Carlos Torres (Salamanca, 1966) chaired the BBVA board of directors in Barcelona this week, where he also met with Catalan businessmen. From the entity's headquarters in Catalonia, in the center of Barcelona, the president of the bank emphasizes that we should "put the focus on how we boost investment" and values that the electoral progress will bring clarity to the political scene. He defends artificial intelligence as a second industrial revolution, even if it is not without risks, and highlights that Catalonia is a key market for the group.
You push the evolution of the economy at the forefront. How do they see it and what might happen in the coming months?
We see a lot of uncertainty, but with data showing greater strength than we expected. Especially in the labor market, with membership numbers that are very good and with very important growth in exports, which are making the GDP behave much better than we expected a few months ago. The key is inflation. How do we manage to contain it and keep long-term inflation expectations anchored. There are also external elements of uncertainty, geopolitical tensions, which greatly influence it. And the other element 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 further back, in Spain over the last 15 years GDP per capita has grown very little, only 3%. In fact, we have broken the path of European convergence.
In this context, the Government imposes a special tax on banking...
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 that you want to eliminate. Now, I sympathize with the need to obtain resources, to advance in the fiscal consolidation that I spoke about at the beginning, and the need also to help the most vulnerable. But doing it with a special tax on a sector that is at the heart of the economy seems to me a very bad idea.
Despite the problems, delinquencies are at their lowest since 2008. Do you foresee a worsening in the near future?
It is predictable that it will increase little by little, but now we are 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 one thing on which I think we should put a greater focus is on how we boost investment, because investment in the fund is what ends up creating opportunities, employment, economic activity and from there all the other things come.
Interest rates have risen and have had their 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 it was not passed on to the customer, the same happens in a rising interest rate cycle. We are focusing on giving our customers profitability options through good alternatives in products, for example, fixed income.
And how does the surprise of the electoral advance impact on this scenario?
I don't have much to comment on. There is a positive element, that the unknowns about who the government of Spain will be in the next four years and the economic policies it will follow will be clarified. And I think it is good that it is clarified as soon as possible. The normal calendar would have been nice too. I don't think there is a big difference, but it is good that in Spain the institutions work, that democracy works and that we have clarity on what the scenario is as soon as possible.
And do it in the middle of the European presidency?
It's not the first time it's happened. I hope that it will not affect it much and that the agenda that was planned will continue to be promoted, because there are elements that are of great 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 regains the leadership, before China or the United States, of the relationship with a part of the world that is very close to us. From Mexico to Patagonia.
What are the main challenges facing the Spanish economy, the most outstanding pending tasks?
Labor market, productivity, investment in education and productive investment, which 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 this investment is already profitable. And then, digitization, which we already have very advanced, and taking advantage of technology and innovation in broader terms. Productivity is one of the pending subjects.
What do you think about advances in artificial intelligence? Lately there have been very worrying messages...
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 by himself, artificial intelligence gives us this extra power in intellectual tasks. I think it will have a very quick and very positive impact on improving productivity on daily work. This will mean that you can do many more things at the same time and, moreover, that you can do them with more enjoyment, because you will eliminate the part of the task that can be more thankless, from processing mails to writing documents or reading information . Now, it has many risks and we are at an early stage of the deployment of this technology. The risks range from you can't trust everything the machine tells you, because it can create content that isn't true. From this 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 being manipulated by third parties. I'm more concerned about the risk of bad actors than robots coming to take our jobs. This will help the progress of humanity, although it also has its risks. The key is how we make the most of this technology.
Will the fan serve BBVA?
We are proceeding cautiously, but we are starting to use the technology in many applications. It is a technology with gigantic potential, with many risks, but which is the future. We need to take these risks, manage them and embrace technology for the positive side it will bring us.
One of these risks is that confidential information is leaked. Have they rated it?
Yes. There is a risk of loss of secrets, of confidential company information, no doubt. But it is no different from the risk that has always existed if it is published on the internet. In any case, I think it is one of the easiest risks to manage. What worries me the most, as a society, is the growing difficulty of differentiating what is real from what is fake. And to the extent that there are bad actors, they will surely go ahead. Technology is usually developed before protections to defend against its misuse.
We experienced turbulence due to the collapse of banks in the United States and Credit Suisse in Europe. Is this crisis the end of the woman?
I think that the situation we have experienced are isolated cases. There may be some more among the regional banks in the United States, but we haven't seen that transfer to other regions, or Europe, or the markets we're in, the emerging markets, 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, business model problems. 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 they got really big in business models that, so the interest rates went up again, it was seen that they were not sustainable.
How do you see the Spanish banking sector? Can there be any more mergers?
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. It is certainly our case, our strategy is very well limited to this organic growth in the countries where we are. We are also betting on some new countries taking advantage of digital models. This is the case of 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 definitely ruled out?
Yes, we are not looking back. We look forward with this focus on organic growth.
Are they worried about the situation in Turkey, where they 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 a hugely attractive country, very similar in many of its features to Mexico, another large country. In the case of Turkey, with a very dynamic economy, very focused on the private sector, with very low indebtedness, both for families and companies. There is, therefore, a penetration of credit over GDP among the lowest in the world, which means that there is a very high level of banking penetration.
But inflation is a serious problem…
In the short term, Turkey has accumulated imbalances, notably very high inflation and an external imbalance that has caused its foreign currency reserves to drop very quickly. And this is a vulnerability. All this has had an impact on BBVA's share price at certain times, but in fact we are the Spanish bank with the best stock market performance this year, above the European average.
His other big international bet is Mexico.
We are growing a lot there, we are the biggest bank but our intention is to continue to gain 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 current geopolitical tensions, Mexico is well positioned to gain market share from China and other Asian countries in supplying the United States. It has a free trade agreement with Canada and with the US, and this gives a very important boost to US investment in Mexico. And a second factor that multiplies the effect is the investment in decarbonisation, 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 they maintain a prominent position here. What is your assessment 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 ranking and market share that has placed us as the second bank, with a market share in individuals clearly above 20% and almost 20% in companies. We are growing strongly, here and throughout Spain, in the number of customers. Last year we gained 11.3 million customers across the group; in Spain, around a million. And the rate of growth 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.
