Peio Belausteguigoitia (Bilbao, 1973), who has worked in various positions at BBVA since 1997, has been managing the bank’s business in Spain since 2019. Passionate about the Athletic Club, he is part of a 13-time winning family saga. Between 1909 and 1923, Copas del Rey starred as the “Spanish fury” inspired by Jose Maria Belausteguigoitia, aka “Belauste”; While this manager confirms that variable mortgage installments will begin to decline this year, he notes that it is not clear that deposit returns will increase much, given the liquidity of institutions. In his view, the “strength” of the Spanish economy in the context of interest rate hikes “very sudden and in a very short time” stands out.
After an above-expected 2023, what expectations do you have for 2024?
Spain grew by 2.5 percent last year and Catalonia by 2.7 percent. For this year, our research service predicts around 1.5% for Spain and 1.4% for Catalonia. It is also important to underline that the Spanish economy will grow twice as much as the European average. And by 2025 we foresee 2.4% for Spain and 2.7% for Catalonia.
¿What about the engine?
This is tourism and it also explains a bit of the difference in Catalonia in 2023. Looking to 2025, one of the driving forces should be the improvement of Europe’s environment, as it is an important trading partner.
So how will the slowdown in 2024 affect the bank?
The year 2023 was heavily affected by interest rate increases, which led to deleveraging of the system as a whole, which was also what was sought with the change in monetary policy to stop inflation. The mortgage segment fell 3.2% across the system and 2.2% at BBVA. The decrease in corporate business was 4.8 percent, and in BBVA it was 1.5 percent. The only part that grew was consumer loans, with 2.6% across the system and 5.9% in BBVA. With this, we got a share from mortgages, consumption and companies.
“I’m seeing more easing of interest rates and so more easing around mortgage payments than anything else.”
What about by 2024?
We expect there will still be deleveraging in mortgages and corporates, but at a much smaller magnitude than in 2023. Interest rates peak in 2024.
So when will mortgage payments start falling?
It depends on each specific situation. The decline in variable interest rates will be gradual throughout 2024. Logically, installments will decrease according to the decline experienced by the reference index Euribor. I would like to emphasize that the economy showed a very strong performance in an environment where there were very sharp interest increases in a very short time.
“Financial institutions in Spain have a comfortable liquidity position, which ultimately largely determines the tendency to recover liabilities.”
And the guilt didn’t increase rapidly…
TRUE.
Because?
There are several factors. One of these is debt levels. It has nothing to do with where families and companies were 10 years ago. At the start of the 2008 crisis, private debt levels in Spain were well above the European average. Today we are down, so there is a greater capacity for resistance to interest rate increases.
Is this the only element?
No. Employment continued and increased. There are records of those who deposit SSI premiums. This is a fundamental factor that stimulates the economy. Companies created investment, growth and therefore employment. It is also true that there is another positive factor in the interest rate increase: savings from the Covid period.
Are there more factors?
Salary increases are tied to inflation. And another factor: The last mortgages formalized in the five years before interest rates rose included a component of new fixed-rate billing. And they had less impact.
Banks are accused of increasing loans more than deposits…
Financial institutions in Spain have a comfortable liquidity position, which ultimately largely determines their propensity to pay debt.
In other words, they lack incentives to install them…
As it stands and looking ahead, I see an easing in the interest rate and therefore an easing in the mortgage payment more than anything else.
BBVA has always been committed to technology…
We want to provide the best experience and customer service possible. This means giving it to them whenever they want, 24 hours a day, seven days a week, and letting the customer choose from the different interaction channels we offer. Technology is the tool that enables BBVA to deliver different and better experiences in terms of convenience. It’s about bringing different experiences and financial functions to the customer, but they often go further. What we want from you is to have the bank in its entirety in your hand, on your mobile phone, but also to have a very strong personal channel, another remote channel or by phone.
Do they do all this with their own resources or do they turn to startups??
We have 3,000 professionals in Spain in software development, which is one of the bank’s strategic priorities. There are more than 20,000 people at the group level. We often have agreements with suppliers around the world regarding the functions we offer. In the startup world, in a completely different area, we have a business unit, but a different business unit. It is called BBVA Spark, which we launched a year and a half ago, and is currently available in Spain, Mexico, Colombia and Argentina. Provides financial services and products to companies; Rather than ‘start-ups’, these companies are companies where technology is fundamentally leveraging their value proposition.
What about in terms of artificial intelligence?
There are approximately 3,300 people in our group dedicated to data science, and 800 of them work on functionalities and the development of new functions or improvement of existing functions based on artificial intelligence. In any case, this is in its early stages. It’s one more tool than what we mentioned before, that is, another lever to be able to offer different functions that are positive and useful for customers.
“The sector makes a fair and equitable contribution to public revenue, without the need for a new increased tax on the amount we already pay for our activity.”
They also emphasize the importance of financing sustainability…
The basic idea is to accompany and advise customers, both individuals and companies. Energy transformation will continue to be on the strategic agenda of all companies. Financial institutions play an important role in this, a fundamental role. It has an increasing weight in global turnover.
The new tax approved by the government was not good for the sector…
The financial sector is competitive and efficient and does not enjoy extraordinary profits. It provides a fair and equitable contribution to public revenue without the need for a new increased tax on the amount we already pay for our activity. It is important for businesses to be profitable as this is what leads to the development of the economy and society. 60 percent of our income of around 29.5 billion is basically divided into three items. One is salaries. BBVA has 121,000 employees, 27,000 of whom are in Spain. The second is payment to suppliers of all kinds who create jobs, growth and wealth. The third is related to loans given to customers. The remaining 40%, approximately 12,000 million, is distributed to third parties. One is for the payment of taxes; another to compensate shareholders, of whom we have 800,000; and another to strengthen the bank’s capital and solvency.