6-K 1 d374202d6k.htm 6-K 6-K
Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2021

Commission file number: 1-10110

 

 

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

(Exact name of Registrant as specified in its charter)

BANK BILBAO VIZCAYA ARGENTARIA, S.A.

(Translation of Registrant’s name into English)

 

 

Calle Azul 4,

28050 Madrid

Spain

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F               X   Form 40-F    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

          Yes      No                 X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

          Yes      No                 X

 

 

 


Table of Contents

LOGO

Condensed Interim Consolidated Financial Statements as of and for the three months ended March 31, 2021 BBVA Group


Table of Contents

P.1

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Contents

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  
Condensed consolidated balance sheets      3  
Condensed consolidated income statements      4  
Consolidated statements of recognized income and expense      5  
Consolidated statements of changes in equity      6  
Condensed consolidated statements of cash flows      8  

NOTES TO THE ACCOMPANYING CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  
1.      Introduction, basis for the presentation of the condensed interim consolidated financial statements and other information      9  
2.      Principles of consolidation, accounting policies, measurement bases applied and recent IFRS pronouncements and interpretations      12  
3.      BBVA Group      14  
4.      Shareholder remuneration system      15  
5.      Operating segment reporting      15  
6.      Risk management      16  
7.      Fair value of financial instruments      21  
8.      Cash, cash balances at central banks and other demand deposits      23  
9.      Financial assets and liabilities held for trading      23  
10.      Non-trading financial assets mandatorily at fair value through profit or loss      23  
11.      Financial assets and liabilities designated at fair value through profit or loss      24  
12.      Financial assets at fair value through other comprehensive income      24  
13.      Financial assets at amortized cost      24  
14.      Investments in joint ventures and associates      25  
15.      Tangible assets      25  
16.      Intangible assets      25  
17.      Tax assets and liabilities      26  
18.      Other assets and liabilities      26  
19.      Non-current assets and disposal groups classified as held for sale      26  
20.      Financial liabilities at amortized cost      29  
21.      Assets and liabilities under insurance and reinsurance contracts      31  
22.      Provisions      31  
23.      Pension and other post-employment commitments      31  
24.      Capital      31  
25.      Retained earnings and other reserves      31  
26.      Accumulated other comprehensive income      32  
27.      Non-controlling interest      33  
28.      Commitments and guarantees given      33  
29.      Net interest income      33  
30.      Dividend income      34  


Table of Contents

P.2

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

31.      Fee and commission income and expense      34  
32.      Gains (losses) on financial assets and liabilities and exchange differences, net      35  
33.      Other operating income and expense      35  
34.      Income and expense from insurance and reinsurance contracts      36  
35.      Administration costs      36  
36.      Depreciation and amortization      36  
37.      Provisions or reversal of provisions      37  
38.      Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification      37  
39.      Impairment or reversal of impairment on non-financial assets      37  
40.      Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations      37  
41.      Subsequent events      38  
42.      Explanation added for translation into English      38  
APPENDIX I. Condensed balance sheets and income statements of Banco Bilbao Vizcaya Argentaria, S.A.      40  


Table of Contents

P.3

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

 

Condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Millions of Euros)

 

       Notes       

March

2021

 

 

    

December

2020 (*)

 

 

Cash, cash balances at central banks and other demand deposits

     8        54,950        65,520  

Financial assets held for trading

     9        101,050        108,257  

Non-trading financial assets mandatorily at fair value through profit or loss

     10        5,488        5,198  

Financial assets designated at fair value through profit or loss

     11        1,110        1,117  

Financial assets at fair value through other comprehensive income

     12        72,771        69,440  

Financial assets at amortized cost

     13        363,754        367,668  

Derivatives - hedge accounting

        1,696        1,991  

Fair value changes of the hedged items in portfolio hedges of interest rate risk

        33        51  

Joint ventures and associates

     14        1,416        1,437  

Insurance and reinsurance assets

        294        306  

Tangible assets

     15        7,703        7,823  

Intangible assets

     16        2,297        2,345  

Tax assets

     17        16,385        16,526  

Other assets

     18        2,193        2,513  

Non-current assets and disposal groups classified as held for sale

     19        88,564        85,987  

TOTAL ASSETS

        719,705        736,176  
                         

LIABILITIES AND EQUITY (Millions of Euros)

                          
       Notes       

March

2021

 

 

    

December

2020 (*)

 

 

Financial liabilities held for trading

     9        81,253        86,488  

Financial liabilities designated at fair value through profit or loss

     11        9,714        10,050  

Financial liabilities at amortized cost

     20        475,813        490,606  

Derivatives - hedge accounting

        2,524        2,318  

Liabilities under insurance and reinsurance contracts

     21        10,325        9,951  

Provisions

     22        5,971        6,141  

Tax liabilities

     17        2,202        2,355  

Other liabilities

     18        3,540        2,802  

Liabilities included in disposal groups classified as held for sale

     19        77,653        75,446  

TOTAL LIABILITIES

        668,994        686,156  

SHAREHOLDERS’ FUNDS

              60,033        58,904  

Capital

     24        3,267        3,267  

Share premium

        23,992        23,992  

Other equity

        31        42  

Retained earnings

     25        31,799        30,508  

Other reserves

     25        (231)        (164)  

Less: treasury shares

        (35)        (46)  

Profit or loss attributable to owners of the parent

        1,210        1,305  

Less: Interim dividends

        -        -  

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     26        (14,718)        (14,356)  

MINORITY INTERESTS (NON-CONTROLLING INTERESTS)

     27        5,396        5,471  

TOTAL EQUITY

              50,711        50,020  

TOTAL EQUITY AND TOTAL LIABILITIES

        719,705        736,176  
                         

MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES) (Millions of Euros)

        
       Notes       

March

2021

 

 

    

December

2020 (*)

 

 

Loan commitments given

     28        135,927        132,584  

Financial guarantees given

     28        11,146        10,665  

Other commitments given

     28        35,896        36,190  

 

  (*)

Presented solely and exclusively for comparison purposes (see Note 1.3).

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


Table of Contents

P.4

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

 

Condensed consolidated income statements for the corresponding three-month period between January 1 and March 31, 2021 and 2020

 

CONDENSED CONSOLIDATED INCOME STATEMENTS (Millions of Euros)

 

     Notes       

March

2021

 

 

      

March

2020 (*)

 

 

Interest and other income

   29        5,483          6,425  

Interest expense

   29        (2,033)          (2,402)  

NET INTEREST INCOME

            3,451          4,024  

Dividend income

   30        6          5  

Share of profit or loss of entities accounted for using the equity method

          (6)          (8)  

Fee and commission income

   31        1,609          1,668  

Fee and commission expense

   31        (476)          (544)  

Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net

   32        122          64  

Gains (losses) on financial assets and liabilities held for trading, net

   32        114          (39)  

Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net

   32        120          16  

Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net

   32        153          236  

Gains (losses) from hedge accounting, net

   32        (25)          16  

Exchange differences, net

   32        99          252  

Other operating income

   33        142          133  

Other operating expense

   33        (388)          (351)  

Income from insurance and reinsurance contracts

   34        757          782  

Expense from insurance and reinsurance contracts

   34        (522)          (475)  

GROSS INCOME

            5,155          5,778  

Administration costs

   35        (1,996)          (2,132)  

Depreciation and amortization

   36        (309)          (345)  

Provisions or reversal of provisions

   37        (151)          (300)  

Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification

   38        (923)          (2,164)  

NET OPERATING INCOME

            1,776          837  

Impairment or reversal of impairment of investments in joint ventures and associates

          -          1  

Impairment or reversal of impairment on non-financial assets

   39        -          (22)  

Gains (losses) on derecognition of non-financial assets and subsidiaries, net

          1          1  

Negative goodwill recognized in profit or loss

          -          -  

Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations

   40        (18)          (9)  

PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS

            1,759          807  

Tax expense or income related to profit or loss from continuing operations

          (489)          (204)  

PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS

            1,270          603  

Profit (loss) after tax from discontinued operations

   19        177          (2,224)  

PROFIT (LOSS) OF THE PERIOD

          1,447          (1,621)  

ATTRIBUTABLE TO MINORITY INTEREST (NON-CONTROLLING INTEREST)

   27        237          172  

ATTRIBUTABLE TO OWNERS OF THE PARENT

          1,210          (1,792)  
             

March

2021

 

 

      

March

2020 (*)

 

 

EARNINGS (LOSSES) PER SHARE (Euros)

            0.17          (0.29)  

Basic earnings (losses) per share from continued operations

          0.14          0.05  

Diluted earnings (losses) per share from continued operations

          0.14          0.05  

Basic earnings (losses) per share from discontinued operations

          0.03          (0.33)  

Diluted earnings (losses) per share from discontinued operations

          0.03          (0.33)  

 

  (*)

Presented solely and exclusively for comparison purposes (see Note 1.3).

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


Table of Contents

P.5

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

 

Consolidated statements of recognized income and expense for the corresponding three-month period between January 1 and March 31, 2021 and 2020.

 

CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)

 

    

 

 

 

March

2021

 

 

 

    

 

 

 

March

2020 (*)

 

 

 

 PROFIT RECOGNIZED IN INCOME STATEMENT

     1,447          (1,621)  

 OTHER RECOGNIZED INCOME (EXPENSE)

     (593)          (2,925)  

 ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT

     151          (345)  

Actuarial gains (losses) from defined benefit pension plans

     (9)          181  

Non-current assets and disposal groups held for sale

     (6)          -  

Share of other recognized income and expense of entities accounted for using the equity method

     -          -  

Fair value changes of equity instruments measured at fair value through other comprehensive income, net

     159          (614)  

Gains (losses) from hedge accounting of equity instruments at fair value through other comprehensive income, net

     -          -  

Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk

     3          161  

Income tax related to items not subject to reclassification to income statement

     4          (73)  

 ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT

     (744)          (2,580)  

 Hedge of net investments in foreign operations (effective portion)

     (40)          620  

Valuation gains (losses) taken to equity

     (40)          620  

Transferred to profit or loss

     -          -  

Other reclassifications

     -          -  

 Foreign currency translation

     (234)          (3,373)  

Translation gains (losses) taken to equity

     (234)          (3,374)  

Transferred to profit or loss

     -          1  

Other reclassifications

     -          -  

 Cash flow hedges (effective portion)

     (392)          378  

Valuation gains (losses) taken to equity

     (392)          378  

Transferred to profit or loss

     -          -  

Transferred to initial carrying amount of hedged items

     -          -  

Other reclassifications

     -          -  

 Debt securities at fair value through other comprehensive income

     (678)          (952)  

Valuation gains (losses) taken to equity

     (592)          (896)  

Transferred to profit or loss

     (87)          (57)  

Other reclassifications

     -          -  

 Non-current assets and disposal groups held for sale

     417          703  

Valuation gains (losses) taken to equity

     373          703  

Transferred to profit or loss

     44          -  

Other reclassifications

     -          -  

 Entities accounted for using the equity method

     4          (11)  

 Income tax relating to items subject to reclassification to income statements

     178          56  

TOTAL RECOGNIZED INCOME/EXPENSE

     853          (4,546)  

 Attributable to minority interest (non-controlling interests)

     5          (175)  

ATTRIBUTABLE TO THE PARENT COMPANY

     848          (4,371)  

 

  (*)

Presented solely and exclusively for comparison purposes (see Note 1.3).

