BANCO BILBAO VIZCAYA ARGENTARIA, S.A. 20-F Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Banco Bilbao Vizcaya Argentaria

20-F

Annual report (foreign)

Filing date:

02/21/2025

TLDR:

BBVA’s 20-F filing for fiscal year 2024 reveals strong financial performance with increased net interest income and profit. The company faces risks including macroeconomic uncertainty and regulatory changes, and a proposed acquisition of Banco de Sabadell presents both opportunities and risks.

ELI5:

BBVA, a big bank, had a good year with more income and profit. They’re dealing with some challenges like uncertain economies and new rules. They also want to buy another bank, which could be good or bad.

Accession #:

0000842180-25-000010

Published on

March 16, 2025

Analyst Summary

Net interest income increased by 9.4% to €25.267 billion.
Profit attributable to the parent company increased by 25.4% to €10.054 billion.
Net Interest Margin: 3.30%
Return on Average Total Assets: 1.4%
Return on Average Shareholders’ Funds: 18.9%
Equity to Assets Ratio: 7.4%
CET1 fully loaded ratio stood at 12.88%.
Net Income / Total Revenue = 28.34%
Net Income / Average Total Assets = 1.29%
Net Income / Average Total Equity = 21.21%
Total Liabilities / Total Equity = 11.87
Total Liabilities / Total Assets = 0.92
(Profit before tax + Interest Expense) / Interest Expense = 1.29
Total Revenue / Average Total Assets = 0.046
(Current Revenue – Previous Revenue) / Previous Revenue = 20.11%
(Current Net Income – Previous Net Income) / Previous Net Income = 25.38%
Net Interest Income / Average Interest-Earning Assets = 3.52%
Administration Costs / Gross Income = 35.68%

Opportunities and Risks

Macroeconomic and Geopolitical Risks: Deterioration of economic conditions in key markets (Spain, Mexico, Turkey) and geopolitical instability.
Credit Risk: Counterparty credit quality and the value of collateral. The NPL ratio remained relatively stable at 3.0%.
Interest Rate Risk: Sensitivity to changes in interest rates, which can impact net interest income and credit risk.
Competition: Increasing competition from neobanks and other financial service providers.
Regulatory and Compliance Risks: Compliance with complex and evolving regulatory requirements, including capital and liquidity requirements.
Cybersecurity Risks: Potential for cyber-attacks and data breaches.
Digital Transformation: Continued investment in digital channels and technologies to improve customer experience and efficiency.
Geographic Diversification: Diversified operations across multiple regions, providing resilience against economic downturns in specific markets.
Sustainability Initiatives: Growing focus on ESG factors, creating opportunities for sustainable finance and investment.
Exposure to Turkey: Significant exposure to the Turkish market, which is subject to economic and political instability.
Level 3 Assets and Liabilities: A portion of financial assets and liabilities are classified as Level 3, indicating reliance on unobservable inputs for valuation.

Potential Implications

Company Performance

Monitor Macroeconomic Conditions: Closely track economic developments in key markets, particularly Spain, Mexico, and Turkey.
Assess Acquisition Risks: Evaluate the potential risks and benefits of the proposed Banco de Sabadell acquisition.
Manage Credit Risk: Maintain a strong focus on credit risk management, particularly in the retail loan portfolio.
Ensure Regulatory Compliance: Proactively address evolving regulatory requirements.

BBVA 20-F Filing Report – Fiscal Year Ended 2024

Executive Summary

This report analyzes the 20-F filing for Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) for the fiscal year ended December 31, 2024. The filing provides a comprehensive overview of the company’s financial performance, risk factors, and business operations. Key areas of focus include the impact of macroeconomic conditions, credit risk management, and regulatory compliance. The report also highlights the company’s strategic initiatives, including its digital transformation and sustainability efforts. A hold recommendation is maintained, pending further assessment of the impact of the proposed Banco de Sabadell acquisition and evolving macroeconomic conditions.

Company Overview

Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) is a global financial services group with a presence in Spain, Mexico, Turkey, and South America. The company operates in retail banking, wholesale banking, asset management, and insurance. BBVA is committed to digital transformation and sustainability.

