Business Context and Reporting Period
Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (BBVA)
Filing Type: Form 6-K (Press Release)
Reporting Period: Third Quarter 2024 (ended September 30, 2024) and Year-to-Date (January 1 – September 30, 2024)
Key Context: BBVA reported record profitability driven by strong lending growth in Mexico and Spain, improved efficiency, and a solid capital position.
Key Financial Metrics
| Metric | 9M 2024 (€ Billion) | YoY Change (Constant €) | 3Q 2024 (€ Billion) | YoY Change (Constant €) |
|---|---|---|---|---|
| Net Attributable Profit | 7.62 | +44% | 2.63 | +26% |
| Gross Income | 26.16 | +29% | 8.72 | +28% |
| Operating Income | 15.97 | +39% | 5.39 | +40% |
| Net Interest Income (NII) | 18.86 | +14% | 5.87 | +4% |
| Net Fees & Commissions | 5.75 | +32% | 1.91 | +28% |
| Net Trading Income | 2.93 | +146% | 1.04 | +97% |
| Operating Expenses | 10.19 | +17% | 3.33 | +13% |
| Impairment on Financial Assets | 4.28 | +37% | 1.44 | +28% |
Profitability & Capital:
- Return on Tangible Equity (ROTE): 20.1% (Record high)
- Return on Equity (ROE): 19.2%
- Efficiency Ratio: 38.9% (Record low, improved 429 bps YoY)
- CET1 Ratio (Fully Loaded): 12.84% (Target range: 11.5% - 12.0%)
- Earnings Per Share (EPS): €0.44 (+32% YoY)
Material Changes vs. Prior Period
- Revenue Growth: Core revenues (NII + Fees) reached €24.61 billion (+18% YoY). Net trading income surged 146% YoY due to Global Markets performance and currency hedging gains (Mexican peso).
- Expense Management: Operating expenses grew 17% YoY, significantly below the weighted average inflation of 21% in operating countries, driving a record efficiency ratio.
- Cost of Risk: Impairment charges increased 37% YoY to €4.28 billion, driven by a strategic focus on high-profitability retail products and economic cycle timing. The accumulated cost of risk stood at 1.42%.
- Shareholder Returns: BBVA paid a record interim dividend of €0.29 per share (+81% YoY), totaling nearly €1.7 billion. Tangible book value plus dividends per share increased 16% YoY.
Outlook, Commentary, and Risks
Management Commentary: Results were fueled by an 11% increase in lending activity (constant euros), with Mexico (+12.3%) and Spain (+1.5%) leading growth. The bank added 8.5 million new customers (67% via digital channels) and channeled €71 billion in sustainable business.
Regional Highlights: - Spain: Record 3Q profit of €1.08 billion; efficiency ratio below 35%. - Mexico: Record 9M profit of €4.19 billion; lending up 12%. - Turkey: Profit up 18.5% in current euros; cost of risk normalizing to 1.12%. - South America: Profit down 3.4% due to higher loan-loss provisions and hyperinflation adjustments in Argentina.
Risks and Contingencies: - Hyperinflation: Continued impact in Argentina and Turkey, though Turkey saw a lower adjustment than the prior year. - Regulatory Taxes: An extraordinary banking tax of €285 million was recorded in 1Q24. - Asset Quality: NPL ratio at 3.3% and coverage ratio at 75% at the Group level; South America NPL ratio remains higher at 5.0%.
Investor Verification Checklist
- Constant Exchange Rates: Verify the distinction between reported growth and growth at constant exchange rates, as currency fluctuations significantly impact the Group's international results.
- Cost of Risk Trajectory: Monitor the 37% increase in impairment charges to ensure it aligns with the stated strategy of growing retail portfolios and does not signal broader credit deterioration.
- Capital Distribution Policy: Confirm the commitment to distribute 40-50% of profits and the threshold for excess capital distribution (above 12% CET1).
- Argentina Exposure: Review specific details on the hyperinflation adjustment impact in Argentina, which offset some gains in the South America region.
- Efficiency Ratio Sustainability: Assess whether the record 38.9% efficiency ratio is sustainable given potential future technology and hiring expenses.