Banco Bilbao Vizcaya Argentaria (BBVA) Q2 2026 earnings review
Record Profits and Unrelenting Shareholder Returns Despite Margin Headwinds
BBVA delivered a blowout first half of 2026, posting a record cumulative net attributable profit of €6.05 billion (+11.1% YoY). A 10.6% acceleration in global loan growth—particularly in wholesale and high-yield retail—more than offset the gravitational pull of declining interest rates in core markets like Spain and Mexico. Despite operating expenses and credit impairments growing faster than revenues, the bank maintained an elite 22.2% ROTE. Armed with a 12.90% CET1 ratio, management underscored their capital generation power by announcing a fresh €2.0 billion framework share buyback program.
🐂 Bull Case
Gross customer loans advanced 10.6% YoY, effectively insulating the bank from interest rate compression. Stable spreads combined with accelerating commercial and wholesale lending drove Net Interest Income up 20.3%.
The combination of the finalized €3.96B framework and the immediately launched €2.0B framework buyback shows immense confidence in organic capital generation and intrinsic value.
🐻 Bear Case
Operating expenses jumped 17.9% YoY, outpacing the 17.3% growth in Gross Income. The efficiency ratio deteriorated by 33 bps to 37.8%, breaking a long trend of positive jaws.
Impairments surged 26.6% YoY, notably driven by consumer and credit card expansions in Mexico and South America, pushing the Group Cost of Risk higher.
⚖️ Verdict: 🟢
Bullish. While expense growth and rising impairments require careful monitoring, BBVA's ability to drive massive volume growth to counteract rate cuts is exceptionally rare. A 22.2% ROTE combined with aggressive buybacks makes the equity highly compelling.
Key Themes
Unstoppable Loan Volume Growth Defies Rate Cuts
Accelerating. Sales growth is being primarily driven by a massive expansion in the balance sheet rather than rate-driven margin expansion. Performing loans under management grew 11.2%, with business loans jumping 13.0%. This sheer volume momentum allowed Net Interest Income to surge 20.3% to €15.16 billion despite rate normalization across Europe and the Americas.
Corporate & Investment Banking (CIB) Breakout
Accelerating. The CIB division—largely represented in the 'Rest of Business' segment—is proving to be a distinct margin improvement and revenue driver. Rest of Business net profit skyrocketed 60.0% YoY to €508M. Pro-forma CIB net attributable profit hit €2.05B (+20.7% at constant FX), leveraging BBVA's cross-border capabilities in New York, Europe, and Asia.
AI Transformation Unit Centralized
Stable. The bank officially launched a new 'AI Transformation unit' to embed artificial intelligence across the organization. Following earlier rollouts of tools like Gemini to its 127k employees, this formalizes the push to extract long-term operational efficiencies and enhance customer personalization.
Credit Impairments Surging in High-Yield Retail
Decelerating. Impairments on financial assets surged 26.6% YoY (24.2% at constant FX) to €3.49 billion. This directly contradicts the bullish narrative of risk-free volume growth. Mexico's Cost of Risk remains highly elevated at 3.26%, while South America hit 2.69%. Management's pivot into higher-margin credit cards and SME lending is exacting a noticeable toll on asset quality.
Efficiency Ratio Deteriorating as OpEx Bites
Reversing. BBVA's hallmark 'positive jaws' reversed this half. Operating expenses accelerated by 17.9% YoY (reaching €8.0 billion), narrowly outpacing Gross Income growth of 17.3%. Consequently, the efficiency ratio worsened by 33 bps to 37.8%. Technology investments and inflation-driven personnel costs (alongside voluntary redundancies) are heavily pressuring the bottom line.
Persistent Hyperinflation Drag
Stable. Emerging market FX and inflation dynamics remain a painful anchor. Turkey's 'Other operating income and expenses' recorded a deeper €201 million loss due to net monetary position impacts. In Argentina, hyperinflation adjustments severely muted what would otherwise be triple-digit nominal growth. The structural complexity of these markets continues to obscure underlying banking performance.
Resilient Macro Despite Geopolitical Headwinds
Stable. Management notes a resilient global macroeconomic environment, forecasting 3.1% global GDP growth for 2026. However, they explicitly flagged supply chain disruptions and geopolitical tensions (US, Iran, Israel) as key risks that could elevate energy prices and delay terminal rate cuts by the Fed and ECB.
Other KPIs
Stable. Improved sequentially from 12.83% in 26Q1, driven by robust organic capital generation (+75 bps from earnings) which easily absorbed the high RWA consumption of loan growth (-41 bps) and dividend accruals/AT1 coupons (-40 bps). The ratio remains substantially above the 8.98% regulatory requirement and the 11.5-12.0% internal target.
Accelerating. Mexico remains the crown jewel, generating nearly half of the Group's profit. Grew 8.2% YoY at constant exchange rates (15.8% at current FX). Loans expanded 11.5%, perfectly balancing Banxico's rate cuts. The efficiency ratio stands at a stellar 30.8%.
Stable. A 2.3% YoY increase, driven by a 4.1% rise in NII. Customer spreads are under pressure from ECB rate cuts, but the volume of lending (particularly public sector and corporate) managed to offset the yield compression.
Guidance
Accelerating. In addition to completing the third tranche of the older €3.96 billion program, the Board approved a fresh €2.0 billion framework, with the first €1.0 billion tranche launching in August 2026. This aggressive stance highlights management's view that the stock remains deeply undervalued relative to its 22.2% ROTE.
Stable. The bank's medium-term standalone goals remain firmly intact. Achieving this requires sustaining average annual profits of ~€12 billion, which implies H1 2026's €6.05 billion is exactly on the required run-rate.
Stable. The bank is currently executing at exactly this target (22.2% in H1 2026). Maintaining this level through the easing cycle will require flawless execution on cost control and CIB fee growth.
Key Questions
Sustainability of Positive Volume Growth
With loan growth exceeding 10% YoY, how much of this is driven by structural market share gains versus late-cycle corporate borrowing, and can this pace be maintained as European and Latin American economies potentially slow in H2 2026?
Retail Impairment Ceiling in Mexico
The cost of risk in Mexico remains high at 3.26%, and Group impairments grew 26.6% YoY. At what point does the marginal cost of risk in high-yield retail products (credit cards/SME) begin to destroy the NII spread advantage?
Operating Jaws Reversal
Operating expenses grew 17.9% YoY, outpacing revenue growth and causing a 33 bps deterioration in the efficiency ratio. How much of this OpEx growth is structural inflation versus front-loaded technology and AI investments, and when will positive jaws return?
M&A vs Organic Buybacks
Given the massive €2.0 billion new share buyback announcement, does this signal that any remaining appetite for large-scale inorganic M&A (following the Sabadell saga) has been permanently shelved in favor of capital returns?