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


Table of Contents

P.6

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

 

Consolidated statements of changes in equity for the three-month period between January 1 and March 31, 2021 and 2020

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)

 

    

Capital

(Note 24)

 

 

    
Share
Premium
 
 
    


Equity
instruments
issued other than
capital
 
 
 
 
     Other Equity       

Retained
earnings

(Note 25)

 
 

 

    

Revaluation
reserves

(Note 25)

 
 

 

    

Other reserves

(Note 25)

 

 

  

 

Treasury shares

 

    

Profit or loss
attributable to
owners of the parent
 
 
 
    
Interim
dividends
 
 
    


Accumulated other
comprehensive
income

(Note 26)

 
 
 

 

    

 

Non-controlling interest

 

 

 

     Total  

March 2021

    



 

Accumulated
other
comprehensive
income

(Note 27)

 

 
 
 
 

 

 

    

Other

(Note 27)

 

 

Balances as of January 1, 2021 (*)

     3,267        23,992        -        42        30,508        -        (164)        (46)        1,305        -        (14,356)        (6,949)        12,421        50,020  

Total income/expense recognized

     -        -        -        -        -        -        -        -        1,210        -        (361)        (232)        237        853  

Other changes in equity

     -        -        -        (12)        1,292        -        (67)        11        (1,305)        -        (1)        -        (80)        (162)  

Issuances of common shares

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Issuances of preferred shares

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Issuance of other equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Period or maturity of other issued equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Conversion of debt on equity

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Common Stock reduction

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Dividend distribution

     -        -        -        -        -        -        -        -        -        -        -        -        (83)        (83)  

Purchase of treasury shares

     -        -        -        -        -        -        -        (159)        -        -        -        -        -        (159)  

Sale or cancellation of treasury shares

     -        -        -        -        16        -        -        170        -        -        -        -        -        186  

Reclassification of financial liabilities to other equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Reclassification of other equity instruments to financial liabilities

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Transfers between total equity entries

     -        -        -        -        1,373        -        (67)        -        (1,305)        -        (1)        -        -        -  

Increase/Reduction of equity due to business combinations

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Share based payments

     -        -        -        (16)        -        -        -        -        -        -        -        -        -        (16)  

Other increases or (-) decreases in equity

     -        -        -        4        (97)        -        -        -        -        -        -        -        3        (90)  

Balances as of March 31, 2021

     3,267        23,992        -        31        31,799        -        (231)        (35)        1,210        -        (14,718)        (7,181)        12,577        50,711  

 

  (*)

Balances as of December 31, 2020 as originally reported in the consolidated Financial Statements for the year 2020.

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


Table of Contents

P.7

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

 

Consolidated statements of changes in equity for the three-month period between January 1 and March 31, 2021 and 2020 (continued)

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)

 

    
Capital
(Note 24)
 
 
    
Share
Premium
 
 
    

Equity instruments
issued other than
capital
 
 
 
     Other Equity       

Retained
earnings

(Note 25)

 
 

 

    

Revaluation
reserves

(Note 25)

 
 

 

    

Other
reserves

(Note 25)

 
 

 

    
Treasury
shares
 
 
    


Profit or loss
attributable to
owners of the
parent
 
 
 
 
    
Interim
dividends
 
 
    

Accumulated other
comprehensive income

(Note 26)

 
 

 

    

 

Non-controlling interest

 

 

 

     Total  

March 2020 (*)

    


 

Accumulated other
comprehensive
income

(Note 27)

 

 
 
 

 

 

    

Other

(Note 27)

 

 

Balances as of January 1, 2020 (**)

     3,267        23,992        -        56        26,402        -        (125)        (62)        3,512        (1,084)        (7,235)        (3,526)        9,727        54,925  

Effect of changes in accounting policies (see Note 1.3)

     -        -        -        -        2,985        -        6        -        -        -        (2,992)        (2,045)        2,045        -  

Adjusted initial balance

     3,267        23,992        -        56        29,388        -        (119)        (62)        3,512        (1,084)        (10,226)        (5,572)        11,773        54,925  

Total income/expense recognized

     -        -        -        -        -        -        -        -        (1,792)        -        (2,579)        (347)        172        (4,546)  

Other changes in equity

     -        -        -        (15)        1,287        -        (38)        26        (3,512)        1,084        -        -        (37)        (1,206)  

Issuances of common shares

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Issuances of preferred shares

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Issuance of other equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Period or maturity of other issued equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Conversion of debt on equity

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Common Stock reduction

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Dividend distribution

     -        -        -        -        (1,063)        -        (3)        -        -        -        -        -        (37)        (1,102)  

Purchase of treasury shares

     -        -        -        -        -        -        -        (331)        -        -        -        -        -        (331)  

Sale or cancellation of treasury shares

     -        -        -        -        (1)        -        -        357        -        -        -        -        -        356  

Reclassification of financial liabilities to other equity instruments

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Reclassification of other equity instruments to financial liabilities

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Transfers between total equity entries

     -        -        -        -        2,462        -        (34)        -        (3,512)        1,084        -        -        -        -  

Increase or (-) reduction of equity due to business combinations

     -        -        -        -        -        -        -        -        -        -        -        -        -        -  

Share based payments

     -        -        -        (19)        -        -        -        -        -        -        -        -        -        (19)  

Other increases or (-) decreases in equity

     -        -        -        4        (111)        -        (2)        -        -        -        -        -        -        (109)  

Balances as of March 31, 2020

     3,267        23,992        -        41        30,675        -        (158)        (36)        (1,792)        -        (12,805)        (5,918)        11,907        49,174  

 

  (*)

Presented solely and exclusively for comparison purposes (see Note 1.3).

 

  (**)

Balances as of December 31, 2019 as originally reported in the consolidated Financial Statements for the year 2019.

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


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P.8

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

Condensed consolidated statements of cash flows for the three-month period between January 1 and March 31, 2021 and 2020

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of Euros)

 

       

March

2021

 

 

    

March

2020 (*)

 

 

CASH FLOW FROM OPERATING ACTIVITIES (1)

        (8,970)        9,206  

Profit for the period

        1,447        (1,621)  

Adjustments to obtain the cash flow from operating activities

        1,991        5,744  

Depreciation and amortization

        309        345  

Other adjustments

        1,682        5,399  

Net increase/decrease in operating assets/liabilities

        (12,101)        5,915  

Financial assets/liabilities held for trading

        2,025        (1,222)  

Non-trading financial assets mandatorily at fair value through profit or loss

        (278)        (809)  

Other financial assets/liabilities designated at fair value through profit or loss

        (484)        39  

Available-for-sale financial assets

        (3,659)        (3,494)  

Loans and receivables / Financial liabilities at amortized cost

        (10,789)        12,324  

Other operating assets/liabilities

        1,084        (923)  

Collection/Payments for income tax

        (306)        (832)  

CASH FLOWS FROM INVESTING ACTIVITIES (2)

        94        (101)  

Tangible assets

        (5)        (29)  

Intangible assets

        (118)        (109)  

Investments in joint ventures and associates

        14        24  

Subsidiaries and other business units

        3        -  

Non-current assets/liabilities held for sale

        200        9  

Other settlements/collections related to investing activities

        -        6  

CASH FLOWS FROM FINANCING ACTIVITIES (3)

        (1,147)        (1,774)  

Dividends

        -        (1,065)  

Subordinated liabilities

        (968)        (563)  

Common stock amortization/increase

        -        -  

Treasury stock acquisition/disposal

        27        25  

Other items relating to financing activities

        (207)        (170)  

EFFECT OF EXCHANGE RATE CHANGES (4)

              443        (2,090)  

NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (1+2+3+4)

              (9,580)        5,241  

CASH OR CASH EQUIVALENTS AT BEGINNING OF THE PERIOD

              76,888        44,303  

CASH OR CASH EQUIVALENTS AT END OF THE PERIOD INCLUDING COMPANIES HELD FOR SALE IN THE USA

        67,308        49,544  
        

COMPONENTS OF CASH AND EQUIVALENT AT END OF THE PERIOD (Millions of Euros)

        
       Notes       

March

2021

 

 

    

March

2020 (*)

 

 

Cash on hand

     8        5,970        5,934  

Cash balances at central banks

     8        44,549        39,117  

Other demand deposits

     8        4,431        4,492  

Less: Bank overdraft refundable on demand

        -        -  

TOTAL CASH AND CASH EQUIVALENTS AT END OF THE PERIOD

        54,950        49,544  

TOTAL CASH AND CASH EQUIVALENTS CLASSIFIED AS NON-CURRENT ASSETS AND DISPOSABLE GROUPS

CLASSIFIED AS HELD FOR SALE IN THE UNITED STATES

     19        12,358        -  

 

  (*)

Presented solely and exclusively for comparison purposes (see Note 1.3).

The accompanying Notes and Appendix are an integral part of the condensed interim consolidated financial statements as of and for the three-month period between January 1 and March 31, 2021.


Table of Contents

P.9

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

LOGO

Notes to the condensed interim consolidated financial statements as of and for the corresponding three-month period between January 1 and March 31, 2021 and 2020

1.        Introduction, basis for the presentation of the condensed interim consolidated financial statements and other information

 

1.1

Introduction

Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter “the Bank” or “BBVA”) is a private-law entity subject to the laws and regulations governing banking entities operating in Spain. It carries out its activity through branches and agencies across the country and abroad.

The Bylaws and other public information are available for inspection at the Bank’s registered address (Plaza San Nicolás, 4, Bilbao) as noted on its web site (www.bbva.com).

In addition to the activities it carries out directly, the Bank heads a group of subsidiaries, joint ventures and associates which perform a wide range of activities and which together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (hereinafter, “the Group” or “the BBVA Group”). In addition to its own separate financial statements, the Bank is required to prepare consolidated financial statements comprising all consolidated subsidiaries of the Group.

