Business Context and Reporting Period
Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (BBVA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2024 (with specific Q3 2024 data provided).
Overview: BBVA reported strong financial performance driven by recurring banking revenues, particularly net interest income and fees. The results include a one-time charge of €285 million for a temporary tax on credit institutions in Spain. The Group continues to pursue a strategy of profitable growth, with significant activity in Spain, Mexico, Turkey, and South America.
Key Financial Metrics
| Metric (Millions of Euros) | Jan-Sep 2024 | Jan-Sep 2023 | YoY Change |
|---|---|---|---|
| Net Attributable Profit | 7,622 | 5,961 | +27.9% |
| Gross Income | 26,161 | 22,104 | +18.4% |
| Net Interest Income | 18,861 | 17,843 | +5.7% |
| Operating Expenses | (10,189) | (9,241) | +10.3% |
| Impairment on Financial Assets | (4,279) | (3,203) | +33.6% |
| Total Assets | 769,341 | 757,736 | +1.5% |
| Total Equity | 56,772 | 53,453 | +6.2% |
Key Ratios and Share Data
- ROE (Return on Equity): 19.2% (vs. 16.3% in Jan-Sep 2023)
- ROTE (Return on Tangible Equity): 20.1% (vs. 17.0% in Jan-Sep 2023)
- Efficiency Ratio: 38.9% (Improved by 429 bps YoY)
- Cost of Risk: 1.42% (vs. 1.11% in Jan-Sep 2023)
- NPL Ratio: 3.3% (vs. 3.3% in Jan-Sep 2023)
- CET1 Ratio (Fully Loaded): 12.84% (vs. 12.73% in Jan-Sep 2023)
- Earnings Per Share (EPS): €1.27 (vs. €0.96 in Jan-Sep 2023)
- Dividend: Interim dividend of €0.29 per share announced and paid in October 2024.
Material Changes vs. Prior Period
- Profit Growth: Net attributable profit increased by 27.9% year-over-year, driven by a 17.6% growth in recurring revenues (net interest income and fees) excluding currency impacts.
- Expense Management: Operating expenses rose 16.6% at constant exchange rates due to inflation and workforce growth, but were outpaced by gross income growth (+29.4% constant), significantly improving the efficiency ratio.
- Provisions: Impairment on financial assets increased 37.1% (constant rates) due to a strategic focus on growing retail products and cyclical timing in certain regions, notably Mexico and South America.
- Balance Sheet: Loans to customers grew 2.4% vs. year-end 2023, driven by corporate loans (+4.6%). Customer funds increased 7.4%, supported by off-balance sheet funds and deposits.
- Geographic Performance:
- Spain: Profit up 37.6% to €2,866m, despite the €285m tax charge.
- Mexico: Profit up 5.6% to €4,193m, driven by strong recurring income.
- South America: Profit up 108.7% to €471m, aided by net trading income.
- Turkey: Profit up 18.5% to €433m, with lower hyperinflation impact.
Outlook, Risks, and Unusual Items
Guidance and Outlook
BBVA Research forecasts global GDP growth of 3.1% in 2024 and 3.3% in 2025. Interest rates are expected to decline gradually in the US and Eurozone. The Group maintains a target CET1 management range of 11.5% - 12.0%, currently standing well above at 12.84%.
Material Risks and Contingencies
- Banco Sabadell Acquisition: BBVA launched a voluntary tender offer for Banco Sabadell. The offer was adjusted to 1 BBVA share + €0.29 cash for every 5.0196 Sabadell shares. The deal is subject to regulatory approvals (CNMV, Spanish antitrust) and shareholder acceptance thresholds. Key regulatory conditions (ECB non-opposition, UK PRA authorization) have been satisfied.
- Macroeconomic Environment: Risks include potential sharp deceleration in activity due to labor market slowdowns and structural challenges in China, alongside persistent inflation risks from geopolitical tensions.
- Currency Volatility: Significant depreciation of the Mexican peso (-14.8%), Turkish lira (-14.7%), and Argentine peso (-17.8%) against the euro impacted reported figures, though hedging strategies are in place.
- Hyperinflation: Continued impact in Argentina and Turkey, though the negative effect in Turkey has moderated compared to the prior year.
Unusual Items
- Temporary Tax: A €285 million charge was recorded in "Other operating income and expenses" for the temporary tax on credit institutions in Spain for 2024.
- Net Trading Income: Increased 104.9% YoY, largely due to favorable results from hedging foreign currency positions (specifically the Mexican peso) recorded in the Corporate Center.
Investor Verification Checklist
- Acquisition Status: Monitor the progress of the Banco Sabadell tender offer, specifically the acceptance rate and final regulatory clearances from the CNMV and Spanish competition authorities.
- Cost of Risk Trajectory: Verify if the elevated cost of risk (1.42%) stabilizes in Q4, particularly in Mexico and South America where provisions increased.
- Currency Hedging Effectiveness: Assess the impact of continued volatility in the Mexican peso and Turkish lira on future earnings and capital ratios.
- Dividend Policy: Confirm the finalization of the 2024 dividend policy following the interim payment of €0.29 per share.
- Regulatory Capital: Track the CET1 ratio to ensure it remains within the management buffer above the 11.5%-12.0% target range amidst organic growth and potential capital issuance for the Sabadell deal.