Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary indicates strong loan growth in key markets and improved net profits across regions. The company's strategic plans include significant shareholder returns and sustainability efforts, which are positive signals. The Q&A reveals some concerns about competition and cost growth, but overall guidance remains optimistic. The company's solid capital position and planned share buybacks further support a positive sentiment. Given these factors, the prediction is a positive stock price movement of 2% to 8% over the next two weeks.
Key Financial Performance
Net Attributable Profit EUR 10.5 billion, a 4.5% increase year-over-year. Despite falling interest rates in core markets, the increase was driven by strong profit evolution.
Loan Portfolio Growth 16.2% increase at constant euros and 11.7% in current euros year-over-year. This growth was attributed to strong activity dynamics and proactive price management.
Return on Tangible Equity (ROTE) 19.3%, industry-leading. This was partially negatively influenced by excess capital held throughout the year.
Tangible Book Value Per Share Plus Dividends 12.8% growth at face value, or 15.2% excluding the impact of share buybacks. Share buybacks at higher value than book value led to some negative impact.
Earnings Per Share (EPS) EUR 1.78, a 5.8% year-over-year increase. This reflects a compounded annual growth rate of 26% over the last 5 years.
Core Revenues 16.3% growth year-over-year in constant euros, driven by 13.9% growth in net interest income (NII) and 14.6% growth in fee income.
Efficiency Ratio 38.8%, one of the best among European peers. This improvement was due to positive jaws with gross income outpacing cost growth.
Cost of Risk 139 basis points, an improvement compared to 2024. This reflects better-than-expected performance in most countries.
Non-Performing Loan (NPL) Ratio Declined year-over-year and quarter-over-quarter, supported by improving asset quality trends.
Coverage Ratio Improved year-over-year and quarter-over-quarter, reflecting better asset quality.
CET1 Ratio 12.70% after deducting EUR 4 billion for the extraordinary share buyback program. Strong earnings contributed 64 basis points to CET1, while activity-driven growth consumed 57 basis points.
Shareholder Distributions EUR 5.2 billion regular payout, equivalent to a 50% payout ratio. This includes a total cash dividend of EUR 0.92 per share, a 31% increase year-over-year.
Customer Acquisition 11.5 million gross new customers in 2025, a record. This growth was driven by a focus on cross-selling and customer monetization.
Spain Loan Growth 8% year-over-year. This was supported by strong new production and market share gains in profitable segments.
Mexico Loan Growth 7.5% year-over-year, or 9.9% excluding the impact of the U.S. dollar. This growth was driven by strong activity dynamics and proactive price management.
Turkey Net Profit EUR 805 million, a significant improvement compared to 2024. This was supported by higher activity levels and recovery in Turkish lira customer spreads.
South America Net Profit EUR 726 million, a 14.3% year-over-year increase. This was driven by improved earnings in Peru and Colombia and lower hyperinflation adjustments in Argentina.
Rest of Business Net Profit EUR 627 million, up from EUR 485 million in 2024. This was driven by solid activity across geographies and robust revenue growth.
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Operating Highlights
AI and Innovation: BBVA is leveraging AI and innovation to transform the bank with a radical customer perspective. Initiatives include a digital adviser, AI assistant for bankers, and efficiency improvements in software development. Employees have access to OpenAI and Gemini, and early positive impacts are being observed.
Capital-light businesses: BBVA prioritized growth in capital-light fee-generating businesses such as insurance, payments, and wealth management, achieving superior growth compared to the bank's average.
Customer acquisition: BBVA achieved a record 11.5 million gross new customers in 2025, with significant monetization potential. For example, in Spain, revenue per customer increases 3.7x between the first and fifth year of the relationship.
Market share gains: BBVA gained loan market share in all its markets in 2025, with meaningful gains across the board. Total market share in Mexico reached 25.6%, increasing by 30 basis points over the year.
Efficiency ratio: BBVA's efficiency ratio improved to 38.8%, one of the best among European peers, supported by positive jaws with gross income growing faster than costs.