The consolidated Financial Statements of the BBVA Group for the year ended December 31, 2020 were approved by the shareholders at the Annual General Meeting (“AGM”) on April 20, 2021.

 

1.2

Basis for the presentation of the condensed interim consolidated financial statements

The BBVA Group’s condensed interim consolidated financial statements (hereinafter, the “consolidated Financial Statements”) as of and for the corresponding three-month period between January 1 and March 31, 2021 are presented in accordance with the International Accounting Standard “Interim Financial Reporting” (“IAS 34”) and have been approved by the Board of Directors at its meeting held on April 29, 2021. In accordance with IAS 34, the interim financial information is prepared solely for the purpose of updating the last annual consolidated Financial Statements, focusing on new activities, events and circumstances that occurred during the period without duplicating the information previously published in those consolidated Financial Statements.

Therefore, the accompanying consolidated Financial Statements do not include all information required by a complete set of consolidated Financial Statements prepared in accordance with International Financial Reporting Standards endorsed by the European Union (hereinafter, “EU-IFRS”), consequently for an appropriate understanding of the information included in them, they should be read together with the consolidated Financial Statements of the Group as of and for the year ended December 31, 2020.

The aforementioned annual consolidated Financial Statements were prepared in accordance with the EU-IFRS applicable as of December 31, 2020, considering the Bank of Spain Circular 4/2017, and with any other legislation governing financial reporting which is applicable and with the format and mark-up requirements established in the EU Delegated Regulation 2019/815 of the European Commission.

The accompanying consolidated Financial Statements were prepared applying principles of consolidation, accounting policies and valuation criteria, which, as described in Note 2, are the same as those applied in the consolidated Financial Statements of the Group as of and for the year ended December 31, 2020, taking into consideration the new Standards and Interpretations that became effective from January 1, 2021 (see Note 2.1), so that they present fairly the Group’s consolidated equity and financial position as of March 31, 2021, together with the consolidated results of its operations and the consolidated cash flows generated by the Group during the three-month period ended March 31, 2020.

The consolidated Financial Statements and explanatory notes were prepared on the basis of the accounting records kept by the Bank and each of the other entities in the Group. They include the adjustments and reclassifications required to harmonize the accounting policies and valuation criteria used by the entities in the Group.

All effective accounting standards and valuation criteria with a significant effect in the consolidated Financial Statements were applied in their preparation.

The amounts reflected in the accompanying consolidated Financial Statements are presented in millions of euros, unless it is more appropriate to use smaller units. Therefore, some items that appear without a balance in these consolidated Financial Statements are due to how the units are expressed. Also, in presenting amounts in millions of euros, the accounting balances have been rounded up or down. It is therefore possible that the totals appearing in some tables are not the exact arithmetical sum of their component figures.

The percentage changes in amounts have been calculated using figures expressed in thousands of euros.


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P.10

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

When determining the information to disclose about various items of the consolidated financial statements, the Group, in accordance with IAS 34, has taken into account their materiality in relation to the consolidated financial statements.

 

1.3

Comparative information

The information included in the accompanying consolidated Financial Statements and the explanatory notes relating to December 31, and March 31, 2020, is presented for the purpose of comparison with the information for March 31, 2021.

Agreement for the sale of BBVA’s U.S. subsidiary to PNC Financial Service Group

As mentioned in Note 3, in 2020 BBVA reached an agreement to sell its entire stake in BBVA USA Bancshares, Inc., which in turn owns all the capital stock of the bank, BBVA USA, as well as other companies of the BBVA Group in the United States with activities related to this banking business. As required by IFRS 5 “Non-current assets held for sale and discontinued operations”, the balances of assets and liabilities corresponding to such companies for sale have been reclassified from their corresponding accounting headings to the headings “Non-current assets and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as held for sale” respectively, from the condensed consolidated balance sheet as of March 31, 2021. Similarly, as required by the aforementioned IFRS 5, the results generated by these companies for the first three months of 2021 are presented in the heading “Profit (loss) after taxes from discontinued operations” of the condensed consolidated income statement for such year, and in the heading “Non-current assets and disposal groups classified as held for sale” of the condensed consolidated statements of recognized income and expense for such year. Additionally, the results corresponding to the first three months of 2020 have been reclassified, to facilitate the comparison between years, to that same section of the respective condensed consolidated income statements and condensed consolidated statements of recognized income and expense for that period. Finally, in the condensed consolidated statements of cash flows, the balances corresponding to cash and cash equivalents have been reclassified to the heading “Total cash and cash equivalents classified as non-current assets and disposal groups classified as held for sale” as of March 31, 2021 and 2020.

Note 19 includes the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, the condensed consolidated income statements and the condensed consolidated cash flow statements of the companies for sale in the United States as of and for the first three months of 2021 and 2020.

 

1.4

Management and impacts of the COVID-19 pandemic

The appearance of the Coronavirus COVID-19 in China and its global expansion to a large number of countries, led the viral outbreak to be classified as a global pandemic by the World Health Organization since last March 11, 2020. The pandemic has affected and continues to adversely affect the world economy and economic activity and conditions in the countries in which the Group operates, leading many of them to economic recession. The governments of the different countries in which the Group operates have adopted different measures that have conditioned the evolution (see Note 6.2).

In this pandemic situation, BBVA has focused its attention on ensuring the continuity of the business operational security as a priority and monitoring the impacts on the business and on the risks of the Group (such as the impacts on results, capital or liquidity). Additionally, BBVA adopted from the beginning a series of measures to support its main interest groups. In this sense, the purpose and the Group’s long-term strategic priorities remain the same and are even reinforced, with a commitment to technology and data-driven decision-making.

With the aim of mitigating the impact of COVID-19, various European and International bodies have made pronouncements aimed at allowing greater flexibility in the implementation of the accounting and prudential frameworks. The BBVA Group has taken these pronouncements into consideration when preparing these consolidated financial statements (see Note 6.1)

The main impacts of COVID-19 pandemic in the BBVA Group’s consolidated Financial Statements are detailed in the following explanatory notes:

 

  LOGO

Note 1.5 includes information on the consideration of the COVID-19 pandemic in the estimates made.

 

  LOGO

Note 4 mentions the amendment of the Group’s shareholder remuneration policy, in accordance with the recommendation issued by the European Central Bank, which no longer pays any amount as a dividend for the financial year 2020 until as long as the uncertainties generated by the pandemic remain.

 

  LOGO

Note 6.1 details the main risks associated with the pandemic as well as the impacts that have occurred both in the activity and in the consolidated financial statements for the first three months of 2021.

 

  LOGO

Note 6.2 includes information related to the initiatives carried out by the Group to help the most affected clients, jointly with the corresponding governments. Likewise, it contains, among others, information with regard to the number of operations and the amount corresponding to payment deferrals’ measures, both public and private, granted by the Group worldwide.


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P.11

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

1.5

Responsibility for the information and for the estimates made

The information contained in the BBVA Group’s consolidated Financial Statements is the responsibility of the Group’s Directors.

Estimates were required to be made at times when preparing these consolidated Financial Statements in order to calculate the recorded or disclosed amount of some assets, liabilities, income, expense and commitments. These estimates relate mainly to the following:

 

  LOGO

Loss allowances on certain financial assets (see Notes 6, 12 and 13).

 

  LOGO

The assumptions used to quantify certain provisions (see Notes 21 and 22) and for the actuarial calculation of post-employment benefit liabilities and other commitments (see Note 23).

 

  LOGO

The useful life and impairment losses of tangible and intangible assets (see Notes 15, 16 and 19).

 

  LOGO

The valuation of goodwill and price allocation of business combinations (see Note 16).

 

  LOGO

The fair value of certain unlisted financial assets and liabilities (see Note 7).

 

  LOGO

The recoverability of deferred tax assets (see Note 17).

As mentioned before, on March 11, 2020, COVID-19 was declared as a global pandemic by the World Health Organization (see Note 1.4). The great uncertainty associated to the unprecedented nature of this pandemic entails a greater complexity of developing reliable estimations and applying judgment.

Therefore, these estimates have been made on the basis of the best available information on the matters analyzed, as of March 31, 2021. However, it is possible that events may take place in the future which could make it necessary to amend these estimations (upward or downward), which would be carried out prospectively, recognizing the effects of the change in estimation in the corresponding consolidated income statement.

During the three-month period ended on March 31, 2021 there have been no significant changes in the estimates made at the end of the 2020 financial year, other than those indicated in these consolidated Financial Statements.

 

1.6

Related-party transactions

The information related to these transactions is presented in Note 53 of the consolidated financial statements of the Group for the year ended December 31, 2020.

As financial institutions, BBVA and other entities in the Group engage in transactions with related parties in the regular course of their business. None of these transactions are considered significant and the transactions are carried out under normal market conditions.

 

1.7

Separate interim financial statements

The separate financial statements of the parent company of the Group (Banco Bilbao Vizcaya Argentaria, S.A.) are prepared under Spanish regulations (Circular 4/2017 of the Bank of Spain, as amended thereafter, and following other regulatory requirements of financial information applicable to it).

Appendix I shows the condensed interim financial statements of Banco Bilbao Vizcaya Argentaria, S.A. as of and for the three-month period ended March 31, 2021.


Table of Contents

P.12

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

2.        Principles of consolidation, accounting policies, measurement bases applied and recent IFRS pronouncements and interpretations

The accounting policies and methods applied for the preparation of the accompanying consolidated Financial Statements do not differ significantly to those applied in the consolidated Financial Statements of the Group for the year ended December 31, 2020 (Note 2), except for the entry into force of new standards and interpretations in the year 2021.

 

2.1

Standards and interpretations that became effective in the first three months of 2021

In addition to the mentioned in Note 1.3, the following amendments to the IFRS standards or their interpretations (hereinafter “IFRIC”) became effective on or after January 1, 2021:

IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Modifications - IBOR reform

On August 27, 2020, the IASB issued the second phase of the IBOR reform that involves the introduction of amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, to ensure that the financial statements reflect the economic effects of the IBOR reform.

These modifications focus on accounting for financial instruments, once a new risk-free benchmark has been introduced (Risk Free Rate, hereinafter “RFR”). The modifications introduce the accounting relief for changes in the cash flows of financial instruments directly caused by the IBOR reform if they take place in a context of “economic equivalence”, by updating the effective interest rate of the instrument. Additionally, it introduces a series of reliefs to the hedging requirements so as not to have to interrupt certain hedging relationships when the new benchmark is introduced. However, similar to the Phase 1 amendments (which entered into force in 2020), the Phase 2 amendments do not provide for exceptions to the measurement requirements applicable to hedged items and hedging instruments in accordance with IFRS 9 or IAS 39. Thus, once the new benchmark has been implemented, the hedged items and hedging instruments must be measured according to the new index, and the possible ineffectiveness that may exist in the hedge will be recognized in profit or loss.

