Carlos Torres (Salamanca, 1966) chaired the board of directors of BBVA in Barcelona this week, where he also met with Catalan businessmen. From the entity's headquarters in Catalonia, in the center of Barcelona, the bank's president stresses that we should "focus on how we stimulate investment" and assesses that the electoral advance will bring clarity to the political scene. He defends artificial intelligence as a second industrial revolution, although it is not without risks, and highlights that Catalonia is a key market for the group.
You press the evolution of the economy in the first line. How do you see it and what can happen in the coming months?
We see a lot of uncertainty, but with some data that shows greater strength than we expected. Especially in the labor market, with very good enrollment numbers and very significant growth in exports, which are making GDP perform much better than we expected a few months ago. The key is in inflation. How we managed to contain it and keep long-term inflation expectations anchored. There are also external elements of uncertainty, geopolitical tensions, which have a great influence. And the other element that I would highlight is the importance of fiscal consolidation after the covid effort and the Next Generation funds, which are helping the economy grow with an expansive fiscal policy. But if we look back, in Spain in the last 15 years GDP per capita has grown very little, only 3%. In fact, we have retraced our path towards European convergence.
In this context, the Government imposes a special tax on banks...
I have talked a lot about the tax since it was announced. And I have spoken very clearly: it seems to us a very bad idea to put a tax on a neuralgic activity, which is in the circulatory system of the economy. Excise taxes make sense for activities that generate a negative externality and that you want to eliminate. Now, I sympathize with the need to obtain resources, to advance in the fiscal consolidation of which I spoke at the beginning, and also the need to help the most vulnerable. But doing it with a special tax on a sector that is at the heart of the economy seems like a very bad idea to me.
Despite the problems, delinquency has been at its lowest since 2008. Do you foresee a worsening in the near future?
It is foreseeable that it will increase little by little, but we are now in a very good situation. It has nothing to do with what we had ten or fifteen years ago, because now the indebtedness of families and companies is much lower than it was then. If there is something that I think we should focus more on, it is how we stimulate investment, because investment in the fund is what ends up creating opportunities, employment, economic activity and everything else comes from there.
Interest rates have risen and have had an impact on mortgages, but not on the remuneration of deposits. Because?
It is a consequence of the excess liquidity that exists right now. In the same way that when interest rates were negative, the client was not transferred, the same thing happens in a cycle of rising interest rates. We are focusing on giving our clients profitability options through good product alternatives, for example, fixed income.
And how does the surprise of the electoral advance impact this scenario?
I don't have many comments to make. There is a positive element that the unknowns are cleared up about what the government of Spain will be in the next four years and the economic policies that it will follow. And I think it's good that it clears up as soon as possible. The normal schedule would have been nice too. I don't think there will be a big difference, but it is good that the institutions work in Spain, that democracy works and that we are clear about the scenario as soon as possible.
And do it in the middle of the European presidency?
It is not the first time it happens. I hope that it does not have too much of an impact and that the agenda that was planned continues to be promoted, because there are elements that are of enormous importance. For example, the relationship between Europe and Latin America, where Spain is so important and companies like ours have a very relevant presence. It is essential that Europe regain leadership, compared to China or the United States, in the relationship with a part of the world that is very close to us. From Mexico to Patagonia.
What are the main challenges of the Spanish economy, the most notable pending tasks?
Labor market, productivity, investment in education and productive investment, which is what generates employment and wealth. We see the opportunities in the transition to a decarbonized world, where a lot of investment is needed and much of that investment is already profitable. And then digitization, which we are already well advanced in, and taking advantage of technology and innovation in broader terms. Productivity is one of the pending subjects.
What do you think about the advances in artificial intelligence? Very worrying messages have dominated lately...
I see the development of this technology as very positive, because it will mean a renewed boost to the productivity of everyone who carries out intellectual tasks. To some extent it is like a second industrial revolution, even if it sounds very grandiose. If the first helped us to have increased physical powers that far exceeded animal traction or what man could have on his own, artificial intelligence gives us that extra power in intellectual tasks. I think it will have a very fast and very positive impact on improving productivity in daily work. That will mean that at the same time you can do many more things and also better, that you can do them with more enjoyment, because you are going to eliminate the part of the task that can be most thankless, from processing e-mail to writing documents or reading information. Now, it has huge risks and we are in an early stage of deploying this technology. The risks range from the fact that you cannot trust everything the machine tells you, because it can create content that is not true. From then until the biases of past decisions are reproduced in the algorithms. It is not that the machine creates biases, but that it reproduces those that already exist and can perpetuate them. And then, the risk of it being manipulated by third parties. I am more concerned about the risk of bad actors than the risk of robots coming to take our jobs. This will help the progress of humanity, although it also has its risks. The key is how we do to make the most of that technology.
