Banco Bilbao Vizcaya Argentaria, S.A. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Tangible book value per share increased 14.6% year-over-year. Return on tangible equity was 20.4% and return on equity 19.5% in the first 6 months of 2025. Net attributable profit for Q2 was EUR 2.749 billion. CET1 ratio was 13.34%, up 25 basis points quarter-over-quarter.
• Revenue Growth: Core revenues continued to grow. Net interest income grew 11% year-over-year, net fees and commissions grew 18% year-over-year. Gross income grew 11.7% year-over-year and 1.7% quarter-over-quarter.
• Loan Growth: Group loan growth was 16% year-over-year. Spain had 6.3% year-over-year loan growth, Mexico had 11.7% year-over-year loan growth.
• Capital: CET1 ratio improved to 13.34%, up 25 basis points. Expect to release 40 to 50 basis points of CET1 from simplification of IRB regulatory models. Medium-term strategic goals: return on tangible equity around 22% average, tangible book value growth mid-teens compound annual growth rate, efficiency ratio around 35% in 2028, cumulative net attributable profit EUR 48 billion in 2025-2028.

Segment Performance

• Spain: Net profit in Q2 was EUR 1.1 billion. NII grew 1% quarter-over-quarter, loan growth 2% quarter-over-quarter. Cost-to-income ratio was 31.3% in the first half (33% excluding one-offs). Cost of risk was 32 basis points in the first half. Full-year guidance upgraded: loan growth mid-single digit, NII slight growth, fees low to mid-single digit, expenses low single digit, cost-to-income ratio 33%, cost of risk below 35 basis points.
• Mexico: Net profit nearly EUR 1.3 billion. Operating income grew over 2% quarter-over-quarter, NII grew over 2% quarter-over-quarter. Deposit mix improved. Cost of risk was 324 basis points in the first half. Full-year guidance upgraded: loan growth close to 10% by year-end, cost of risk below 350 basis points.
• Turkey (Garanti BBVA): Net profit EUR 412 million, up over 17% year-over-year. NII growth driven by Turkish lira customer spread increase. Loan growth across portfolios. Cost of risk was 164 basis points in the first half, expected to close at around 180 basis points full-year.
• South America: Net profit EUR 421 million, up 33% year-over-year. Solid lending trends, improved deposit mix. Cost of risk expected to be below 250 basis points full-year. Argentina saw reduced impact from hyperinflationary adjustment.

Guidance

• Upgraded Guidance: Spain's full-year guidance upgraded for loan growth, NII, fees, and expenses. Mexico's full-year guidance upgraded for loan growth and cost of risk. Group upgraded guidance for majority metrics. Excess capital of around EUR 13 billion expected to be available for distribution.
• Capital Distribution: EUR 36 billion available for distribution, with max 50% regular payout (EUR 24 billion) and excess EUR 12 billion.

Risks

• Macro Factors: Interest rate fluctuations in core markets negatively impact results. Currency headwinds. Hyperinflation in Turkey and Argentina affecting financials.
• Regulatory Risks: Changes in regulatory requirements may impact capital and profitability.
• Competition Risks: Intense competition affecting market share and revenue growth.

Question and Answer

• **Q: ROTE and CET1 using forward FX rates?

A: Used forward rates in countries except Turkey, details in appendix of presentation.

• **Q: Impact of Sabadell integration?

A: Stand-alone plan presented, details on Sabadell integration in September prospectus.

• **Q: Phasing of synergies?

A: Details on synergies in September prospectus after publishing.

• **Q: Mexico lending growth prospects?

A: Balanced growth in retail and corporate, SMEs and credit cards key. Margin compression moderating with rate stability.

• **Q: Efficiency targets 2028?

A: Productivity gains from AI and engineering operations, cost-to-income ratio around 35% in 2028.

• **Q: Capital distribution timing?

A: Share buyback starts after Sabadell transaction concludes.

• **Q: Nubank banking license impact?

A: Nubank is competitor, deposit price advantage may diminish with rate decline.