Banco Bilbao Vizcaya Argentaria SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Value Creation and Profitability: Tangible book value per share + dividends grew 17.2%, return on tangible equity was 19.7%, net attributable profit surpassed €10 billion, and EPS grew 28%.
• Business Growth: Loan portfolio increased 14.3%, 11.4 million new customers acquired, 75% of clients interact via mobile app, and €100 billion in sustainable business channeled in 2024.
• Digital Strategy: Mobile penetration rate reached 75%, logins per month doubled since 2020, transactions in global mobile app multiplied 2.5x, and net promoter score improved 10 points in 5 years.
• Sustainability: Mobilized over €99 billion in sustainable business in 2024, beating the 2018-2025 goal of €300 billion, and reduced emissions in committed portfolios by 27%.
• Financials: Annual P&L showed gross income +20% and operating income +24%; Q4 P&L had net attributable profit >€2.4 billion, strong NII, and fee income +27% constant year-over-year.

Segment Performance

• Spain: Delivered a net profit of €3.8 billion in 2024. Activity levels remained robust with strong loan growth, 4.1% in 2024 and 2.3% q-o-q in Q4. Guidance for 2025 includes low to mid single-digit loan growth, slight NII decline, low-single digit fee growth, expenses slightly growing below average inflation, and cost of risk stable at or slightly below 38 basis points.
• Mexico: Achieved earnings close to €5.4 billion in 2024, with loan growth accelerating to 15.8% in 2024. NII grew 2.7% q-o-q. Guidance for 2025 includes high single-digit loan growth, NII growth slightly below activity growth, expenses slightly growing below 2024, efficiency ratio at 30%, and cost of risk to around 300 basis points.
• Turkey: Garanti BBVA had a net profit of €611 million, a 16% increase y-o-y. Guidance for 2025 includes net profit close to €1 billion, better second half, customer spread recovery, lower hyperinflation adjustment, and cost of risk around 180 basis points.
• South America: Delivered over €600 million in net profit in 2024. Guidance for 2025 includes loan growth above 2024 and lower cost of risk below 270 basis points.

Guidance

• Group: Expect to maintain return on tangible equity in the high teens and efficiency ratio around 40%.
• Spain: Low to mid single-digit loan growth in 2025, slight NII decline, low-single digit fee growth, expenses slightly growing below average inflation, and cost of risk stable.
• Mexico: High single-digit loan growth in 2025, NII growth slightly below activity growth, expenses slightly growing below 2024, efficiency ratio at 30%, and cost of risk around 300 basis points.
• Turkey: Net profit close to €1 billion in 2025, better second half, lower hyperinflation adjustment, and cost of risk around 180 basis points.
• South America: Loan growth above 2024 and lower cost of risk below 270 basis points.

Risks

• Currency Fluctuations: Impact on financial results, especially in hyperinflationary countries like Argentina and Turkey.
• Interest Rate Changes: Effect on net interest income, particularly critical in Turkey with interest rate movements.
• Competitive Pressures: Potential impact on loan growth in segments like mortgages in Spain.

Question and Answer

Q: Benjamin Toms of RBC on BBVA's CET1 ratio and excess capital A: Onur Genç stated they are committed to profitable growth, with CNMV lifting restrictions on share buybacks, and they will start a €993 million share buyback program, aiming to return excess capital to shareholders.

Q: Francisco Riquel of Alantra on Mexico's deposit cost and loan-to-deposit ratio A: Luisa Gómez Bravo discussed managing deposit costs well, maintaining a competitive advantage with a 2.9% cost of deposits vs peers' 5.3%, and loan-to-deposit ratio at 104% with plans to maintain it while funding growth.

Q: Antonio Reale of Bank of America on Mexico's cost control and Turkey's net interest margin A: Luisa Gómez Bravo spoke about cost control levers in Mexico and Onur Genç highlighted Turkey's potential with interest rate declines and duration gap management.

Q: Maksym Mishyn of JB Capital on Spain's loan book and capital management A: Onur Genç discussed Spain's market share gains in consumer and enterprise segments and plans for capital management actions including risk transfers.

Q: Alvaro Serrano of Morgan Stanley on Mexico's growth outlook and Basel IV impact A: Onur Genç and Luisa Gómez Bravo spoke about Mexico's structural advantages and minimal Basel IV impact, with confidence in Mexico's growth and minimal Basel effects.

Q: Ignacio Ulargui of BNP Paribas on Spain's competition and growth segments A: Onur Genç discussed competition in mortgages and growth in consumer and enterprise segments in Spain.

Q: Carlos Peixoto of CaixaBank on capital management, hyperinflation impacts, and Spanish banking tax A: Luisa Gómez Bravo spoke about SRTs contributing to capital, minimal hyperinflation impacts, and the banking tax not affecting the Sabadell transaction rationale.

Q: Britta Schmidt of Autonomous Research on Mexico's loan growth and capital generation A: Onur Genç and Luisa Gómez Bravo discussed Mexico's high single-digit loan growth confidence and capital generation plans based on growth and market impacts.

Q: Andrea Filtri of Mediobanca on guidance assumptions for NII, Turkey, and Argentina A: Luisa Gómez Bravo provided details on NII guidance, Turkey's interest rate and inflation assumptions, and Argentina's marginal contribution to results.

Q: Hugo Cruz of KBW on Mexico's cost of risk guidance A: Onur Genç explained the cost of risk guidance in Mexico is due to mix changes, particularly more growth in retail.

Q: Cecilia Romero of Barclays on FX hedging strategy and HSBC's potential exit in Mexico A: Luisa Gómez Bravo discussed FX hedging strategies across geographies and Onur Genç refrained from commenting on HSBC's potential exit rumors.

Q: Ignacio Cerezo of UBS on Mexico's customer spread and rate environment A: Onur Genç provided insights on Mexico's customer spread sensitivity to rate changes and the bank's NII sensitivity to curve movements.