Detailed Analysis

Financial Performance

BBVA reported a net interest income of €25.267 billion for 2024, a 9.4% increase compared to 2023. This growth was driven by higher yields on loans and effective management of funding costs. However, the increase in interest expense of 47.0% partially offset this growth. Profit attributable to the parent company increased by 25.4% to €10.054 billion.

Key Ratios

Net Interest Margin: 3.30%
Return on Average Total Assets: 1.4%
Return on Average Shareholders’ Funds: 18.9%
Equity to Assets Ratio: 7.4%

Risk Assessment

The filing identifies several key risks, including:

Macroeconomic and Geopolitical Risks: Deterioration of economic conditions in key markets (Spain, Mexico, Turkey) and geopolitical instability.
Credit Risk: Counterparty credit quality and the value of collateral. The NPL ratio remained relatively stable at 3.0%.
Interest Rate Risk: Sensitivity to changes in interest rates, which can impact net interest income and credit risk.
Competition: Increasing competition from neobanks and other financial service providers.
Regulatory and Compliance Risks: Compliance with complex and evolving regulatory requirements, including capital and liquidity requirements.
Cybersecurity Risks: Potential for cyber-attacks and data breaches.

Opportunities

Digital Transformation: Continued investment in digital channels and technologies to improve customer experience and efficiency.
Geographic Diversification: Diversified operations across multiple regions, providing resilience against economic downturns in specific markets.
Sustainability Initiatives: Growing focus on ESG factors, creating opportunities for sustainable finance and investment.

Management’s Discussion and Analysis (MD&A)

The MD&A provides a detailed discussion of BBVA’s operating results, financial condition, and future prospects. Management highlights the company’s strong performance in key markets, as well as its focus on digital transformation and sustainability. The MD&A also acknowledges the challenges posed by macroeconomic uncertainty and regulatory changes.

Red Flags & Uncommon Metrics

The filing does not raise any immediate red flags. However, the following uncommon metrics warrant further attention:

Exposure to Turkey: Significant exposure to the Turkish market, which is subject to economic and political instability.
Level 3 Assets and Liabilities: A portion of financial assets and liabilities are classified as Level 3, indicating reliance on unobservable inputs for valuation.

Geographic Segment Performance

Key observations from the geographic segment analysis:

Spain: Net interest income increased due to higher yields on loans.
Mexico: Net interest income increased, driven by higher volumes and yields in the loan portfolio.
Turkey: Net interest income decreased due to the depreciation of the Turkish lira and higher funding costs.
South America: Net interest income increased, driven by higher volumes and yields in the loan portfolio.

Capital Adequacy

BBVA’s CET1 fully loaded ratio stood at 12.88% as of December 31, 2024, indicating a strong capital position. The company also complies with MREL requirements.

Proposed Acquisition of Banco de Sabadell

BBVA has announced a proposed acquisition of Banco de Sabadell through an exchange offer. This transaction could significantly impact BBVA’s future performance and risk profile. The acquisition is subject to regulatory approvals and other conditions.

Conclusion & Actionable Insights

BBVA’s 20-F filing reveals a company with a strong financial performance and a clear strategic vision. However, the company faces several challenges, including macroeconomic uncertainty, regulatory changes, and increasing competition. The proposed acquisition of Banco de Sabadell presents both opportunities and risks. The following actions are recommended:

Monitor Macroeconomic Conditions: Closely track economic developments in key markets, particularly Spain, Mexico, and Turkey.
Assess Acquisition Risks: Evaluate the potential risks and benefits of the proposed Banco de Sabadell acquisition.
Manage Credit Risk: Maintain a strong focus on credit risk management, particularly in the retail loan portfolio.
Ensure Regulatory Compliance: Proactively address evolving regulatory requirements.

Overall Assessment: Hold. Further analysis is needed to fully assess the impact of the proposed Banco de Sabadell acquisition and evolving macroeconomic conditions.

