Banco Bilbao Vizcaya Argentaria's Q3 2025: Contradictions Emerge on Capital Distribution, Mexico's Cost of Risk, Spain's Loan Growth, and Deposit Costs

Date of Call: October 30, 2025

Financials Results

• Revenue: Core revenues: NII +18% YoY and fees +15% YoY; gross income +16.2% YoY (first 9 months, constant euros); quarterly NII +7.1% QoQ and fees +5.8% QoQ; net attributable profit >€2.5bn in Q3; cumulative net profit ~€8bn, +4.7% YoY (9M2025).
• Gross Margin: Return on tangible equity 19.7% and ROE 18.8% (first 9 months 2025).
• Operating Margin: Efficiency ratio 38.2% (improved vs prior year); operating expenses +11% YoY (below average inflation across footprint).

Guidance:

• Spain: NII guidance raised to low single-digit growth in 2025.
• Mexico: full-year cost of risk guidance improved to below 340 bps.
• CET1: expect +40–50 bps regulatory impact in Q4.
• Capital return: €1bn buyback starts immediately; interim dividend €0.32/share on Nov 7; larger buyback pending ECB approval.
• SRTs: expect ~30–40 bps capital generation from SRTs annually.
• Medium-term: cost-to-income target 35% by 2028; CIB to grow ~20% p.a. (double in ~4 years).

Business Commentary:

* Strong Financial Performance and Profitability: - BBVA reported a record cumulative profit of almost EUR 8 billion in the first 9 months of 2025, marking a 4.7% increase year-over-year in current euros. - The strong performance was driven by solid core revenue evolution, particularly from net interest income and fees, and contained growth in impairments.

• Capital and Shareholder Remuneration:
• BBVA's CET1 capital ratio improved by 8 basis points to 13.42% during the quarter, supported by strong capital generation and regulatory impacts.

• The company plans to resume shareholder remuneration programs, including a EUR 1 billion share buyback program starting the next day and a record interim dividend of EUR 0.32 per share.

• Asset Quality and Cost of Risk:

• The cost of risk was reported at 135 basis points, slightly above the previous quarter, but better than guidance, with improvements in Mexico and stability in other regions.

• The increase was partly due to an annual IFRS model calibration and partially offset by positive macroeconomic adjustments.

• Geographic Expansion and Loan Growth:

• BBVA's loan growth in Spain and Mexico maintained strong performance, with Spain's corporate lending growing 18% and Mexico's lending at 9.8% year-over-year.
• Growth was driven by demand due to economic factors like immigration, investment activities, and construction in Spain, and a focus on profitable segments in Mexico.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted tangible book value per share +17% YoY, RoTE 19.7%, record ~€8bn net profit (9M), 'net attributable profit once again exceeding the €2.5 billion mark' and immediate resumption of shareholder remuneration (€1bn buyback, €0.32 interim dividend), signaling confidence and shareholder-friendly stance.

Q&A:

• Question from Maksym Mishyn (JB Capital Markets): Please comment on loan-book growth in Spain (corporate demand, weak mortgages) and why Mexico's cost of risk implies a Q4 pickup?
  Response: Corporate lending is broad-based and strong (midsized +11%, corporate/CIB +18%); mortgages intentionally underweighted due to unattractive pricing; Mexico's cost-of-risk was upgraded to <340bps—Q3 uptick driven by timing of IFRS 9 annual recalibration and macro updates, while underlying trends are improving.

• Question from Antonio Reale (BofA Securities): Reflections on the Sabadell bid and how quickly can capital be returned to hit the 11.5–12% target?
  Response: Sabadell chapter is closed; with expected Q4 regulatory tailwind (40–50bps) plus organic capital, excess will be returned to reach the 11.5–12% target—extraordinary buyback planned pending ECB approval.

• Question from Francisco Riquel (Alantra): Customer spreads in Spain fell below ~2.9% and loan yields fell; can you guide on spreads and liability trends? And are Mexico margins just timing-driven?
  Response: Customer spreads appear near the bottom and should stabilise (September monthly ~2.83%); lending yield decline largely from repricing timing and mix; ALCO supports NIM; Mexico margins are resilient due to faster asset repricing and proactive price management and are expected to stabilise.

• Question from Benjamin Toms (RBC Capital Markets): Group costs up ~11% YoY—any levers for 2026? Ambition for global CIB growth?
  Response: Cost discipline via positive jaws and keeping cost growth below inflation; aim for 35% cost-to-income by 2028; CIB targeted to double over ~4 years (~20% revenue CAGR) with RoRWA >2%.