The IBOR transition is considered to be a complex initiative, which affects BBVA Group in different geographical areas and business lines, as well as in a multitude of products, systems and processes. The main risks to which the Group is exposed due to the transition are; (1) risk of litigation related to the products and services offered by the Group; (2) legal risks derived from changes in the documentation required for existing operations; (3) financial and accounting risks, derived from market risk models and from the measurement, hedging, cancellation and recognition of the financial instruments associated with the benchmark indices; (4) price risk, derived from how changes in the indices could impact the pricing mechanisms of certain instruments; (5) operational risks, as the reform may require changes to the Group’s IT systems, business reporting infrastructure, operational processes and controls, and (6) behavioral risks derived from the potential impact of customer communications during the transition period, which could lead to customer complaints, regulatory penalties or reputational impact.

BBVA Group has a significant number of financial assets and liabilities referenced to IBOR rates, especially Euribor, which are used, among others, in loans, deposits, debt issuances and financial derivatives. Furthermore, although the exposure to Eonia is lower in the banking book, this benchmark interest rate is used in financial derivatives in the trading book, as well as in the collateral agreements, and most are booked in Spain. In the case of LIBOR, the USD is the most relevant currency for both cash products and financial derivatives in the banking book and the trading book. Other LIBOR currencies (CHF, GBP and JPY) have a much lower exposure.

Therefore, BBVA Group has established an IBOR transition program, provided with a robust governance structure by means of an Executive Steering Committee, with representation from senior management of the affected areas, which reports directly to the Group’s Global Leadership Team. At the local level, each geography has defined a local governance structure with the participation of senior management. The coordination between geographies is realized through the Project Management Office (PMO) and the Global Working Groups that incorporate a multi-geographic and transversal view on the areas of Legal, Risk, Regulatory, Engineering, Finance and Accounting. The project also involves both Corporate Assurance of the different geographies and business lines and Global Corporate Assurance of the Group.

The IBOR transition project within BBVA Group takes into account the different approaches and timings of transition to the new RFRs when evaluating different risks associated with de reform, as well as defining the lines of action to mitigate them. BBVA is aligned with the Good Practices issued by the ECB that outline how banks can better structure their governance, identify related risks and create contingent action plans and documentation in relation to the transition of reference rates.

A relevant aspect of this transition is its impact on contracts referenced to LIBOR and Eonia maturing after December 31, 2021 (when most indices disappeared) and June 30, 2023 (in the case of dollar LIBOR except 1-week and 2-month). In this regard, in the case of the Eonia, BBVA is carrying out the novation of the contracts maturing after 2021 (it should be noted that these exposures are immaterial in the Group and mostly against clearing houses) and has already begun, proactively, the renegotiation of collateral contracts to adapt them to the operations against clearing houses already migrated last July. The Group already has new fallbacks in place which incorporate the €STR as a replacement rate, as well as language to incorporate this benchmark as the main reference rate in new contracts. In the case of LIBOR, BBVA Group has identified the stock of contracts maturing after December 31, 2021 and June 30, 2023 (in the case of dollar LIBOR except 1-week and 2-month) and is working on the implementation of tools/systems that will allow the stock to be migrated to solutions such as those proposed by ISDA (Group entities are already adhered to the ISDA protocol) or in bilateral negotiations. Likewise, BBVA Group continues to work on adapting all its systems and processes to deal with alternative Risk Free Rates, such


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P.13

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

as SOFR and SONIA. In this sense, BBVA is already operating in both derivative products and loans with Risk Free Rates indices. On the other hand, the non-issuance of new contracts with LIBOR rates with expiration beyond 2021 is promoted.

In the case of EURIBOR, the European authorities have encouraged amendments of its methodology so that it complies with the requirements of the European Regulation on Benchmarks. BBVA actively participates in various working groups, including the EURO RFR WG which works specifically, amongst others, on the definition of fallbacks in contracts, in anticipation of an option to change the index in the future.

Additionally, a large communication and training campaign is being carried out both for the Group’s internal staff and for clients, in order to have a good understanding and understanding of the project.

Amendments to IFRS 4 Insurance Contracts

The amendment to IFRS 4 includes a deferral in the temporary exception option regarding the application of IFRS 9 for entities whose business model is predominantly an insurance model until January 1, 2023, aligning it with the entry into force of the IFRS 17 Insurance Contracts rule. This amendment entered into force on January 1, 2021, although it has had no impact on the Group since the Bank does not take the option.

 

2.2

Standards and interpretations issued but not yet effective as of March 31, 2021

At the date of preparation of these consolidated Financial Statements, new International Financial Reporting Standards and Interpretations thereof had been published that were not mandatory as of March 31, 2021. Although in some cases the International Accounting Standards Board (“IASB”) allows early adoption before their effective date, the BBVA Group has not proceeded with this option for any such new standards.

IFRS 17 – Insurance Contracts

IFRS 17 establishes the principles for account insurance contracts. This new standard supersedes IFRS 4, by introducing deep changes in the accounting of insurance contracts with the aim of achieving greater homogeneity and increasing comparability between entities.

Unlike IFRS 4, the new standard establishes minimum requirements for grouping insurance contracts for the purposes of their recognition and measurement, determining the units of account by considering three levels: portfolios (contracts subject to similar risks and managed together), annual cohorts and their possibility of becoming onerous.

Regarding the measurement model, the new standard contemplates several methods, being the General Model (Building Block Approach) the method that will be applied by default for the valuation of insurance contracts, unless the conditions are given to apply any of the two other methods: the Variable Fee Approach, and the Simplified Model (Premium Allocation Approach). With the implementation of IFRS 17, the valuation of insurance contracts will be based on a model that will use updated assumptions at each balance sheet date.

The General Model requires entities to value insurance contracts for the total of:

 

   

fulfilment cash flows, which comprise the estimation of future cash flows discounted to reflect the time value of money, the financial risk associated with future cash flows, and a risk adjustment for non-financial risk;

 

   

and the contractual service margin, which represents the expected unearned benefit from the insurance contracts, which will be recognized in the entity’s income statement as the service is provided in the future, instead of being recognized at the time of the estimation.

The amounts recognized in the income statement shall be classified into insurance revenue, insurance service expenses and insurance finance income or expenses. Insurance revenue and insurance service expenses shall exclude any investment components. Insurance revenue shall be recognized over the period the entity provides insurance coverage.

An entity shall apply IFRS 17 for annual reporting periods beginning on or after January 1, 2023 (with at least one year comparative information); however, the endorsement by the European Commission is still pending.

Since 2019, the Group maintains a project to implement IFRS 17 in order to harmonize the criteria in the Group and with the participation of all involved areas and countries.

Amendments to IAS 1 “Presentation of financial statements” and IAS 8 “Accounting policies, changes in accounting estimates and errors

In February 2020 the IASB issued several amendments to different IAS with the aim of improving the quality of the disclosures in relation to the accounting policies applied by the entities with the ultimate aim of providing useful and material information in the Financial Statements. With respect to the modification introduced by the IASB on the definition of “Materiality” included in IAS 1 and IAS 8, the purpose followed by the regulator is to clarify what is considered material for inclusion in the financial statements. The new definition of materiality is as follows: “Information is material if its


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Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

omission, inaccuracy or concealment could reasonably be expected to influence the decisions that the main users of financial information make based on the financial statements” This new definition of materiality, incorporates the reference to the concealment of information which equates to the omission or inappropriate expression of financial information. Likewise, the amendments introduce clarifications to distinguish between accounting estimate and accounting policy.

These modifications will come into effect on January 1, 2023, although no significant impact is expected on BBVA’s Financial Statements.

 

3.

BBVA Group

The BBVA Group is an international diversified financial group with a significant presence in retail banking, wholesale banking and asset management. The Group also operates in the insurance sector.

The following information is detailed in the Appendices to the consolidated Financial Statements of the Group for the year ended December 31, 2020:

 

  LOGO

Appendix I shows relevant information related to the consolidated subsidiaries and structured entities.

 

  LOGO

Appendix II shows relevant information related to investments in subsidiaries, joint ventures and associates accounted for using the equity method.

 

  LOGO

Appendix III shows the main changes and notification of investments and divestments in the BBVA Group.

 

  LOGO

Appendix IV shows fully consolidated subsidiaries with more than 10% owned by non-Group shareholders.

The BBVA Group’s activities are mainly located in Spain, Mexico, South America, and Turkey, with an active presence in other areas of Europe and Asia (see Note 5).

Significant transactions in the first three months of 2021

Divestitures

Sale of the BBVA Group’s stake in Paraguay

On January 22, 2021 and once the mandatory authorizations were obtained, BBVA completed the sale of its direct and indirect shareholding of 100% of the capital stock of Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (“BBVA Paraguay”) in favor of Banco GNB Paraguay S.A., a subsidiary of the Gilinski Group. The total amount received by BBVA amounts to approximately 250 million US dollars (approximately 210 million euros). The operation has generated a capital loss net of taxes of approximately 9 million euros. Likewise, this operation has a positive impact on the Common Equity Tier 1 (“fully loaded”) of the BBVA Group of approximately 6 basis points, which is reflected in the capital base of the BBVA Group in the first three months of 2021.

Significant transactions in 2020

Divestitures

Agreement for the sale of BBVA’s U.S. subsidiary to PNC Financial Service Group

On November 15, 2020, BBVA reached an agreement with PNC Financial Services Group, Inc. for the sale of 100% of the capital stock of its subsidiary BBVA USA Bancshares, Inc., which in turn owns all the capital stock of the bank, BBVA USA, as well as other companies of the BBVA Group in the United States with activities related to this banking business.

The agreement reached does not include the sale of the institutional business of the BBVA Group developed through its broker-dealer BBVA Securities Inc. nor the participation in Propel Venture Partners US Fund I, L.P. which will be transferred by BBVA USA Bancshares Inc. to entities of the BBVA Group prior to the closing of the transaction. In addition, BBVA will continue to develop the wholesale business that it currently carries out through its branch in New York.

The price of the transaction amounts to approximately 11,600 million US dollars. The price will be fully paid in cash.

