding our future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, constitute forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," and other similar expressions are intended to identify these forward-looking statements. These forward-looking statements reflect the Company's views regarding future events and financial performance. Such statements are subject to risks, uncertainties, assumptions and other important factors, many of which may be beyond the Company's control, that could cause actual results to differ materially from anticipated results. If the Company's assumptions and estimates are incorrect, or if the Company becomes subject to significant limitations as the result of litigation or regulatory action, then the Company's actual results could vary materially from those expressed or implied in these forward-looking statements. The forward-looking statements are and will be based on the Company's then current views and assumptions regarding future events and speak only as of their dates made. The Company assumes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by securities law or regulation. For further information regarding risks and uncertainties associated with the Company's business, please refer to the "Risk Factors" section of the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on February 28, 2018, as updated by our subsequent SEC filings.