Banco Bilbao Vizcaya Argentaria (BBVA) Q4 2025 earnings review
Record Profits: Volume Victory Over Rate Headwinds
BBVA delivered a historic year with Net Attributable Profit exceeding €10.5 billion (+19% YoY constant), driven by a powerful volume strategy that successfully offset interest rate headwinds. While customer spreads compressed significantly in Spain (down 50 bps) and Mexico due to rate cuts, the bank countered this with massive loan growth (+16.2% YoY). Management signaled extreme confidence by announcing a €5.2B cash dividend and ongoing buybacks. However, the reliance on volume to mask tightening margins raises the stakes for execution in 2026, particularly as cost of risk in Mexico is guided higher.
🐂 Bull Case
The bank grew loans at double-digit rates (Spain +8%, Mexico +10% ex-FX) in a mature market environment. This 16.2% constant currency loan growth is the primary shield against falling interest rates, proving the bank can grow NII even as spreads tighten.
BBVA Mexico holds a 44% market share in payrolls, providing a massive, low-cost funding base (Cost of Deposits ~2.25% vs ~4.11% peers). This creates a defensive moat against neobanks and sustains high margins (NIM ~12%) despite rate cuts.
🐻 Bear Case
The 'rate tailwind' is officially over. Spain's customer spread fell from 3.30% to 2.80% YoY, and Mexico is seeing compression. NII growth now relies entirely on volume; if the macro environment slows loan demand, the P&L will have no buffer.
Guidance for Mexico's Cost of Risk (CoR) is increasing to ~340 bps for 2026 (vs ~327 bps in 2025). While management attributes this to a mix shift toward retail/cards, it represents a significant headwind to bottom-line growth in the bank's most important geography.
⚖️ Verdict: 🟢
Strong. BBVA is executing a textbook pivot from 'margin expansion' to 'volume growth' to sustain record profits. The 19.3% ROTE is best-in-class. However, the rising risk costs in Mexico and the end of easy money from high rates warrant close monitoring.
Key Themes
Mexico: The Crown Jewel Powers On
Mexico remains the engine room, contributing €5.3B in net profit (+5.7% YoY). Despite concerns about neobank competition (Nubank, Revolut), BBVA gained 29 bps of loan market share (to 25.6%). The bank's dominance in low-cost transactional deposits allows it to maintain profitability superior to peers, even as Banxico cuts rates.
Spain Spread Compression
Spain's NII resilience is being tested. Customer spreads dropped to 2.80% in Q4 from 3.30% a year ago. While NII grew 3.2% in 2025, guidance for 2026 is merely 'low to mid-single digit' growth. The bank is relying on volume (Loans +8% vs market average) and ALCO portfolio management to prevent NII contraction.
Shareholder Returns: Cash + Buybacks
BBVA is aggressively returning capital. The payout includes a record €5.2B in cash dividends (€0.92/share, +31% YoY) plus a €4B extraordinary share buyback program (€1.5B currently executing). Even after these distributions, CET1 stands at 12.70%, significantly above the 11.5-12.0% target range, implying further returns are likely.
Turkey: Volatile but Recovering?
Turkey contributed €805M in profit, missing the €1B potential cited in previous calls due to a tax code change (€42M impact) and inflation adjustments. While management guides for ~€1B in 2026, the region remains a wildcard heavily dependent on macro stabilization (inflation coming down).
Expense Inflation vs. Efficiency
Group operating expenses rose 10.5%, outpacing general inflation (9.6%). Management argues this is investment in growth (hiring, tech), and points to positive 'jaws' (Revenue +16.3%). However, in Spain, expenses are guided to grow 'mid-to-high single digits' in 2026 due to base effects, which could pressure the bottom line if revenue growth stalls.
CIB / Rest of Business Expansion
The 'Rest of Business' segment (primarily wholesale banking/CIB in US/Europe) is booming, with Net Profit up 29.4% to €627M. This validates the strategy of serving enterprise clients cross-border, moving beyond pure retail dependency. Loans in this segment grew double-digits.
Other KPIs
Stable/Strong. Continues to lead European peers. The 2026 guidance calls for ~20%, implying management believes buybacks (reducing the 'E') and profit stability will boost returns despite margin pressure.
Improving. Improved 206 basis points YoY. This sub-40% ratio is a key competitive advantage, allowing BBVA to absorb higher risk costs or margin compression better than less efficient peers.
Stable. Down from 12.88% due to the €4B buyback deduction, but still well above the 11.5-12.0% target. This excess capital buffer (~70-120 bps) suggests the distribution story is not over.
Guidance
Accelerating. Improving from 19.3% in 2025. This relies on execution of buybacks (reducing denominator) and maintaining profit levels despite rate cuts.
Decelerating. Down from +11.4% in 2025. Reflects the impact of lower rates (Banxico expected to cut to ~6.5%) partially offset by volume growth (High Single Digit).
Decelerating. Down from +5.4% in 25Q4 (annualized trends) and +3.2% FY. Confirms the 'margin squeeze' is limiting top-line expansion to purely volume-driven gains.
Deteriorating/Rising. Up from 331 bps in FY25. Management attributes this to a mix shift towards credit cards/consumer loans rather than underlying credit degradation, but it is a higher cost burden.
Key Questions
Mexico Asset Quality Ceiling
With Cost of Risk guided to ~340 bps and a strategic shift toward riskier retail lending, at what point does the higher provisioning outweigh the yield benefits, especially if the Mexican economy slows?
Spain Expense Growth Justification
Guidance for Spain expenses is 'mid-to-high single digit' growth in 2026. With NII only growing 'low-to-mid single digits,' this implies negative operating leverage (negative jaws). Why is cost control relaxing in a falling rate environment?
Deploying the Last €2B of Excess Capital
With CET1 at 12.70% and a target of 12.0%, significant excess capital remains even after the €4B buyback. Is M&A completely off the table following the Sabadell expiration, or is another extraordinary distribution planned for H2 2026?