BBVA: Assessing the Value of a High-Quality Bank at a Reasonable Price

BBVA's core investment thesis is built on a foundation of exceptional capital efficiency and a fortress balance sheet. The bank's financial performance in the first nine months of 2025 was outstanding, with . , a metric that signals a durable competitive moat. It demonstrates the bank's ability to generate substantial returns on its capital base, a hallmark of a high-quality franchise with pricing power and operational discipline.

This profitability is underpinned by a significant capital buffer. As of September 2025, . This level provides a wide margin above regulatory requirements, offering substantial resilience against economic shocks and giving management the flexibility to pursue strategic initiatives, including aggressive shareholder returns. The strength of this position directly enabled the bank to accelerate its capital return program, .

Strategically, BBVA is executing a disciplined plan for profitable, organic growth across its diverse markets. The bank's roadmap, covering 2025 to 2028, focuses on sustainable expansion in Spain, Mexico, and Türkiye, supported by rigorous cost and risk management. This is not a story of reckless lending but of targeted growth in segments with higher risk-adjusted returns. The plan projects a and high single-digit annual growth in lending volume in Mexico, all while maintaining efficiency ratios and cost of risk within strict targets.

The bottom line is a bank that combines the financial strength of a utility with the growth trajectory of a leader. Its near-20% ROTE proves its capital is deployed exceptionally well, while its CET1 ratio provides a powerful safety net.

With a clear, multi-year plan focused on profitable activity and disciplined execution, BBVA operates as a durable franchise, well-positioned to compound value for shareholders through various economic cycles.

Financial Engine: Growth, Profitability, and Capital Allocation

BBVA's financial engine runs on a powerful, self-reinforcing cycle: robust growth funds exceptional capital returns, which in turn boost shareholder value. The first nine months of 2025 delivered a textbook example. Core revenues, combining net interest income and fees, grew , . This operational momentum translated directly into superior profitability, , .

The bank's proven capital allocation policy is the critical link that turns this earnings power into tangible returns. BBVA has a clear, accelerating track record of returning capital, targeting through a mix of dividends and buybacks. The results are staggering. Since 2021, the bank has executed share buybacks totaling , . This aggressive repurchase program, combined with a steady rise in dividends, has created a powerful earnings-per-share accretion. As a result, while attributable profit grew at a healthy clip, EPS grew at even higher rates in recent years.

Analyst consensus projects this engine will continue to run smoothly. They forecast net attributable profit of , . This confidence is built on a foundation of strong profitability metrics, , . The bank's recent actions underscore its commitment: it just paid its highest interim dividend ever and is poised to launch another significant buyback program.

The bottom line is a model of disciplined financial execution. BBVA's growth in lending and customer acquisition fuels its earnings, which are then systematically returned to shareholders. This creates a virtuous cycle that compounds value, making it a standout performer in the European banking sector.

Risks and Challenges: Navigating a Complex Landscape

For a disciplined operator like BBVA, the path forward is clear but not without friction. The bank operates in a landscape of intensifying competitive pressure, evolving regulatory demands, and persistent country-specific volatility. These are not existential threats, but real headwinds that must be managed with care.

The competitive threat is structural, particularly in emerging markets where traditional oligopolies are being challenged. The rise of neobanks and digital platforms is a global trend that directly targets the retail banking model. In markets like Brazil, where a handful of banks control the vast majority of the credit market, this digital disruption is a tangible risk. While BBVA's scale and brand provide a buffer, . The bank must defend its core franchises while also adapting its own digital offerings to meet this new standard.

Regulatory evolution adds another layer of complexity. The full implementation of the European Markets in Crypto-assets Regulation () has brought significant standardization to the crypto-asset services market, but it has also introduced new compliance requirements for banks. The recent proposal to centralize supervision of these services within the European Securities and Markets Authority () further shifts the regulatory landscape, creating uncertainty for institutions navigating cross-border operations. This is part of a broader international trend where jurisdictions are establishing their own frameworks, raising the stakes for interoperability and increasing the cost of global compliance.

Country-specific risks remain material, particularly in Turkey and Argentina. In Türkiye, BBVA has applied hyperinflationary accounting rules effective January 2022. This accounting treatment, while providing a clearer picture of real financial performance, creates a persistent drag on reported profits. , a direct consequence of restating financials for high inflation. In Argentina, high inflation continues to create volatility, . This macroeconomic instability complicates lending decisions, credit risk assessment, and overall financial planning for those segments.

The bottom line is that BBVA's management must navigate a three-pronged challenge: defending its core markets against digital challengers, adapting to a fragmented and evolving global regulatory regime, and managing the financial noise generated by volatile emerging economies. These are manageable pressures for a well-capitalized, globally diversified bank, but they are the very factors that separate a steady operator from a high-flying one.

Valuation and Catalysts: The Margin of Safety

The investment case for BBVA converges at a compelling price. The stock trades at a , a multiple that sits below the industry average. This valuation suggests the market may be underestimating the durability of the bank's earnings power, . For a value investor, this represents a tangible margin of safety-a buffer against uncertainty built into the price.

A direct catalyst to unlock this value is already in motion. The bank has launched an , the largest in its history. This program is a disciplined capital allocation tool that will reduce shares outstanding, providing a direct and immediate boost to earnings per share. , . This is not an isolated event; , a track record that has consistently amplified shareholder returns.

While the buyback offers a near-term EPS lift, the bank's strategic initiatives are designed for long-term compounding. Its focus on profitable, organic growth includes a clear expansion of its digital banking model into new European markets like Germany and Italy, where it has seen encouraging early reactions. Concurrently, BBVA is executing a comprehensive ', aimed at improving customer interactions and operational efficiency. However, these initiatives are not expected to materially alter near-term earnings. Their value accrues over a multi-year horizon, aligning with a long-term investment thesis.

The bottom line is a classic value proposition: disciplined capital allocation at a reasonable price. The current P/E multiple offers a margin of safety, while the massive buyback program provides a near-term catalyst for EPS growth. The strategic investments in digital and AI are the fuel for future cycles, but the immediate story is one of a bank returning capital to shareholders with conviction. For an investor, the setup is clear-a durable earnings engine priced for modest expectations, with a powerful lever to enhance returns already being pulled.