It is expected that the transaction will result in a positive impact on BBVA Group’s Common Equity Tier 1 ratio (fully loaded) of approximately 294 basis points and positive results (net of taxes) of approximately 580 million euros (calculated at an exchange rate 1.20 EUR /USD). During the year ended December 31, 2020, approximately 300 million euros has been recognized for the entities to be disposed of (corresponding to the results generated by the companies held for sale, from the signing of the operation to the end of the year, and which are included in the consolidated Financial Statements as of December 31, 2020), as well as an approximately positive impact of 9 basis points of Common Equity Tier I (fully loaded).

The closing of the transaction is subject to obtaining regulatory authorizations from the competent authorities. It is estimated that the closing of the transaction will take place in mid-2021.


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P.15

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Note 19 includes the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, the condensed consolidated income statements and the condensed consolidated cash flow statements of the companies for sale in the United States as of and for the first three months of 2021 and 2020.

Alliance bancassurance with Allianz, Compañía de Seguros y Reaseguros, S.A.

On April 27, 2020, BBVA reached an agreement with Allianz, Compañía de Seguros y Reaseguros, S.A. to create a bancassurance joint venture in order to develop the non-life insurance business in Spain, excluding the health insurance line of the business.

On December 14, 2020, once the required authorizations had been obtained, BBVA completed the operation and announced the transfer to Allianz, Compañía de Seguros y Reaseguros, S.A. of half plus one share of the company BBVA Allianz Seguros y Reaseguros, S.A., for which it received 274 million euros, without taking into account a variable part of the price (up to 100 million euros depending on certain objectives and planned milestones). This operation had a profit net of taxes of 304 million euros and a positive impact on the fully loaded CET1 of the BBVA Group of 7 basis points recorded in the consolidated Financial Statements as of December 31, 2020.

 

4.

Shareholder remuneration system

On December 15, 2020 the ECB issued recommendation ECB/2020/62, repealing recommendation ECB/2020/35 and recommending that significant credit institutions exercise extreme prudence when deciding on or paying out dividends or performing share buy-backs aimed at remunerating shareholders. Recommendation ECB/2020/62 circumscribes prudent distributions to the results for the years 2019 and 2020, excluding the distributions corresponding to the financial year 2021, until September 30, 2021, when the ECB will reassess the economic situation. BBVA’s intention is to reestablish its Group shareholder remuneration policy announced on February 1, 2017, once the recommendation ECB/2020/62 is repealed and there are no additional restrictions or limitations of application.

The Annual General Meeting of BBVA held on April 20, 2021, approved, under item 3 of the Agenda, the cash distribution in the amount of €0.059 gross per share against the share premium account as shareholder remuneration in relation to the Group’s result in the 2020 financial year for an amount equal to €0.059 (€0.0478 net of withholding tax) per BBVA share, paid to shareholders on April 29, 2021 (see Note 41).

 

5.

Operating segment reporting

Operating segment reporting represents a basic tool for monitoring and managing the different activities of the BBVA Group. In preparing the information by operating segment, the starting point is the lowest-level units, which are aggregated in accordance with the organizational structure determined by the Group’s Management to create higher-level units and, finally, the reportable operating segments themselves.

At the end of the three-month period between January 1 and March 31, 2021, the structure of the information by operating segments reported by the BBVA Group differs from that presented at the end of the 2020 financial year, mainly as a consequence of the exclusion of the United States as an operating segment, as a result of the sale agreement reached with PNC (see Note 3). The core of the business in the United States excluded from this agreement, together with those of the old segment “Rest of Eurasia” has become a new segment called “Rest of business”.

Due to the agreement reached to sell the entire stake of the Group in BBVA USA Bancshares, Inc., which in turn owns all the capital stock of the bank, BBVA USA, as well as other companies of the BBVA Group in the United States with activities related to this banking business, the balance sheet items of the companies for sale and the gains and losses generated by them have been classified in accordance with IFRS 5 “Non-current assets held for sale and discontinued operations” (see Note 19).

The BBVA Group’s operating segments and the agreements reached are summarized below:

 

  LOGO

Spain

Includes mainly the banking and insurance business that the Group carries out in Spain, including the results of the new company that emerged from the bancassurance agreement reached with Allianz at the end of 2020 (see Note 3).

 

  LOGO

Mexico

Includes banking and insurance businesses in this country as well as the activity that BBVA Mexico carries out through its branch in Houston.

 

  LOGO

Turkey

Reports the activity of Garanti BBVA group that is mainly carried out in this country and, to a lesser extent, in Romania and the Netherlands.

 

  LOGO

South America


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P.16

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

It mainly includes the banking and insurance activity carried out in the region. The information for this operating segment includes BBVA Paraguay for data on results, activity, balance sheet and relevant management indicators for 2020; data which is not included for 2021 since the sale agreement was completed in January 2021 (see Note 3).

 

  LOGO

Rest of business

It mainly incorporates the wholesale activity carried out in Europe, excluding Spain, and the United States with regard to the New York branch, as well as the institutional business that the Group develops in the United States through its broker-dealer BBVA Securities Inc. It also incorporates the banking business developed through the five BBVA branches located in Asia.

Corporate Center performs centralized Group functions, including: the costs of the head offices with a corporate function, management of structural exchange rate positions; portfolios whose management is not linked to customer relationships, such as industrial holdings; certain tax assets and liabilities; funds for employee commitments; goodwill and other intangible assets, as well as the financing of such asset portfolios. It also includes the results of the participation in the venture capital fund Propel Venture Partners. Additionally, and until the mandatory authorizations are received and the sales agreement with PNC mentioned above is completed, the results obtained by the Group’s businesses in the United States included in such agreement are to be presented in a single line under the heading “Profit (loss) after tax from discontinued operations” in the income statement.

 

6.

Risk management

The principles and risk management policies, as well as tools and procedures established and implemented in the Group as of March 31, 2021 do not differ significantly from those included in Note 7 in the consolidated Financial Statements of the Group for the year ended December 31, 2020.

 

6.1

Risk associated with the coronavirus pandemic (COVID-19)

The COVID-19 (coronavirus) pandemic has affected and is expected to continue to adversely affect the world economy, having led many of the countries in which the Group operates to economic recession in 2020. This recession is expected to be followed by high but uneven activity growth across sectors and geographies in 2021. Among other challenges, the countries in which the Group operates have experienced widespread increases in unemployment levels and declines in production, while public debt has significantly increased due to the support and spending measures implemented by authorities. Furthermore, an increase in loan losses by both companies and individuals is expected, which has so far been slowed down by the impact of government and sector support measures, including bank payment deferrals and direct aid measures. In addition, volatility in the financial markets may continue, affecting exchange rates and the value of assets and investments, all of which has adversely affected the Group’s results in 2020 and is expected to continue to affect them in the future.

Furthermore, the Group has been and may continue to be affected by the specific measures or recommendations adopted by authorities in the banking sector, such as variations in reference interest rates, the relaxation of prudential requirements, the suspension of dividend payments, the deferral of monthly installments for certain loans and the implementation of credit lines with public guarantees, especially to companies and self-employed individuals, as well as any changes in financial assets purchase programs by the ECB. Although as of March 31, 2021, a large part of the payment deferrals granted due to the COVID-19 pandemic have already expired and, therefore, it has been possible to observe the payment behavior for many customers, there are still transactions in force that will first be largely payable before the end of the first semester of 2021. Hence, as of March 31, 2021, it is not possible to know the payment behavior for these customers since it cannot yet be assured that economic conditions will improve during that period.

Since the outbreak of the COVID-19 pandemic, the Group has experienced a decline in its activity. For instance, the granting of new loans to individuals has decreased since mobility restriction measures were approved in certain countries in which the Group operates. In addition, the Group faces various risks, such as a greater risk of impairment of the value of its assets (including financial instruments valued at fair value, which may undergo significant fluctuations) and of the securities held for liquidity reasons, a further increase in non-performing loans and risk-weighted assets, as well as a negative impact on the Group’s financing cost and its access to financing (especially in an environment where credit ratings are affected). As of March 31, 2021, 8% of the Group’s exposure is placed in the sectors identified as most vulnerable to the current environment, which are leisure, residential real estate, commercial real estate, non-food retailers and air transportation.

Additionally, in several of the countries in which the Group operates, including Spain, the Group has temporarily closed a significant number of its branches and reduced opening hours to the public, and the teams which provide central services have been working remotely. Despite the fact these measures have been partially reversed, it is unclear how long it will take before they can be fully reversed due to the persistence of the COVID-19 pandemic. Furthermore, the pandemic could adversely affect the business and operations of third parties that provide critical services to the Group and, in particular, the higher demand and/or the lower availability of certain resources could, in some cases, make it more difficult for the Group to maintain the required service levels. In addition, the widespread use of remote work has increased the risks related to cybersecurity, as the use of non-corporate networks has increased.

Therefore, the COVID-19 pandemic has had an adverse effect since its inception in March 2020 on the Group’s results and capital base.

 

6.2

Credit risk


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P.17

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

The banks are a key part of the solution to the COVID-19 crisis. Specifically, BBVA, has activated support initiatives with a focus on the most affected customers, regardless of whether they are companies, SMEs, self-employed workers or private individuals. The following are just some of those initiatives:

 

   

In Spain, support for SMEs, self-employed workers and companies through lines of credit and lines guaranteed by the Official Credit Institute (ICO, for its acronym in Spanish), extended until June 30, 2021, (loans with grace periods up to 24 months and 72 month period, 96 months for the credit account) and for individual customers extended until March 31, 2021 with grace periods on loans to affected individuals (up to 9 month in first mortgage and up to 6 months in consumer lending) and payment deferrals of 3 months for citizens in social rental housing under from the Social Housing Fund. Additionally, the publication of Royal Decree Law 5/2021, of March 12, on extraordinary measures to support business solvency in response to the COVID-19 pandemic, will mean the adoption of new support measures with public guarantees, for companies and self-employed workers. The Code of Good Practices is pending approval by the Government which subsequently will be voluntary by financial institutions.

 

   

In the United States, flexibility in the repayment of loans for small businesses and for consumer finance and has eliminated some fees and commissions for individual customers.

 

   

In Mexico, grace periods up to 4 months on various credit products, fixed payment plan to reduce monthly credit card charges and suspension of Point of Sale (POS) fees to support retailers with lower turnover, as well as different support plans aimed at each situation for larger business customers.

 

   

In Turkey, delay until May 31, 2021 of loan repayments, interests and amortizations without any penalty.

