Business Context and Reporting Period
Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (BBVA)
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: First half of 2024 (January 1, 2024 – June 30, 2024), with specific data for the second quarter (Q2 2024).
Context: BBVA reported record profitability and strong loan growth across its key markets (Spain, Mexico, Turkey, and South America). The bank highlighted a strategic combination with Banco Sabadell and continued progress in digital transformation and sustainable business initiatives.
Key Financial Metrics
| Metric | 1H 2024 | Q2 2024 |
|---|---|---|
| Net Attributable Profit | €4.99 billion | €2.79 billion |
| Gross Income | €17.45 billion | €9.23 billion |
| Operating Income | €10.59 billion | €5.75 billion |
| Net Interest Income (NII) | €12.99 billion | €6.48 billion |
| Net Fees and Commissions | €3.84 billion | €1.96 billion |
| Operating Expenses | €6.86 billion | €3.48 billion |
| Impairments on Financial Assets | €2.84 billion | €1.48 billion |
| Return on Tangible Equity (ROTE) | 20.0% | 20.0% |
| Return on Equity (ROE) | 19.1% | 19.1% |
| Efficiency Ratio | 39.3% | 39.3% |
| CET1 Capital Ratio (Fully Loaded) | 12.75% | 12.75% |
| Cost of Risk (Accumulated) | 1.42% | 1.42% |
| NPL Ratio | 3.3% | 3.3% |
| NPL Coverage Ratio | 75% | 75% |
Material Changes vs. Prior Period
- Profit Growth: Net attributable profit for 1H24 increased 29% year-over-year (yoy) in reported terms and 37% in constant euros. Q224 profit rose 38% yoy (37% constant euros).
- Revenue Expansion: Recurring revenues (NII + Fees) grew 23% yoy in constant euros. Net Trading Income surged 183% yoy, driven by exchange rate hedges (Mexican peso) and Global Markets performance.
- Loan Growth: Lending activity grew 10.7% yoy in constant euros, driven by corporate loans. Mexico saw a 12.6% increase, while Turkey reported 51% growth in local currency lending.
- Expense Management: Operating expenses rose 20% yoy, which was below the average inflation in BBVA's footprint (21.3%) and lower than gross income growth, improving the efficiency ratio by 362 basis points to an all-time low of 39.3%.
- Impairments: Impairments on financial assets increased 43% yoy to €2.84 billion, attributed to higher provisions associated with growth in profitable segments.
Guidance, Outlook, and Management Commentary
- Strategic Outlook: CEO Onur Gene stated the bank will "comfortably surpass" the ambitious goals set for the 2021-2024 period. Management expressed full confidence in the success of the combination with Banco Sabadell.
- Capital Policy: BBVA maintains a distribution policy of 40-50% of annual profit via dividends and buybacks. The bank is committed to distributing excess capital above the 12% upper band of its target CET1 range.
- Sustainability Goals: The bank channeled €46 billion in sustainable business in 1H24, bringing the total since 2018 to €252 billion, exceeding the pace required to meet the €300 billion target for 2018-2025.
- Digital Transformation: 5.6 million new customers were acquired in 1H24, with 67% joining through digital channels.
- Risks and Contingencies:
- Hyperinflation: Turkey and Argentina saw smaller adjustments for hyperinflation in Q2 due to moderation in inflation rates.
- Interest Rates: High-interest-rate environments contributed to increased loan-loss provisions in Mexico.
- Regulatory: The CET1 ratio is based on a pro-forma Basel IV fully loaded ratio, subject to regulatory approvals.
Key Facts for Investor Verification
- Record Profitability: Verify the sustainability of the 20% ROTE and 39.3% efficiency ratio, which are described as all-time bests.
- Constant Euro Adjustments: Confirm the impact of currency fluctuations, as many growth metrics (e.g., 37% profit growth) are reported in constant euros, differing from reported figures.
- Impairment Trends: Monitor the 43% increase in impairments to ensure it remains aligned with loan growth and does not signal deteriorating asset quality.
- Banco Sabadell Combination: Assess the regulatory and integration risks associated with the announced combination with Banco Sabadell.
- Regional Performance: Review the specific performance of Mexico (52% of group profit) and Turkey, which showed divergent profit trends (Mexico up 3.3% yoy, Turkey down yoy but improving sequentially).