Banco Bilbao Vizcaya Argentaria, S.A. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Value Creation: Net attributable profit reached a record EUR 10.5 billion in 2025, 4.5% higher than the previous year despite falling interest rates.
• Loan Growth and Profitability: Loan portfolio increased by 16.2% at constant euros and 11.7% in current euros, with return on tangible equity at industry-leading 19.3%.
• Strategic Transformation: Transforming the bank with a radical customer perspective, leveraging AI and innovation. Started 8 initiatives including digital adviser and AI assistant for bankers.
• New Customer Acquisition: Reached a record 11.5 million gross new customers in 2025, with strong cross-sell potential in Spain and Mexico.
• Execution of Strategy: Prioritized growth in enterprise, sustainability, and capital-light businesses, achieving superior growth in these areas.

Segment Performance

• Spain: Net profit reached EUR 4.1 billion in 2025, driven by 8% year-on-year loan growth, robust fees, contained costs, and improving asset quality. Fourth quarter net profit exceeded EUR 1 billion. Loan growth remained solid, with market share gains in profitable segments. Cost-to-income ratio was 33.1%.
• Mexico: 2025 was a remarkable year with 8% core revenue growth, total market share at 25.6%, and net profit of EUR 1.4 billion in Q4. Loan book growth accelerated in Q4, total deposits grew, and cost-to-income ratio was 30%. Asset quality remained solid.
• Turkey: Net profit was EUR 805 million in 2025, with improvement in net interest income, robust fee income, but cost of risk at 194 basis points. Effective tax rate increased in Q4 due to tax code change.
• South America: Net profit reached EUR 726 million in 2025, supported by growth in Peru and Colombia, core revenues positive, and cost-to-income ratio at 43.9%. Asset quality trends improving.
• Rest of Business: Net profit was EUR 627 million in 2025, with strong activity, healthy loan growth, 15.9% year-on-year net interest income growth, and cost of risk at 16 basis points.

Guidance

• Expect strong business momentum to continue with solid loan growth supporting net interest income and revenue growth.
• Maintain cost discipline with expected expense evolution in Spain and Corporate Center considering base effects.
• Cost of risk expected to remain broadly aligned with 2025 levels.
• Group return on tangible equity goal around 20% and cost-to-income ratio below 40%.

Risks

• Interest Rate Changes: Impact on net interest income and customer spreads in regions like Spain and Mexico.
• Competition: New entrants in markets like Mexico could pose challenges, though BBVA has strong digital capabilities and infrastructure.
• Macroeconomic Conditions: Uncertainty in regions like Turkey and Argentina due to inflation, interest rates, and currency depreciation.

Question and Answer

Q: On Spain, why is there a gap between loan growth and NII guidance?

A: Euribor expectations and slight decline in average spreads lead to different guidance between activity growth and NII/revenue growth.

Q: How is BBVA preparing for competition in Mexico's deposit market?

A: BBVA has a high market share in transactional deposits, especially in the low bucket, and maintains a positive gap in cost of funding compared to competitors.

Q: What is the outlook for customer spreads in Spain?

A: Average customer spreads in Spain have declined but are expected to stabilize and potentially increase as rate policy evolves.

Q: How is BBVA using AI for cost reduction?

A: Still in early innings, but seeing positive impacts in efficiency savings, with expectations of reflected benefits in cost-to-income ratio by 2028.

Q: What are the risks in Turkey's macroeconomic outlook?

A: Upside exists if inflation and interest rates improve, but depends on macro evolution of the country; current guidance is based on inflation, interest rates, and currency depreciation assumptions.