Cost of risk: Cost of risk improved to 139 basis points year-to-date, better than 2024, with nonperforming loan and coverage ratios also improving.
Strategic plan 2025-2028: BBVA's new strategic plan focuses on a radical customer perspective, AI and innovation, and prioritizing growth in enterprises, sustainability, and capital-light businesses. The plan is on track with superior growth in selected areas.
Shareholder returns: BBVA announced a total regular distribution of EUR 5.2 billion for 2025, the highest in its history, and continued executing a EUR 4 billion extraordinary share buyback program.
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Risk or Challenges
Falling Interest Rates: Despite achieving record profits, the company faced challenges from falling interest rates in core markets like Spain and Mexico, which negatively impacted net interest income.
Share Buybacks Impact: The share buyback programs, while increasing shareholder value, negatively impacted the tangible book value per share due to shares being bought at a higher value than book value.
Tax Code Change in Turkey: A tax code change in Turkey at the end of the year negatively impacted earnings in that region.
Rising Operational Risk Costs: Year-end operational risk calculations, driven by higher revenues and activity, led to increased risk-weighted assets (RWAs), impacting capital ratios.
Provisioning Needs in Turkey: Elevated provisioning needs in Turkey's retail portfolios, following a long period of negative real interest rates, increased the cost of risk.
Argentina Retail Portfolio Risk: High provisioning requirements in Argentina's retail portfolio led to adjustments in risk appetite for this segment.
Hyperinflationary Impacts: Hyperinflation in countries like Argentina and Turkey continued to have a negative impact, though it has been declining.
Loan Growth and Capital Consumption: Exceptional loan growth led to higher-than-usual capital consumption, impacting CET1 ratios, though this was attributed to profitable growth.
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Guidance & Outlook
Loan Growth: Strong business momentum is expected to continue with solid loan growth across the board, supporting net interest income and overall revenue growth.
Cost Discipline: The company maintains a clear commitment to cost discipline, with expected evolution in Spain and Corporate Center impacted by VAT-related base effects, but overall aligned with the original plan.
Cost of Risk: Expected to remain broadly aligned with 2025 levels.
Return on Tangible Equity (ROTE): The group expects to achieve a return on tangible equity goal of around 20%, better than 2025.
Cost-to-Income Ratio: The company aims to achieve a cost-to-income ratio of below 40%.
Strategic Priorities Execution: Focus will remain on executing strategic priorities announced in 2025, with further discussions planned in 2026 through BBVA strategic talks and deep dives into specific countries and business segments.
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Shareholder Return Plan
Regular payout from 2025 results: EUR 5.2 billion, entirely in cash, with a total cash dividend of EUR 0.92 per share, the highest cash dividend ever by BBVA.
Final dividend for 2025: EUR 0.60 per share to be paid in April 2026, complementing the EUR 0.32 per share distributed in November 2025.
Extraordinary share buyback program: EUR 4 billion announced in December 2025, with the first tranche of EUR 1.5 billion already being executed.
Impact of share buybacks on tangible book value per share: EUR 993 million already executed and the existing tranche of EUR 1.5 billion currently in execution, leading to some negative impact on tangible book value per share creation.
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Key Q&A
Q:What are the key assumptions for Spain's NII guidance being low to mid-single digit despite an 8% loan growth in 2025?
A:The Euribor 12-month rate is expected to remain flat at around 2.25% on average for 2025 and 2026. Average spreads are expected to show a slight decline, leading to a difference between activity growth and overall NII and revenue growth.
Q:How is BBVA addressing competition in deposits in Mexico and what is the outlook for customer spread?
A:BBVA maintains a positive gap in deposit costs compared to the industry (2.5% for BBVA vs. 4.11% for the industry). The bank has a strong position in transactional deposits, with 1/3 of deposits in the EUR 0 to EUR 30,000 bucket. BBVA expects Banxico rates to lower to 6.5% by mid-year, leading to some compression of spreads in 2026.
Q:How does BBVA plan to ensure market share gains in Spain are not at the expense of profitability?
