BBVA (BBVA) Q3 2026 earnings review
BBVA's corporate lending lifts profit, but its capital cushion shrinks
BBVA, the Spanish banking group with large operations in Mexico and Turkey, kept quarterly profit above €3 billion even as its capital cushion shrank. Third-quarter net profit rose 19% from a year ago to €3,015 million, lifted by a 20% jump in corporate loans since December, especially in New York and Europe. That lending surge kept nine-month return on tangible equity at 22%, above what the bank's own 21% full-year plan pointed to.
| Nine-month revenue, at constant currency | +16.3% +18.2% as reported (€32.1B) |
|---|---|
| Third-quarter net profit | €3,015M +19.1% from a year ago |
| Core capital ratio (CET1) | 12.21% 12.90% last quarter (target: 11.5–12.0%) |
| Full-year return on tangible equity outlook | Unchanged ~21% target vs 22.0% achieved in 9M |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong corporate loan growth and high returns were offset by a rapid drop in excess capital and worsening Turkish credit losses. One caution: the bank's core capital ratio fell 69 basis points in three months to 12.21% as share buybacks and fast loan growth drained most of the buffer above its 12% target ceiling, while two corporate defaults in the international wholesale book cut that division's bad-loan reserve coverage in half.
The question now is whether BBVA can keep growing corporate loans near 20% a year without either running out of excess capital for buybacks or suffering larger corporate defaults. Growth bulls see the international wholesale division as a durable new profit engine, while bears see a fast-growing loan book that ties up capital and shows early credit cracks. Year-end capital ratios and fourth-quarter bad-loan inflows in February will tell.
🐂 Bull Case
Corporate Lending Carries the Bank
BBVA is a Spanish banking group that earns most of its profit in Mexico, Spain, Turkey and South America. Its fastest-growing arm is Rest of Business, which houses corporate and investment banking in New York, Europe outside Spain, and Asia. That division's nine-month net profit rose 58.5% from a year ago, excluding currency moves, to €801 million.
- Business loans across the group: €287.7 billion, up 19.9% since December
- Rest of Business performing loans: €99.7 billion, up 47.8% since December at constant exchange rates
- Corporate and Investment Banking (CIB, the group-wide wholesale division) nine-month profit: €3,082 million, up 19.0% at constant exchange rates
- Spain nine-month net profit: €3,106 million, down 0.2% from a year ago
This corporate push matters because Spain's profit stopped growing in the third quarter, falling 13.3% from the second quarter to €934 million. Lending to large companies in the United States and Europe is picking up the slack, driving group net interest income (the profit from lending minus deposit costs) up 21.7% from a year ago in the third quarter to €8,079 million.
What to watch: the return on risk-weighted assets (profit divided by risk-adjusted loans) in Rest of Business at year-end. It rose to 2.1% from 1.7% in 2025, but it still sits well below the group average of 3.1%, meaning these corporate loans tie up more capital per euro of profit.
BBVA's Full-Year Profit Target Looks Cautious
BBVA's headline profitability target for 2026 is a return on tangible equity (ROTE, net profit as a percentage of shareholders' equity excluding goodwill and software) of about 21%. By our math, that target pointed to €5.4 billion to €5.7 billion of net profit for the second half of the year.
The lender earned €3,015 million in the third quarter alone, up 19.1% from a year ago, bringing nine-month ROTE to 22.0%. By our math, hitting only 21% for the full year would require fourth-quarter profit to drop to about €2.5 billion, down 17% from the third quarter. Beating the implied second-half pace shows the full-year plan was cautious, especially after the bank raised that target twice earlier this year.
What to watch: fourth-quarter net profit when full-year results arrive in February. A figure near €3 billion would lift full-year ROTE toward 22% and keep the bank ahead of its 2025–2028 target of €48 billion in cumulative profit.
Mexico Grows Through Rate Cuts With Model Help
Mexico is BBVA's largest profit engine, generating €4,522 million in the first nine months, or 45% of business-area earnings. Bears worry that digital-only rivals and lower Mexican central bank rates (down from 7.50% a year ago to 6.50%) will squeeze lending margins, while bulls see a dominant franchise expanding loan volumes.
