Banco Bilbao Vizcaya Argentaria SA Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Value Creation and Profitability: Tangible value per share + dividends increased 14.1% year-over-year and 3.3% quarter-over-quarter. Return on tangible equity was 20.2% and return on equity was 19.3%.
• Financial Results: Net attributable profit was EUR 2,698 million, up 23% year-over-year and 10.9% quarter-over-quarter. CET1 ratio improved to 13.09%, up 21 basis points quarter-over-quarter.
• Revenue Breakdown: Net interest income grew 8.5% year-over-year, net fees and commissions increased 19% year-over-year, and gross income rose 28% year-over-year.
• Activity and Loan Growth: Group loan growth was 15.1% year-over-year. Spain saw loan growth of 6.6% year-over-year, and Mexico had 17.2% year-over-year loan growth.
• Efficiency and Asset Quality: Efficiency ratio was 38.2%, cost of risk was 130 basis points, NPL was 2.9%, and coverage ratio was 82%.
• Customer Acquisition: Record 2.9 million new customers, with 66% joining via digital channels.
• Sustainability: Target to channel EUR 700 billion in sustainable finance by 2029, with a record sustainable finance figure in Q1.

Segment Performance

• Spain: Net profit surpassed EUR 1 billion in Q1. NII grew 1% quarter-over-quarter despite lower interest rates, with loan growth accelerating to 6.6% year-over-year. Efficiency ratio reached an exceptional 32%, and cost of risk declined to 30 basis points.
• Mexico: Net profit grew nearly 8% year-over-year, driven by core revenue growth of 7.3% year-over-year. Net interest income was robust, supported by increased lending activity, with loan growth at 17.2% year-over-year. Efficiency ratio remained at 30%, and cost of risk was 305 basis points in Q1.
• Turkey: Net profit was EUR 158 million, up 10% year-over-year. NII increased due to a wider Turkish lira customer spread, and loan growth continued across lira and foreign currency portfolios. Cost of risk stood at 189 basis points in Q1.
• South America: Net profit exceeded EUR 200 million in Q1, supported by revenue growth, lower impairments, and improving asset quality, with cost of risk 230 basis points below full-year guidance.

Guidance

• Maintain return on tangible equity of high teens.
• Spain: Expect low to mid-single digit loan growth, slight decline in NII, low single-digit fee growth, and cost of risk around 35 basis points.
• Mexico: Reaffirm high single-digit loan growth and NII growth, with cost of risk guidance at 350 basis points.
• Turkey: Net profit expected below EUR 1 billion due to higher than expected inflation, interest rates, and currency devaluation.
• South America: Positive outlook with improving economic environment supporting continued growth.

Risks

• Macro uncertainties affecting various segments, including tariff discussions and global trade wars.
• Currency fluctuations impacting financial results, especially in Turkey.
• Uncertainty around inflation and interest rate movements in Turkey affecting net profit.
• Volatility in global markets impacting fee income and net trading income.

Question and Answer

• Q: Follow-up on Turkey's NII and cost of risk. A: Sensitivity to inflation, interest rates, and currency; cost levers being worked on, but net profit expected below EUR 1 billion due to macro parameters.
• Q: Spain loan growth profitability. A: Loans must pass loan-by-loan profitability framework with ROCE thresholds; all new lending is profitable.
• Q: Capital optimization in Spain. A: Expect SRT contributions, with NIM focus and gradual impact on capital.
• Q: Cost of deposits in Spain and Mexico. A: NIM focus; Spain saw cost of deposits at 66 basis points, Mexico had higher cost due to institutional deposits but loan-to-deposit ratio improved to 1.03.