A:BBVA's customer spread dynamics are influenced by faster repricing of its mortgage loan portfolio compared to peers. The bank expects stable customer spreads in the first half of the year, with potential slight increases by year-end depending on Euribor rate performance. Profitability is supported by core revenue growth in NII and fees.
Q:What is BBVA's approach to capital generation and its strategic goals for 2028?
A:BBVA aims to achieve EUR 48 billion in profits and EUR 36 billion in capital distribution by 2028. The bank is focused on growth in capital-intensive areas as long as it is above the cost of equity. BBVA is also exploring more SRTs to manage capital flow.
Q:What is BBVA's cost growth expectation for 2026 and its impact on cost-to-income ratio?
A:BBVA expects group cost growth to be higher than inflation due to one-off trends and continued investments in growth franchises. The cost-to-income ratio is expected to remain below 40% in 2026, with a midterm goal of 35%.
Q:How does BBVA view the entry of new competitors in Mexico's banking market?
A:BBVA believes that service quality, particularly digital experience, is the key differentiator for customers. The bank has a strong digital presence, with 81% of new customer acquisitions in 2025 done through digital channels. BBVA also benefits from its extensive infrastructure and payroll relationships.
Q:What are BBVA's plans for SRT transactions and their impact on risk-weighted assets?
A:BBVA generated 35 basis points of capital in 2025 through SRTs and plans to deliver 30-40 basis points in 2026. The bank is also exploring SRT deals in Mexico and Turkey to further mobilize the balance sheet.
Q:What is BBVA's approach to dividend distribution and share buybacks?
A:BBVA is committed to distributing all excess capital above 12% CET1. The bank has flexibility in its payout policy, with a mix of cash dividends and share buybacks. Future distributions will depend on capital levels and market conditions.
Q:What is BBVA's guidance for NII growth in Mexico and its assumptions?
A:BBVA expects mid- to high single-digit NII growth in Mexico for 2026, with some compression of average spreads due to a 300 basis point decrease in reference rates in 2025. The ALCO portfolio, with extended durations and yields at around 8.6%, will support NII dynamics.
Q:What is BBVA's outlook for Turkey and its sensitivity to macroeconomic changes?
A:BBVA expects Turkey's cost of risk to remain around 200 basis points in 2026. The bank's guidance is based on assumptions of inflation, interest rates, and currency depreciation. Sensitivity to macro changes includes EUR 15-20 million impact per 1% inflation, EUR 40 million per 1% interest rate change, and EUR 20 million per 1% currency depreciation.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the cost of equity applied to different loan categories in Spain and Mexico, as well as the exact impact of AI on cost-to-income ratio improvements. Additionally, they did not disclose the P&L numbers for their digital banks in Italy and Germany, citing the need for further maturity of those businesses.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Core
EUR activity
EUR improvement
EUR share
EUR tranche
Loan
NPL ratio
acceleration
addition
adjustment variable
axis
bank area
base effect
buyback program
cash dividend
code change
commitment
cost income
coverage cost
customer perspective
dimension value
distribution
end adjustment
enterprise
fee income
friction
income ratio
indicator
loan euro
loan portfolio
momentum
payout
priority
program EUR
ratio coverage
share basis
share buyback
shareholder
tax code
track
tranche EUR
transformation
value book
variable compensation
BBVA Transcript
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call summary indicates strong loan growth in key markets and improved net profits across regions. The company's strategic plans include significant shareholder returns and sustainability efforts, which are positive signals. The Q&A reveals some concerns about competition and cost growth, but overall guidance remains optimistic. The company's solid capital position and planned share buybacks further support a positive sentiment. Given these factors, the prediction is a positive stock price movement of 2% to 8% over the next two weeks.
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The earnings call summary highlights strong financial performance across regions, improved efficiency, and strategic growth in corporate loans. Net profit increases in key markets and disciplined cost management are positive indicators. The Q&A section reveals robust growth ambitions and a commitment to shareholder returns, despite some uncertainties in Mexico and Turkey. Management's proactive strategies and optimistic guidance, along with planned share buybacks, suggest a positive outlook for the stock price.
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BBVA Report
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