 

   

In South America, Argentina has provided micro-SMEs and SMEs access to credit facilities to purchase teleworking equipment, funding facilities for payroll payments and the possibility of refinancing the unpaid credit card balances in 9 instalments; Colombia has frozen the repayment of loans for up to six months for credits until June 30, 2021, and is offering financing with government guarantee for SMEs; and in Peru, several measures were approved to support the SMEs and customers with consumer loans or credit cards, including extending the payment term and reducing instalments by up to 40%.

The amount of payment deferrals and the financing granted with public guarantees given at a Group level, as well as the number of customers, as of March 31, 2021 and December 31, 2020 are as follows:

 

Amount of payment deferrals and financing with public guarantees as of March 31, 2021 and December 31, 2020 (Millions of Euros)

 

     Payment deferrals                

Financing with

public guarantees

 

 

     
       Existing        Completed        Total       

Number of

customers

 

 

     Total       

Number of

customers

 

 

    

Total

payment deferrals

and guarantees

 

 

 

    
(%) credit
investment
 
 

March 2021

     5,446        21,860        27,306        2,763,853        16,648        255,785        43,954        12.9%  

December 2020

     6,536        21,868        28,405        2,779,964        16,053        249,458        44,458        12.9%  

 

Amount of payment deferrals and financing with public guarantees by concept as of March 31, 2021 and December 31, 2020 (Millions of Euros)

 

     Payment deferrals       

Financing with

public guarantees

 

 

     Existing        Completed        Total  
      

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

Group

     5,446        6,536        21,860        21,868        27,306        28,405        16,648        16,053  

Customers

     3,888        4,503        14,338        14,550        18,226        19,052        1,296        1,235  

Of which: Mortgages

     3,324        3,587        7,826        7,471        11,150        11,059        1        1  

SMEs

     713        1,023        4,640        4,743        5,353        5,766        10,898        10,573  

Non-financial

corporations

     802        961        2,721        2,397        3,524        3,358        4,439        4,232  

Other

     42        50        161        179        203        229        15        13  


Table of Contents

P.18

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Amount of payment deferrals by stages as of March 31, 2021 and December 31, 2020 (Millions of Euros)

 

     Stage 1        Stage 2        Stage 3        Total  
      

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

    

March

2021

 

 

    

December

2020

 

 

Group

     16,742        18,602        8,215        7,736        2,349        2,066        27,306        28,405  

Customers

     11,106        12,336        5,205        4,997        1,915        1,719        18,226        19,052  

Of which: Mortgages

     6,857        7,347        3,150        2,844        1,144        867        11,150        11,059  

SMEs

     3,617        4,147        1,393        1,327        344        292        5,353        5,766  

Non-financial corporations

     1,842        1,903        1,591        1,399        90        56        3,524        3,358  

Other

     178        216        26        13        -        -        203        229  

The payment deferral measures for bank customers in the different countries in which the Group operates (such as those included in Royal Decree Law 11/2020, as well as in the CECA-AEB agreement to which BBVA has adhered in Spain) result in the temporary suspension, total or partial, of the contractual obligations with a deferral for a specific period of time.

Regarding the classification of exposures according to their credit risk, the Group has maintained a rigorous application of IFRS 9 when granting the payment deferrals and has reinforced the procedures for monitoring credit risk both throughout the life of the transactions and at their maturity. This means that the payment deferrals granting does not imply in itself an automatic trigger for a significant increase in risk and that the transactions subject to the payment deferrals are initially classified in the stage they had previously, unless, based on their risk profile, they should be classified in a worse stage. On the other hand, as evidence of payment has ceased to exist or has been reduced, the Group has introduced additional indicators or segmentations to identify the significant increase in credit risk that may have occurred in some transactions or a set of them and, where appropriate, they have been classified in Stage 2 or Stage 3. Furthermore, the indications provided by the European Banking Authority (EBA) have been taken into account to not consider forbearance the payment deferrals that meet a series of requirements. All this without prejudice to maintaining its consideration as a forbearance if it was previously qualified as such or classifying the exposure in the corresponding stage previously stated.

On the other hand, the accounting treatment of singular transactions, that is to say, not covered by the general frameworks described, as well as that of the payment deferrals that expire and may require additional support is in accordance with the updated evaluation of the customer’s credit quality and the characteristics of the solution granted.

Regarding public support for the loans’ lending, it does not affect the evaluation of the significant increase in risk since it is valued through the credit quality of the instrument. However, in estimating the expected loss, the existence of the guarantor implies a possible reduction in the level of provisions necessary since, for the hedged part, the loss that would be incurred in the foreclosure of the guarantee is taken into account.

The public guarantees granted in the different geographies in which the Group operates have been considered as an integral part of the terms and conditions of the loans granted under the consideration that the guarantees are granted at the same time that the financing is granted to the client and in a way inseparable from it.

Additional adjustments to expected loss measurement

In addition to what is described on individualized and collective estimates of expected losses and macroeconomic estimates, the Group may supplement the expected losses, if it deems it necessary, to collect the effects that may not be included, either by considering additional risk drivers or by the incorporation of sectorial particularities or that may affect a set of operations or borrowers. These adjustments should be temporary, until the reasons that motivated them disappear or materialize.

For this reason, the expected losses have been supplemented with additional amounts that have been considered necessary to collect the particular characteristics of borrowers, sectors or portfolios and that may not be identified in the general process. In order to incorporate those effects that are not included in the impairment models, there are management adjustments to the expected losses which amount to 316 million euros in Spain as of March 31, 2021 (223 million euros as of December 31, 2020). This variation is driven by the use of 57 million euros in the period, as well as the need of an additional provision given the possibility of new extensions in the financing granted or agreements aimed at ensuring business viability.

Maximum credit risk exposure

In accordance with IFRS 7 “Financial Instruments: Disclosures”, the BBVA Group’s credit risk exposure by headings in the balance sheets as of March 31, 2021 and December 31, 2020 is provided below. It does not consider the loss allowances and the availability of collateral or other credit enhancements to guarantee the fulfillment of payment obligations. The details are broken down by the nature of the financial instruments:


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P.19

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Maximum credit risk exposure (Millions of Euros)

 

       Notes       

March

2021

 

 

     Stage 1        Stage 2        Stage 3  

Financial assets held for trading

              69,386           

Debt securities

     9        24,171           

Equity instruments

     9        11,518           

Loans and advances

     9        33,697           

Non-trading financial assets mandatorily at fair value through profit or loss

              5,488           

Loans and advances to customers

     10        758           

Debt securities

     10        317           

Equity instruments

     10        4,414           

Financial assets designated at fair value through profit or loss

     11        1,110           

Derivatives (trading and hedging)

              46,305           

Financial assets at fair value through other comprehensive income

              72,845                             

Debt securities

        71,562        71,270        292        -  

Equity instruments

     12        1,255        -        -        -  

Loans and advances to credit institutions

     12        28        28        -        -  

Financial assets at amortized cost

              376,020        328,883        32,180        14,957  

Loans and advances to central banks

        5,472        5,472        -        -  

Loans and advances to credit institutions

        11,515        11,492        19        4  

Loans and advances to customers

        322,866        275,918        32,015        14,933  

Debt securities

        36,166        36,000        145        21  

Total financial assets risk

              571,154        -        -        -  

Total loan commitments and financial guarantees

              182,969        168,099        13,947        922  

Loan commitments given

     28        135,927        126,165        9,533        228  

Financial guarantees given

     28        11,146        9,508        1,356        283  

Other commitments given

     28        35,896        32,426        3,058        411  

Total maximum credit exposure

        754,123           


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P.20

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

 

Maximum credit risk exposure (Millions of Euros)

 

     
     Notes      December 2020        Stage 1        Stage 2        Stage 3  

Financial assets held for trading

          68,075           

Debt securities

   9      23,970           

Equity instruments

   9      11,458           

Loans and advances

   9      32,647           

Non-trading financial assets mandatorily at fair value through

profit or loss

          5,198           

Loans and advances to customers

   10      709           

Debt securities

   10      356           

Equity instruments

   10      4,133           

Financial assets designated at fair value through profit or loss

   11      1,117           

Derivatives (trading and hedging)

          46,302           

Financial assets at fair value through other comprehensive income

          69,537                             

Debt securities

        68,404        67,995        410        -  

Equity instruments

   12      1,100        -        -        -  

Loans and advances to credit institutions

   12      33        33        -        -  

Financial assets at amortized cost

          379,857        334,552        30,607        14,698  

Loans and advances to central banks

        6,229        6,229        -        -  

Loans and advances to credit institutions

        14,591        14,565        20        6  

Loans and advances to customers

        323,252        277,998        30,581        14,672  

Debt securities

        35,785        35,759        6        20  

Total financial assets risk

          570,084                             

Total loan commitments and financial guarantees

          179,440        165,726        12,682        1,032  

Loan commitments given

   28      132,584        124,104        8,214        265  

Financial guarantees given

   28      10,665        9,208        1,168        290  

Other commitments given

   28      36,190        32,414        3,300        477  

Total maximum credit exposure

        749,524           

The changes during the period between January 1 and March 31, 2021 and the year ended December 31, 2020 of impaired financial assets (financial assets and guarantees given) are as follows:

 

 

Changes in impaired financial assets and guarantees given (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Balance at the beginning

     15,478        16,770  
   

Additions

     1,916        9,533  
   

Decreases (*)

     (925)        (5,024)  

Net additions

     991        4,509  
   

Amounts written-off

     (794)        (3,603)  
   

Exchange differences and other

     (36)        (968)  

Discontinued operations

     -        (1,230)  

Balance at the end

     15,639        15,478  

 

  (*)

Reflects the total amount of impaired loans derecognized from the condensed consolidated balance sheet throughout the period as a result of mortgage recoveries and real estate assets received in lieu of payment as well as monetary recoveries.

Loss allowances

Below are the changes during the period between January 1 and March 31, 2021 and the year ended December 31, 2020 in the loss allowances recognized on the accompanying consolidated balance sheets to cover the estimated loss allowances in loans and advances of financial assets at amortized cost:


Table of Contents

P.21

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Changes in loss allowances of loans and advances at amortized cost (Millions of Euros)

 

      

March

2021

 

 

      

December

2020

 

 

Balance at the beginning of the period

     (12,141)          (12,427)  

Increase in loss allowances charged to income

     (2,566)          (9,274)  

Stage 1

     (608)          (1,699)  

Stage 2

     (629)          (2,169)  

Stage 3

     (1,330)          (5,407)  

Decrease in loss allowances charged to income

     1,643          4,381  

Stage 1

     508          1,485  

Stage 2

     425          1,077  

Stage 3

     710          1,818  

Transfer to written-off loans, exchange differences and other

     857          4,056  

Transfer to discontinued operations

     -          1,123  

Closing balance

     (12,207)          (12,141)  

 

7.