In the first nine months, Mexican net interest income grew 8.5% at constant exchange rates as loan growth of 7.9% and lower funding costs offset lower benchmark rates. Third-quarter profit held steady at €1,517 million, down 0.7% from the second quarter at constant currency. Loan-loss provisions got help from "the impact of the annual recalibration of the parameters in the loss estimation calculation models", which lowered the nine-month cost of risk (annualized loan-loss provisions as a share of loans) by 7 basis points in the quarter to 3.19%.
What to watch: Mexico's non-performing loan coverage ratio (reserves divided by bad loans) in the fourth quarter. It fell 7 percentage points in the third quarter to 111% as retail defaults rose and the model update reduced required reserves; a further drop would show credit quality is worsening beneath the model change.
🐻 Bear Case
Loan Growth and Buybacks Drain the Capital Buffer
BBVA highlights its capital strength, saying its Common Equity Tier 1 ratio (CET1, core equity divided by risk-weighted assets) of 12.21% lets it keep "a large management buffer over the Group's CET1 requirement" of 8.97%. Management also pledges to return excess capital above its 11.5% to 12.0% target range through dividends and share buybacks.
Yet that excess buffer above 12.0% shrank by More than two-thirds in a single quarter, falling 69 basis points from 12.90% in June to 12.21% in September. The bank booked a 49-basis-point deduction for its €2 billion extraordinary buyback program. Even without buybacks, the ratio fell 20 basis points because fast loan growth added €10.7 billion of risk-weighted assets (consuming 44 basis points of capital) "with lower transferred balances than in previous periods" via risk-transfer deals.
What to watch: the CET1 ratio at year-end alongside risk-weighted asset growth. With only 21 basis points of cushion left above the 12.0% ceiling, another quarter of 20-basis-point organic capital drain would leave almost no excess capital for new extraordinary buybacks in early 2027.
Turkish Retail Loan Losses Keep Climbing
BBVA owns 86% of Garanti BBVA in Turkey, where inflation ended September at 29.7%. Last quarter, the group raised its full-year Turkish cost of risk outlook from 200 basis points to about 220 basis points, counting on lower loan losses and central bank rate cuts in the second half of 2026.
Instead, credit losses worsened in the third quarter. Turkey's nine-month cost of risk jumped 18 basis points from June to 2.55% (255 basis points), driven by "higher requirements in retail portfolios and lower releases in the wholesale portfolio" as credit card balances grew 30.2% since December. Meanwhile, the conflict in Iran prompted Turkey's central bank to hold its effective funding rate at 40% until August before cutting the policy rate to 36% in October. Turkish net profit fell in the third quarter to €258 million, down from €269 million in the second quarter.
What to watch: Turkey's full-year cost of risk in the fourth-quarter report. By our math, hitting the 220-basis-point full-year plan would require the fourth-quarter annualized cost of risk to drop to 1.15%, less than half the nine-month rate, making a third straight miss on Turkish credit costs likely.
Rising Costs and Corporate Defaults Trim Profit
Across the group, third-quarter net profit of €3,015 million edged down 1.5% from €3,062 million in the second quarter, even though gross income (total revenue) rose 3.9% to €10,913 million. Higher overhead costs and loan-loss provisions ate up the revenue gain.
- Third-quarter operating expenses: €4,168 million, up 5.5% from the second quarter and up 0.6 percentage points as a share of revenue to 38.2%
- Corporate Center (head office) nine-month net loss: €974 million, 34.6% worse than a year ago, "associated with higher personnel expenses" including voluntary redundancies
- Rest of Business non-performing loans: €427 million, up 179.9% since December due to "the impairment of two wholesale customers"
- Rest of Business bad-loan coverage ratio: 84%, down from 172% in December
What to watch: non-performing loan inflows in Rest of Business over the next two quarters. Because this corporate loan book grew 47.8% in nine months, even a few individual defaults quickly cut reserve coverage in half.
Risks this quarter didn't answer
Because the third-quarter interim report contains no conference call transcript or presentation slides, four standing items from prior quarters got no new quantitative disclosure.