Do they use it at BBVA?
We proceed cautiously, but we are starting to use the technology in many applications. It is a technology with enormous potential, with many risks, but it is the future. You have to assume those risks, manage them and embrace technology for all the positive things it will bring us.
One of those risks is that sensitive information is leaked. Have they valued it?
Yes. There is a risk of loss of secrets, of confidential company information, without a doubt. But it is not different from the risk that there has always been if one publishes on the Internet. In any case, I think it is one of the easiest risks to manage. I am more concerned, as a society, with the increasing difficulty of telling the true from the false. And to the extent that there are bad actors, they will surely go ahead. Technology is usually developed before protections to defend against misuse.
We have experienced turbulence due to the collapse of banks in the United States and Credit Suisse in Europe. Does that crisis end it?
I believe that the situation we have experienced are isolated cases. There may be some more among the regional banks in the United States, but we have not seen that carry over to other regions, not in Europe, not in the markets that we are in, in emerging markets, in Latin America, for example. The situation of the banks is very solid, the fundamentals are very solid and the episodes have been very specific to entities that had basic problems, of business model. This highlights the importance of diversification, of a solid business model throughout the cycle, not based on a conjunctural situation, in this case of interest rates that were very low and that gave rise to positions that were gradually very large in business models that, as soon as interest rates reversed, were seen to be unsustainable.
How do you see the Spanish banking sector? Can there be any more fusion?
There has already been a very important consolidation process. There could be some more operation, always. But I think that most of the entities are now focused on organic growth and taking advantage of the growth opportunities associated with decarbonization, digitalization and innovation. This is certainly our case, our strategy is very well limited to that organic growth in the countries where we are. We also bet on some new countries taking advantage of digital models. This is the case in Italy or the digital banks we have in Brazil or the United Kingdom, but mergers are clearly in the background.
So, is the merger with Sabadell definitively ruled out?
Yeah, we don't look back. We look forward with that focus on organic growth.
Are you concerned about the situation in Turkey, where you control one of the big banks, Garanti?
The economic policies put in place by President Erdogan, after the last elections, will be key to correcting the macroeconomic imbalances that currently exist, which are very relevant. We see Turkey as an enormously attractive country, very similar in many of its features to Mexico, another large country. In the case of Turkey, with a very dynamic economy, heavily invested in the private sector, with very low indebtedness, both for families and companies, there is, therefore, a penetration of credit over GDP that is one of the lowest in the world, which means that there is a very high bank penetration path.
But inflation is a serious problem...
In the short term, Turkey has accumulated imbalances, especially very high inflation and an external imbalance that means that its foreign currency reserves have fallen very quickly. And that is a vulnerability. All of this has had an impact on the BBVA share price at certain times, but in fact we are the Spanish bank with the best performance on the stock market this year, above the European average.
His other great international bet is Mexico.
We are growing a lot there, we are the largest bank, but our intention is to continue gaining market share. Mexico has great potential in terms of size, youth of the population, low credit penetration, internal dynamism and then two things that give it a spectacular tailwind. One, the tendency to make production chains. With the current geopolitical tensions, Mexico is very well placed to gain market share from China and other Asian countries in supplying the United States. It has a free trade agreement with Canada and the US, and that gives a very important boost to US investment in Mexico. And a second factor that multiplies the effect is investment in decarbonization, which in the US has resulted, among other things, in the Inflation Reduction Act, a good tool from which we could copy things.
BBVA has played an important role in the concentration process of the financial sector in Catalonia and maintains a prominent position here. What assessment do you make of that bank bet?
It has been enormously positive, without a doubt. At that time, we considered Catalonia as a key market, a market in which to grow. And we made an incredible leap in the ranking and in market share that has positioned us as the second bank, with a market share clearly higher than 20% for individuals and almost 20% for companies. We are growing strongly, here and throughout Spain, in number of clients. Last year we gained 11.3 million customers across the group; in Spain, of the order of a million. And the rate of growth in this first quarter has continued to be very important, both in the group and in Spain and Catalonia. The new financing for the business sector in Catalonia in 2022 has been 16,000 million euros.
