BANCO BILBAO VIZCAYA ARGENTARIA SA 2026 Q2
Earnings Overview & AI Insights

Earnings Performance

Summary of Financial Performance: The company reported very strong loan growth, with year-over-year lending in the “rest of business” up 52%, above guidance, while maintaining attractive profitability. RoRWA was 2.1% for the rest of business and about 3% for CIB excluding Argentina and Turkey; ROC for CIB was 24%, well above cost of equity. Management emphasized that growth is being achieved at sustainable returns, with most CIB revenues being client-driven and cross-border client revenues representing 40% of total CIB client revenues.

Company Outlook & Strategy: Management reaffirmed no change in strategic thinking or financial management principles amid leadership transition. The company remains focused on expanding its CIB and commercial banking franchises, with prior medium-term goals targeting EUR 10 billion in CIB revenue by the end of the strategic period. They see continued revenue growth ahead, supported by their global footprint, diversified client relationships, and strong liquidity position. Capital policy remains disciplined: excess CET1 above 12% will be returned to shareholders, and the newly announced EUR 2 billion buyback is expected to run through year-end.

Key Industry Trends: Management highlighted a broader industry trend of technology-driven lending demand across core tech and adjacent sectors. They believe BBVA is well positioned to benefit due to its liquidity and strong leverage ratio. In Mexico, they pointed to improving activity levels and a pipeline of public-sector-led investment projects, including renewable energy tenders, as supportive for future lending. They also noted that rate dynamics in Mexico may have bottomed, which could help spreads.

Operational Highlights: The ALCO portfolios in Mexico and Spain were actively managed by extending duration and anticipating maturities. Mexico’s ALCO book reached EUR 19.1 billion, with duration extended to 3.2 years and yield at 8.8%; Spain’s book stood around EUR 55 billion with duration at 3.5 years and yield at 3%. Management stressed that ALCO is used to manage NII sensitivity, not as a substitute for client lending. They also said the bank has built an AI transition risk framework to assess client vulnerability, and current exposures to data centers, technology, and financial sponsors remain very small.

Challenges & Risks: Management acknowledged the need to remain cautious on ALCO duration and interest-rate risk, noting that long-duration positions can hurt if macro conditions change. They also referenced monitoring AI-related transition risk across portfolios, though they do not currently see a major risk profile. Geographic and macro volatility remain relevant, particularly in Turkey and Argentina, which can distort returns and were excluded from some profitability calculations. Deposit-cost pressure in Mexico was mentioned, but management rejected the idea that ALCO is a substitute for core business execution.

Key Analyst Questions & Responses: Analysts asked about ALCO strategy in Mexico and Spain, capital allocation, future buybacks, organic capital generation, SRT usage, and Turkey NII/spread trends. Management responded that ALCO purchases are intended to manage rate sensitivity and support NII, while client lending remains the priority. They reiterated a firm CET1 target of 11.5%-12.0% and said any excess above 12% will be distributed, with the current EUR 2 billion buyback expected to continue until year-end. On Mexico, they were constructive on activity and spreads, citing public investment projects and a likely bottom in rates.