• Question from Sofie Peterzens (Goldman Sachs): Competitive pressure in Mexico from neobanks and appetite for inorganic growth (Europe); how are Italian/German digital banks performing?
  Response: Focus is on organic growth; BBVA's Mexico franchise (44% payroll share, strong NPS and ROE) is defensible vs neobanks and will compete hard; Italian/German digital banks are growing (≈€10bn deposits in unit) and no near-term inorganic M&A planned.

• Question from Alvaro de Tejada (Morgan Stanley): Could challengers scale into meaningful competition in Mexico? Commentary on deposit mix changes and NPL paths in Turkey/Argentina?
  Response: BBVA continues to gain share (49bps lending share ytd) and expects to defend its leading position; deposit mix shift was strategic to rebuild deposits; Turkey cost-of-risk guided around ~180bps with retail stabilizing; Argentina saw retail deterioration due to very high real rates—origination tightened.

• Question from Ignacio Ulargui (BNP Paribas): Any chance of launching restructuring plans to further control costs in geographies like Spain or Mexico?
  Response: No formal restructuring programme in the plan; management will pursue ongoing productivity and targeted efficiency measures (e.g., prior selective headcount actions), not a broad restructuring.

• Question from Carlos Peixoto (Caixa): Is the 20% RoTE target for 2025 still achievable and is Turkey's ~€1bn net profit target still valid?
  Response: Management remains committed to the 20% RoTE target for the year; Turkey this year is expected somewhat below €1bn given tougher macro assumptions versus initial forecasts.

• Question from Ignacio Cerezo Olmos (UBS): Timing for ECB approval of the buyback and can you comment on Turkey customer spread normalisation/timeline?
  Response: ECB approval process initiated (legal maximum ~4 months but likely sooner); announcement will follow approval; Turkey spread normalisation depends on interest-rate declines—NIM can improve by accessing repo funding despite customer spread lag.

• Question from Borja Ramirez Segura (Citigroup): Details on SRTs and any learnings on gaining market share in Spain post-Sabadell?
  Response: Expect ~30–40bps of capital from SRTs (28bps YTD); market-share gains across most segments (public sector and mortgages exceptions due to deliberate pricing stance) driven by client-focused execution and people/coverage.

• Question from Britta Schmidt (Bernstein Autonomous): Is Turkish repo-driven NII sustainable? Can you quantify IFRS9 calibration vs macro on Q3 provisions? Any material operational RWA change in Q4? Clarify governance on buyback approval.
  Response: Repo usage supports Turkish NIM but dynamics reflect regulatory constraints; the firm won't quantify IFRS9 vs macro split publicly—management said underlying provisions would have been slightly lower absent the calibration; no material operational RWA impact expected in Q4; buyback needs ECB approval then Board execution.

• Question from Unknown Analyst (Jefferies): For the 20% RoTE guidance, what Q4 moving parts will drive the improvement?
  Response: Q4 RoTE support will come from both numerator (earnings) and denominator reduction via planned share buybacks, which will lower tangible equity and help meet the 20% target.

• Question from Fernando Gil de Santivañes (Intesa Sanpaolo): Spain public-sector loan trends, are you pursuing litigation against Supreme Court decisions, and any update on Argentina hedging after elections/FX intervention?
  Response: Public-sector lending included one-offs but overall trend positive as local governments return to bank financing; no comment on legal proceedings; Argentina exposures largely unhedged due to high hedging costs and small scale.

Contradiction Point 1

Capital Distribution and Sabadell Deal

It involves the company's capital distribution strategy and how it aligns with potential acquisitions like Sabadell, which impacts investor expectations and regulatory compliance.

What lessons were learned from the Sabadell bid failure, and what is the outlook for capital and distribution? - Antonio Reale (BofA Securities)

2025Q3: The EUR 13 billion is for profitable growth, and the EUR 36 billion is for distribution. We believe we will reinvest the EUR 13 billion in a profitable manner. The EUR 36 billion will be available for distribution, following our payout policy. Regarding Sabadell, their impact is not included in this stand-alone plan. - Onur Genc(CEO & Executive Director)

Will all EUR 13 billion of capital be distributed, or could part be withheld? How will the Sabadell integration affect the figure, considering both capital impacts and earnings generation? - Carlos Joaquim Peixoto (Caixa Banco de Investimento, SA)

2025Q2: The EUR 13 billion is for profitable growth, and the EUR 36 billion is for distribution. We believe we will reinvest the EUR 13 billion in a profitable manner. The EUR 36 billion will be available for distribution, following our payout policy. Regarding Sabadell, their impact is not included in this stand-alone plan. - Onur Genc(CEO & Executive Director)

Contradiction Point 2

Cost of Risk in Mexico

It involves the company's assessment of the cost of risk in Mexico, which is critical for financial planning and investor expectations.