Fair value of financial instruments

The criteria and valuation methods used to calculate the fair value of financial assets as of March 31, 2021 do not differ significantly from those included of Note 8 of the consolidated Financial Statements for the year ended December 31, 2020.

The techniques and unobservable inputs used for the valuation of the financial instruments classified in the fair value hierarchy as Level 3, do not significantly differ from those detailed in Note 8 of the consolidated Financial Statements for the year 2020.

The effect on the consolidated income statements and on the consolidated equity, resulting from changing the main assumptions used in the valuation of Level 3 financial instruments for other reasonably possible assumptions, does not differ significantly from that detailed in Note 8 of the consolidated Financial statements for the year 2020.

Below is a comparison of the carrying amount of the Group’s financial instruments in the accompanying consolidated balance sheets and their respective fair values as of March 31, 2021 and December 31, 2020:

 

Fair value and carrying amount (Millions of Euros)

 

   
            March 2021       December 2020  
       Notes         
Carrying
Amount
 
 
       Fair Value       Carrying Amount          Fair Value  

ASSETS

                                                 

Cash, cash balances at central banks and other demand deposits

     8          54,950          54,950       65,520          65,520  

Financial assets held for trading

     9          101,050          101,050       108,257          108,257  

Non-trading financial assets mandatorily at fair value through profit or loss

     10          5,488          5,488       5,198          5,198  

Financial assets designated at fair value through profit or loss

     11          1,110          1,110       1,117          1,117  

Financial assets at fair value through other comprehensive income

     12          72,771          72,771       69,440          69,440  

Financial assets at amortized cost

     13          363,754          368,827       367,668          374,267  

Hedging derivatives

          1,696          1,696       1,991          1,991  

LIABILITIES

                                                 

Financial liabilities held for trading

     9          81,253          81,253       86,488          86,488  

Financial liabilities designated at fair value through profit or loss

     11          9,714          9,714       10,050          10,050  

Financial liabilities at amortized cost

     20          475,813          477,002       490,606          491,006  

Hedging derivatives

          2,524          2,524       2,318          2,318  

The following table shows the financial instruments in the accompanying consolidated balance sheets, broken down by the measurement technique used to determine their fair value as of March 31, 2021 and December 31, 2020:


Table of Contents

P.22

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Fair Value of financial Instruments by Levels (Millions of Euros)

 

       March 2021        December 2020  
       Level 1        Level 2        Level 3        Level 1        Level 2        Level 3

ASSETS-

                                                     

Cash, cash balances at central banks and other demand deposits

     54,794        -        156        65,355        -        165  

Financial assets held for trading

     30,830        66,784        3,437        32,555        73,856        1,847  

Loans and advances

     1,108        29,395        3,194        2,379        28,659        1,609  

Debt securities

     13,053        11,049        69        12,790        11,123        57  

Equity instruments

     11,448        20        49        11,367        31        60  

Derivatives

     5,220        26,320        125        6,019        34,043        121  

Non-trading financial assets mandatorily at fair value through profit or loss

     4,069        346        1,074        3,826        381        992  

Loans and advances

     204        -        553        210        -        499  

Debt securities

     -        289        28        4        324        28  

Equity instruments

     3,864        56        493        3,612        57        465  

Financial assets designated at fair value through profit or loss

     952        159        -        939        178        -  

Debt securities

     952        159        -        939        178        -  

Financial assets at fair value through other comprehensive income

     62,823        9,382        566        60,976        7,866        598  

Loans and advances

     28        -        -        33        -        -  

Debt securities

     61,676        9,347        465        59,982        7,832        493  

Equity instruments

     1,120        35        101        961        34        105  

Financial assets at amortized cost

     33,819        15,888        319,120        35,196        15,066        324,005  

Hedging derivatives

     46        1,642        8        120        1,862        8  

LIABILITIES-

                                                     

Financial liabilities held for trading

     25,163        54,171        1,919        27,587        58,045        856  

Deposits

     8,412        28,222        1,443        8,381        23,495        621  

Trading derivatives

     6,140        25,928        477        7,402        34,046        232  

Other financial liabilities

     10,611        21        -        11,805        504        3  

Financial liabilities designated at fair value through profit or loss

     -        8,249        1,465        -        8,558        1,492  

Customer deposits

     -        873        -        -        902        -  

Debt certificates

     -        2,515        1,465        -        3,038        1,492  

Other financial liabilities

     -        4,861        -        -        4,617        -  

Financial liabilities at amortized cost

     94,943        236,364        145,695        90,839        255,278        144,889  

Derivatives – Hedge accounting

     44        2,451        29        53        2,250        15  


Table of Contents

P.23

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

8.        Cash, cash balances at central banks and other demand deposits

 

Cash, cash balances at central banks and other demand deposits (Millions of Euros)

 

                       Notes                        

March

2021

 

 

      

December

2020

 

 

 Cash on hand

 

       

 

5,970

 

 

 

      

 

6,447

 

 

 

 Cash equivalent balances at central banks (*)

 

       

 

44,549

 

 

 

      

 

53,079

 

 

 

 Other financial assets

 

       

 

4,431

 

 

 

      

 

5,994

 

 

 

Total

     7        54,950          65,520  

(*) The variation is mainly due to a decrease in the balances of BBVA, S.A. in Bank of Spain

9.         Financial assets and liabilities held for trading

 

Financial assets and liabilities held for trading (Millions of Euros)

 

                       Notes                        

March

2021

 

 

    

December

2020

 

 

ASSETS

                          

 Derivatives (*)

 

       

 

31,665

 

 

 

    

 

40,183

 

 

 

 Equity instruments

 

    

 

6.2

 

 

 

    

 

11,518

 

 

 

    

 

11,458

 

 

 

 Debt securities

 

    

 

6.2

 

 

 

    

 

24,171

 

 

 

    

 

23,970

 

 

 

 Loans and advances

 

    

 

6.2

 

 

 

    

 

33,697

 

 

 

    

 

32,647

 

 

 

Total assets

     7        101,050        108,257  

LIABILITIES

                          

 Derivatives (*)

 

       

 

32,544

 

 

 

    

 

41,680

 

 

 

 Short positions

 

       

 

10,632

 

 

 

    

 

12,312

 

 

 

 Deposits

 

       

 

38,077

 

 

 

    

 

32,496

 

 

 

Total liabilities

     7        81,253        86,488  

(*) The variation is mainly due to the evolution of derivatives in BBVA, S.A.

10.        Non-trading financial assets mandatorily at fair value through profit or loss

 

Non-trading financial assets mandatorily at fair value through profit or loss (Millions of Euros)

 

 

                     Notes                      

March

2021

 

 

    

December

2020

 

 

 Equity instruments

 

   6.2

 

    

 

4,414

 

 

 

    

 

4,133

 

 

 

 Debt securities

 

   6.2

 

    

 

317

 

 

 

    

 

356

 

 

 

 Loans and advances to customers

 

   6.2

 

    

 

758

 

 

 

    

 

709

 

 

 

Total

   7      5,488        5,198  


Table of Contents

P.24

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

11.         Financial assets and liabilities designated at fair value through profit or loss

 

Financial assets and liabilities designated at fair value through profit or loss (Millions of Euros)

 

 

                     Notes                      

March

2021

 

 

    

December

2020

 

 

ASSETS

                      

 Debt securities

   6.2 / 7      1,110        1,117  

LIABILITIES

                      

 Customer deposits

        873        902  

 Debt certificates issued

        3,979        4,531  

 Other financial liabilities: Unit-linked products

        4,861        4,617  

 Total liabilities

   7      9,714        10,050  

12.         Financial assets at fair value through other comprehensive income

 

Financial assets at fair value through other comprehensive income (Millions of Euros)

 

 

                       Notes                        

March

2021

 

 

    

December

2020

 

 

 Equity instruments

     6.2        1,255        1,100  

 Debt securities

        71,488        68,308  

 Loans and advances to credit institutions

     6.2        28        33  

 Total

     7        72,771        69,440  

        Of which: loss allowances of debt securities

        (74)        (97)  

13.         Financial assets at amortized cost

 

 Financial assets at amortized cost (Millions of Euros)

 

                       Notes                        

March

2021

 

 

    

December

2020

 

 

 Debt securities

        36,108        35,737  

 Loans and advances to central banks

        5,458        6,209  

 Loans and advances to credit institutions

        11,505        14,575  

 Loans and advances to customers

        310,683        311,147  

Government

        18,923        19,391  

Other financial corporations

        8,823        9,817  

Non-financial corporations

        137,157        136,424  

Other

        145,780        145,515  

Total

     7        363,754        367,668  

        Of which: impaired assets of loans and advances to customers (*)

        14,933        14,672  

        Of which: loss allowances of loans and advances (*)

        (12,207)        (12,141)  

        Of which: loss allowances of debt securities

        (58)        (48)  

 

  (*)

See Note 6.2


Table of Contents

P.25

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

14.         Investments in joint ventures and associates

 

Joint ventures and associates (Millions of Euros)

 

 

      

March

2021

 

 

    

December

2020

 

 

Joint ventures

     151        149  

Associates

     1,265        1,288  

Total

     1,416        1,437  

15.         Tangible assets

 

Tangible assets. Breakdown by type (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

 Property, plant and equipment

     7,490        7,601  

 For own use

     7,195        7,311  

Land and Buildings

     4,393        4,380  

Work in Progress

     47        52  

Furniture, Fixtures and Vehicles

     5,498        5,515  

Right to use assets

     3,065        3,061  

Accumulated depreciation

     (5,400)        (5,275)  

Impairment

     (409)        (422)  

 Leased out under an operating lease

     295        290  

Assets leased out under an operating lease

     345        345  

Accumulated depreciation

     (50)        (54)  

Impairment

     -        -  

 Investment property

     214        222  

Building rental

     175        198  

Other

     4        4  

Right to use assets

     133        123  

Accumulated depreciation

     (46)        (42)  

Impairment

     (52)        (60)  

Total

     7,703        7,823  

16.         Intangible assets

 

Intangible assets (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Goodwill

     896        910  

Other intangible assets

     1,401        1,435  

Total

     2,297        2,345  

The composition of the balance of this caption of the accompanying condensed consolidated balance sheets, according to the nature of the items that comprise them, is shown below:

 

Other intangible assets (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Computer software acquisition expense

     1,190        1,202  

Other intangible assets with an infinite useful life

     9        12  

Other intangible assets with a definite useful life

     202        221  

Total

     1,401        1,435  


Table of Contents

P.26

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

17.         Tax assets and liabilities

 

Tax assets and liabilities (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Tax assets

                 

 Current tax assets

     942        1,199  

 Deferred tax assets

     15,443        15,327  

Total tax assets

     16,385        16,526  

Tax liabilities

                 

 Current tax liabilities

     361        545  

 Deferred tax liabilities

     1,841        1,809  

Total tax liabilities

     2,202        2,355  

18.         Other assets and liabilities

 

 Other assets and liabilities: (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

ASSETS

                 

 Inventories

     517        572  

 Transactions in progress

     81        160  

 Accruals

     859        756  

 Other items

     736        1,025  

Total

     2,193        2,513  

LIABILITIES

                 

 Transactions in progress

     61        75  

 Accruals

     1,603        1,584  

 Other items

     1,875        1,144  

Total

     3,540        2,802  

19.         Non-current assets and disposal groups classified as held for sale

 

Non-current assets and disposal groups classified as held for sale. Breakdown by items (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

 Foreclosures and recoveries

     1,384        1,398  

 Other assets from tangible assets

     501        480  

 Companies held for sale (*)

     87,381        84,792  

 Accrued amortization (**)

     (93)        (89)  

 Impairment losses

     (609)        (594)  

Total non-current assets and disposal groups classified as held for sale

 

     88,564        85,987  

 Companies held for sale (*)

     77,653        75,446  

Total liabilities included in disposal groups classified as held for sale

 

     77,653        75,446  

 

   (*)

The balance corresponds mainly to the sale of the stake in BBVA USA (see Note 3).