- Currency swings and hedge costs: the Mexican peso fell 3.3% against the euro in the third quarter, but the report does not quantify the currency-hedge impact inside the Corporate Center.
- Exiting hyperinflation accounting in Turkey by 2028: nine-month net monetary losses in Turkey and Argentina remained a drag, with €384 million lost in Argentina alone (up from €277 million a year ago), and no updated bridge for the 2025–2028 profit plan.
- Artificial intelligence cost savings: the report names The Eight and The Frame transformation programs "to evolve toward a more personalized and proactive relationship with customers, redesign and streamline processes, and enhance employee capabilities", without giving the financial impact promised for October.
- Finance chief transition: the report makes no mention of the handover from Luisa Gómez Bravo to Gonzalo Rodríguez.
👓 Other Themes
Rate Hikes and Energy Inflation Reshape Markets
BBVA Research notes that Middle East conflicts lifted energy prices and pushed Eurozone and US inflation above 3% in 2026. In response, the European Central Bank raised its deposit rate twice, in June and September, by 50 basis points in total to 2.50%, while the US Federal Reserve hiked to 4.00%. Higher bond yields hurt the market value of BBVA's government bond portfolios this year, though variable-rate loans in Spain benefit from higher benchmark rates.
💲 Other KPIs
Total customer loans before reserves grew 20.7% from a year ago and 14.4% since December (excluding the Romanian unit being sold to Raiffeisen Bank). By our math, the bank added €18.2 billion of gross loans in the third quarter, nearly double the €9.6 billion it added in the same quarter last year, led by corporate borrowing.
Customer deposits grew 14.5% from a year ago and 7.4% since December, about half the pace of loan growth this year. By our math, net new deposits slowed to €6.6 billion in the third quarter from €23.3 billion a year earlier, widening the gap between loans and deposits in Mexico, Turkey and Spain.
Net asset value per share excluding intangible assets rose 4.2% from €9.55 a year ago, or 14.3% when adding back €0.97 of dividends paid in April and October. However, it fell 1.9% from €10.14 in June because the bank paid the October dividend and bought back shares at more than twice their book value.
🔮 Guidance
Unchanged. The report reiterates progress toward the strategic plan targets without revising the 2026 return on tangible equity outlook of about 21%, which was raised twice earlier this year (+0.5 points in Q1, +0.5 points in Q2). With nine-month ROTE at 22.0%, the target implies fourth-quarter profit of about €2.5 billion by our math, down 1% from a year ago.
Unchanged. BBVA completed the first €1,000 million tranche on October 1, buying 40.2 million shares (0.73% of share capital), and launched the remaining €1,000 million second tranche on October 14. Combined with the €3,960 million program completed in August, extraordinary buybacks total €5,960 million this year.
❓ Key Questions
Will the 12.21% CET1 ratio pause extraordinary buybacks in 2027?
Core capital fell 69 basis points in the third quarter, leaving just 21 basis points above the 12.0% target ceiling. With corporate loan growth consuming 44 basis points of capital in a single quarter, how much excess capital can BBVA generate for 2027 buybacks?
What were the two wholesale defaults in Rest of Business?
Non-performing loans in Rest of Business nearly tripled since December to €427 million, cutting reserve coverage from 172% to 84%. Which sectors or geographies caused the two corporate impairments, and are any other large exposures on the watch list?
Is the 220 bps Turkey cost of risk target still reachable?
Turkey's nine-month cost of risk rose to 255 basis points as retail and credit card defaults climbed. Hitting the 220-basis-point full-year outlook would require fourth-quarter credit costs to fall by more than half; what is the updated full-year expectation?
How much did the model recalibration lower Mexico's loan provisions?
Mexico's cost of risk fell 7 basis points to 3.19% in the third quarter while its bad-loan ratio rose 9 basis points to 2.9% and coverage dropped 7 points to 111%. How many basis points of provision relief came from the annual parameter recalibration?
What financial targets came out of the October AI talks?
Management previously pointed to October 6 for details on its artificial intelligence rollout, but the third-quarter report gives only qualitative descriptions of The Eight and The Frame. What cost savings or revenue gains are built into the 35% efficiency goal for 2028?