Why is the cost of risk in Mexico improving despite a fourth-quarter increase? - Maksym Mishyn (JB Capital Markets)

2025Q3: The improvement in Mexico's cost of risk is due to a positive adjustment in macroeconomic expectations, offsetting the negative impact from the annual recalibration of IFRS 9 modeling. Mexico's growth dynamics and cost of risk dynamics are favorable. - Onur Genc(CEO & Executive Director)

Could you summarize the net profit trends during the plan period, with a focus on Mexico and Turkey? - Cecelia Romero Reyes (Barclays Bank PLC)

2025Q2: We have seen a meaningful improvement in the outlook for the economy in Mexico that is driving a meaningful improvement in our macroeconomic expectations. And then also, offsetting some of that, we have annual recalibration of our IFRS 9 models in Mexico. - Carlos Torres Vila(CFO)

Contradiction Point 3

Loan Growth and Profitability in Spain

It involves differing explanations of the factors influencing loan growth and profitability in Spain, which are crucial for assessing the bank's regional performance and strategic focus.

What is the nature of corporate loan demand in Spain and why is mortgage growth below sector average? - Maksym Mishyn(JB Capital Markets)

2025Q3: Loan growth is driven by strong economic conditions, with Spain's GDP growth forecast upgraded to 3%. Investment is growing, particularly in energy, renewables, and housing. There's a mismatch in demand and supply for housing. The corporate segment, especially midsized companies, is growing due to overall economic conditions. Mortgages are not growing as the pricing doesn't align with the return we expect. We're not interested in market share if there's no return. - Onur Genç(CEO & Executive Director)

Why is loan growth accelerating in Spain despite competition? What is the profitability of new loans? - Francisco Riquel(Alantra Equities)

2025Q1: In Spain, the trend is positive, with solid demand for mortgages and corporate lending. Loan growth in Spain is strong and market share is widening. The Spanish cost base is stable, in line with guidance. The dynamics are positive and the demand is there. Rates are actually supporting lending in the corporate side. - Onur Genc(CEO)

Contradiction Point 4

Deposit Costs in Spain and Mexico

It highlights contrasting expectations and impacts of deposit costs in Spain and Mexico, which are vital for understanding the bank's liquidity management and profitability strategies.

Can you discuss current demand for corporate loans in Spain and why mortgage growth is below sector averages? - Maksym Mishyn(JB Capital Markets)

2025Q3: In Spain, our deposits grew 6%, reaching €156 billion. Deposit costs declined by 9 basis points year-on-year, helped by the absence of interbank funding due to the strong customer franchise. - Onur Genç(CEO & Executive Director)

What are the expectations for deposit costs in Spain and Mexico? - Marta Romero(Citi)

2025Q1: On the deposit side, we are expecting some pressure in Spain in the second half due to the competition, and therefore, we expect deposit costs to increase. - Luisa Bravo(CFO)

Contradiction Point 5

Cost of Risk in Mexico

It involves differing explanations of the factors influencing the cost of risk in Mexico, which are crucial for assessing the bank's risk management and profitability.

Why is the cost of risk in Mexico improving despite the fourth quarter’s increase? - Maksym Mishyn(JB Capital Markets)

2025Q3: The improvement in Mexico's cost of risk is due to a positive adjustment in macroeconomic expectations, offsetting the negative impact from the annual recalibration of IFRS 9 modeling. Mexico's growth dynamics and cost of risk dynamics are favorable. - Onur Genç(CEO & Executive Director)

Why hasn't the Mexico loan growth guidance been updated despite strong Q1 performance? Why was Q1's cost of risk lower than the full-year guidance? - Maksym Mishyn(JB Capital)

2025Q1: The lower cost of risk in Q1 is due to underlying fundamentals, but macro uncertainty affects guidance adjustments. - Onur Genc(CEO)