 

  (**)

Corresponds to the accumulated depreciation of assets before their classification as “Non-current assets and disposal groups classified as held for sale”.

Assets and liabilities from discontinued operations

As mentioned in Note 1.3 and 3, in 2020 the agreement for the sale of the BBVA subsidiary in the United States was announced. The assets and liabilities corresponding to the companies for sale were reclassified to the headings “Non-current assets and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as held for sale” of the condensed consolidated balance sheet as of March 31, 2021 and December 31,


Table of Contents

P.27

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

2020; and the earnings of these companies as of March 31, 2021 and 2020 were classified under the heading “Profit (loss) after tax from discontinued operations” of the accompanying condensed consolidated income statements (see Note 1.3).

The condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, and the condensed consolidated income statements and the condensed consolidated statements of cash flows for the first three months of 2021 and 2020 are provided below:

Condensed consolidated balance sheets of the companies held for sale in the United States subsidiary for the periods ended March 31, 2021 and December 31, 2020

 

CONDENSED ASSETS (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Cash, cash balances at central banks and other demand deposits

     12,358        11,368  

Financial assets held for trading

     736        821  

Non-trading financial assets mandatorily at fair value through profit or loss

     15        13  

Financial assets at fair value through other comprehensive income

     4,918        4,974  

Financial assets at amortized cost

     64,589        61,558  

Derivatives - hedge accounting

     8        9  

Tangible assets

     827        799  

Intangible assets

     2,032        1,949  

Tax assets

     362        360  

Other assets

     1,477        1,390  

Non-current assets and disposal groups classified as held for sale

     15        16  

TOTAL ASSETS

     87,337        83,257  
                  

CONDENSED LIABILITIES (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Financial liabilities held for trading

     100        98  

Financial liabilities at amortized cost

     76,623        73,132  

Derivatives - hedge accounting

     1        2  

Provisions

     163        157  

Tax liabilities

     223        201  

Other liabilities

     543        492  

TOTAL LIABILITIES

     77,653        74,082  
                  

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Millions of Euros)

 

      

March

2021

 

 

    

December

2020

 

 

Actuarial gains (losses) on defined benefit pension plans

     (71)        (66)  

Hedge of net investments in foreign operations (effective portion)

     (432)        (432)  

Foreign currency translation

     1,223        801  

Hedging derivatives. Cash flow hedges (effective portion)

     222        250  

Fair value changes of debt instruments measured at fair value through other comprehensive income

     58        70  

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     1,000        622  


Table of Contents

P.28

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

Condensed consolidated income statements of companies held for sale in the United States subsidiary for the periods ended March 31, 2021 and 2020

 

CONDENSED INCOME STATEMENTS (Millions of Euros)

 

      

March

2021

 

 

      

March

2020

 

 

Interest and other income

     595          722  

Interest expense

     (37)          (190)  

NET INTEREST INCOME

     558          532  

Dividend income

     1          1  

Fee and commission income

     163          181  

Fee and commission expense

     (48)          (48)  

Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net

     (2)          24  

Gains (losses) on financial assets and liabilities held for trading, net

     29          41  

Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net

     1          1  

Gains (losses) from hedge accounting, net

     (1)          7  

Exchange differences, net

     (4)          (23)  

Other operating income

     5          5  

Other operating expense

     (16)          (17)  

GROSS INCOME

     687          706  

Administration costs

     (387)          (388)  

Depreciation and amortization

     (47)          (52)  

Provisions or reversal of provisions

     4          (13)  

Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification

     (24)          (411)  

NET OPERATING INCOME

     233          (158)  

Impairment or reversal of impairment on non-financial assets

     -          (2,084)  

Gains (losses) on derecognition of non-financial assets and subsidiaries, net

     (1)          -  

Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations

     1          -  

PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS

     232          (2,242)  

Tax expense or income related to profit or loss from continuing operations

     (55)          18  

PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS

     177          (2,224)  

Profit (loss) after tax from discontinued operations

     -          -  

PROFIT (LOSS) FOR THE PERIOD

     177          (2,224)  

ATTRIBUTABLE TO MINORITY INTEREST (NON-CONTROLLING INTEREST)

     -          -  

ATTRIBUTABLE TO OWNERS OF THE PARENT

     177          (2,224)  

Condensed consolidated statements of cash flows of companies held for sale in the United States subsidiary for the periods ended March 31, 2021 and 2020

 

CONDENSED STATEMENTS OF CASH FLOWS (Millions of Euros)

 

      

March

2021

 

 

      

March

2020

 

 

A) CASH FLOWS FROM OPERATING ACTIVITIES

     531          (1,051)  

B) CASH FLOWS FROM INVESTING ACTIVITIES

     (29)          (29)  

C) CASH FLOWS FROM FINANCING ACTIVITIES

     (15)          (18)  

D) EFFECT OF EXCHANGE RATE CHANGES

     503          112  

(INCREASE/DECREASE) NET CASH AND CASH EQUIVALENTS (A+B+C+D)

     990          (986)  


Table of Contents

P.29

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

20.

Financial liabilities at amortized cost

 

20.1

Breakdown of the balance

 

Financial liabilities measured at amortized cost (Millions of Euros)

 

 
       Notes         

March

2021

 

 

      

December

2020

 

 

Deposits

          405,187          415,467  

Deposits from central banks

          50,156          45,177  

Demand deposits

          133          163  

Time deposits and other

          42,232          38,274  

Repurchase agreements

          7,791          6,740  

Deposits from credit institutions

          23,967          27,629  

Demand deposits

          10,251          7,196  

Time deposits and other

          8,938          16,079  

Repurchase agreements

          4,779          4,354  

Customer deposits

          331,064          342,661  

Demand deposits

          260,988          266,250  

Time deposits and other

          69,298          75,666  

Repurchase agreements

          778          746  

Debt certificates

          57,418          61,780  

Other financial liabilities

                13,208          13,358  

Total

     7          475,813          490,606  

The amount recorded in Deposits from central banks - Time deposits includes the provisions of the TLTRO III facilities of the European Central Bank, mainly BBVA S.A. amounting to €38,692 and €35,032 million as of March 31, 2021 and December 31, 2020, respectively.

The positive remuneration currently being generated by the drawdowns of the TLTRO III facilities is recorded under the heading of “Interest income and other similar income – other income” in the condensed consolidated income statements and amounts to €88 million and €23 million as of March 31, 2021 and 2020 (see Note 29.1).


Table of Contents

P.30

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

20.2

Debt certificates

 

Debt certificates (Millions of Euros)

 

      

March

2021

 

 

      

December

2020

 

 

In Euros

     37,962          42,462  

Promissory bills and notes

     655          860  

Non-convertible bonds and debentures

     14,363          14,538  

Covered bonds (*)

     11,502          13,274  

Hybrid financial instruments (**)

     417          355  

Securitization bonds

     2,362          2,538  

Wholesale funding

     370          2,331  

Subordinated liabilities

     8,293          8,566  

Convertible perpetual certificates

     4,500          4,500  

Non-convertible preferred stock

     -          159  

Other non-convertible subordinated liabilities

     3,793          3,907  

In foreign currencies

     19,454          19,318  

Promissory bills and notes

     1,100          1,024  

Non-convertible bonds and debentures

     8,465          8,691  

Covered bonds (*)

     219          217  

Hybrid financial instruments (**)

     1,172          455  

Securitization bonds

     3          4  

Wholesale funding

     1,091          1,016  

Subordinated liabilities

     7,404          7,911  

Convertible perpetual certificates

     1,709          1,633  

Non-convertible preferred stock

     -          35  

Other non-convertible subordinated liabilities

     5,695          6,243  

Total

     57,418          61,780  

 

  (*)

Including mortgage-covered bonds.

 

  (**)

Corresponds to structured note issuance whose underlying risk is different from the underlying risk of the derivative.

Most of the foreign currency issues are denominated in U.S. dollars.

 

20.3

Other financial liabilities

 

Other financial liabilities (Millions of Euros)

 

      

March

2021

 

 

      

December

2020

 

 

Lease liabilities

     2,623          2,674  

Creditors for other financial liabilities

     2,943          2,408  

Collection accounts

     2,623          3,276  

Creditors for other payment obligations

     5,019          5,000  

Total

     13,208          13,358  


Table of Contents

P.31

Translation of the Interim Consolidated Financial Statements originally issued in Spanish and prepared in accordance with IAS 34, as adopted by the European Union. In the event of a discrepancy, the Spanish-language version prevails.

 

21.

Assets and liabilities under insurance and reinsurance contracts

As of March 31, 2021 and December 31, 2020, the balance under the heading “Assets under reinsurance and insurance contracts” in the accompanying condensed consolidated balance sheets amounted to €294 million and €306 million, respectively.

 

Liabilities under insurance and reinsurance contracts (Millions of Euros)

 

      

March

2021

 

 

      

December

2020

 

 

Mathematical reserves

     9,018          8,731  

Provision for unpaid claims reported

     667          672  

Provisions for unexpired risks and other provisions

     641          548  

Total

     10,325          9,951  

 

22.

Pr