Banco Bilbao Vizcaya Argentaria, S.A. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Core Revenues: Net interest income and fees grew 18% and 15% year-over-year, respectively, and 7% and 6% quarter-over-quarter in constant euros.
• Loan Growth: Activity and loan growth maintained a pace of 16% year-over-year, with Spain at 7.8% and Mexico at 9.8% (excluding USD impact 10.9%).
• Capital and Shareholder Remuneration: CET1 capital ratio was 13.42%, expected to have a 40-50 basis points regulatory boost in the fourth quarter. Resuming share buyback and dividend.
• Sustainability: EUR 97 billion was channeled into sustainable business in the first 9 months of 2025.
• Asset Quality: Cost of risk stood at 135 basis points, better than guidance, with NPL and coverage ratios improving.

Segment Performance

• Spain: Loan growth accelerated to 7.8% year-over-year. Net profit reached EUR 3.1 billion in the first 9 months of 2025. NII guidance was revised to low single-digit growth in 2025. Fee income was up 4.2% year-over-year, with cost of risk at 34 basis points.
• Mexico: Loan growth was 9.8% year-over-year, and excluding the U.S. dollar currency impact, it would have been 10.9%. Net profit was EUR 1.3 billion in the quarter. NII grew 3.3% quarter-over-quarter. Fee income was up 2.6% quarter-over-quarter. Cost of risk guidance was improved to below 340 basis points.
• Turkey: Net attributable profit was EUR 648 million in the first 9 months, a strong increase of nearly 50% compared to the same period last year. NII was supported by strong activity growth. Cost of risk was 176 basis points.
• South America: The region posted a net profit of EUR 585 million in the first 9 months, a 24% increase year-over-year in current terms. NII was solid, and fee income showed remarkable growth. Asset quality was positive in Peru and Colombia, while Argentina was deteriorating.
• Rest of Business (CIB, Italy/Germany digital): This unit was delivering around EUR 480 million in profits. Revenue grew close to 25% year-over-year in the first 9 months, driven by strong NII and fee income. Risk metrics were very solid with an NPL ratio of 18 basis points and cost of risk for the first 9 months at 10 basis points.

Guidance

• Spain: NII guidance was revised to low single-digit growth in 2025.
• Mexico: Cost of risk guidance was improved to below 340 basis points.
• Capital: Expecting a 40-50 basis points regulatory boost in the fourth quarter. Resuming share buyback and dividend.
• CIB Business: Aspiration to double the business in 4 years with a 20% revenue growth target.

Risks

• Macro Environment: Interest rate changes impacting spreads, especially in Argentina.
• Regulatory: Uncertainty around ECB approval for the share buyback.
• Competition: Neobanks in Mexico posing competition to deposit and credit card markets.
• Hyperinflation: Impact on Turkey's financials due to hyperinflationary conditions.

Question and Answer

Q: On loan book growth in Spain and cost of risk in Mexico.

A: Onur Genç discussed Spain's loan growth drivers including immigration, tourism, next-generation EU funds, and housing demand. For Mexico, cost of risk guidance was improved to below 340 basis points, with dynamics affected by macro adjustments and IFRS 9 modeling recalibration.

Q: On the Sabadell transaction and capital distribution outlook.

A: Onur Genç stated the Sabadell chapter was closed as a missed opportunity, and the capital target was 11.5%-12%, with expectations of reaching this via share buybacks and distributions.

Q: On margins in Spain and Mexico.

A: In Spain, customer spreads and lending yields were discussed with stability expected. In Mexico, margins were resilient due to price management and deposit cost resilience.

Q: On group costs and CIB business ambitions.

A: Group costs were managed with focus on cost-to-income ratio. CIB business aimed to double in 4 years via cross-border trade finance and institutional business.

Q: On Mexico's competitive landscape and inorganic growth.

A: Mexico's franchise was highlighted as strong, with neobanks posing competition but BBVA leveraging scale and client franchise. Inorganic growth focus was on organic growth.

Q: On Mexico's asset quality and Turkey's customer spread.

A: Mexico's asset quality was positive, while Turkey's customer spread was challenged by regulatory restrictions on deposit pricing. NIM improved due to cheaper funding via repo markets.

Q: On capital SRTs and market share in Spain.

A: SRTs were expected to generate 30-40 basis points of capital in Q4. BBVA was gaining market share in most segments in Spain except mortgages due to pricing.