BBVA Financial Analysis – 2024

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin: Not directly calculable from the provided data. Requires revenue and cost of goods sold, which are not explicitly detailed.
Operating Profit Margin: Not directly calculable from the provided data. Requires operating income, which is not explicitly detailed.
Net Profit Margin:
- Ratio/Metric: Net Income / Total Revenue = 10,054 / 35,481 = 28.34%
Return on Assets (ROA):
- Ratio/Metric: Net Income / Average Total Assets = 10,054 / 777,997 = 1.29%
Return on Equity (ROE):
- Ratio/Metric: Net Income / Average Total Equity = 10,054 / 47,416 = 21.21%
Earnings Per Share (EPS) – Basic and Diluted: Not directly calculable from the provided data. Requires the number of outstanding shares.

Liquidity

Current Ratio:
- Ratio/Metric: Total Current Assets / Total Current Liabilities. Requires calculation of current assets and liabilities from the provided data. Approximation: Assuming Total Assets and Total Liabilities are primarily current, 772,402 / 712,388 = 1.08
Quick Ratio (Acid-Test Ratio):
- Ratio/Metric: (Total Current Assets – Inventory) / Total Current Liabilities. Requires inventory data.
Cash Ratio:
- Ratio/Metric: Cash and Cash Equivalents / Total Current Liabilities. Requires calculation of current liabilities from the provided data. Approximation: 51,145 / 712,388 = 0.07

Solvency/Leverage

Debt-to-Equity Ratio:
- Ratio/Metric: Total Liabilities / Total Equity = 712,388 / 60,014 = 11.87
Debt-to-Assets Ratio:
- Ratio/Metric: Total Liabilities / Total Assets = 712,388 / 772,402 = 0.92
Interest Coverage Ratio (Times Interest Earned):
- Ratio/Metric: EBIT / Interest Expense = (Profit before tax + Interest Expense) / Interest Expense = (10,575 + 36,392) / 36,392 = 1.29

Activity/Efficiency

Inventory Turnover: Not applicable. BBVA is a financial institution, not a retail/manufacturing company.
Days Sales Outstanding (DSO): Not directly calculable from the provided data. Requires accounts receivable and revenue information.
Days Payable Outstanding (DPO): Not directly calculable from the provided data. Requires accounts payable and cost of goods sold information.
Asset Turnover:
- Ratio/Metric: Total Revenue / Average Total Assets = 35,481 / 777,997 = 0.046

Valuation

Price-to-Earnings Ratio (P/E):
- Ratio/Metric: Market Cap / Net Income. Market Cap = Shares Outstanding * Share Price. Shares Outstanding is not provided. Approximation: Using current share price of $12.97 (converted to EUR at 1.0389) and estimated EPS of 1.68 EUR, P/E = (12.97/1.0389) / 1.68 = 7.43
Price-to-Book Ratio (P/B):
- Ratio/Metric: Market Cap / Book Value of Equity. Book Value of Equity = Total Equity = 60,014 million EUR. Market Cap is not provided.
Price-to-Sales Ratio (P/S):
- Ratio/Metric: Market Cap / Total Revenue. Total Revenue = 35,481 million EUR. Market Cap is not provided.
Enterprise Value to EBITDA (EV/EBITDA):
- Ratio/Metric: (Market Cap + Total Debt – Cash) / EBITDA. Market Cap is not provided. EBITDA = Net Income + Interest + Taxes + Depreciation and Amortization = 10,054 + 36,392 + 4,830 + 1,533 = 52,809 million EUR.

Growth Rates

Revenue Growth:
- Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = (35,481 – 29,542) / 29,542 = 20.11%
Net Income Growth:
- Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = (10,054 – 8,019) / 8,019 = 25.38%
EPS Growth: Not directly calculable from the provided data. Requires EPS for both periods.

Other Relevant Metrics

Net Interest Margin:
- Ratio/Metric: Net Interest Income / Average Interest-Earning Assets = 25,267 / 716,824 = 3.52%
Cost to Income Ratio:
- Ratio/Metric: Administration Costs / Gross Income = 12,660 / 35,481 = 35.68%

Commentary

BBVA’s financial performance in 2024 shows a strong improvement in profitability, driven by significant growth in net interest income and a substantial increase in net income. The bank maintains a solid capital base, as indicated by its equity to assets ratio. However, the high debt-to-equity ratio suggests a reliance on leverage, which could pose risks. Further analysis is needed to assess the sustainability of these trends and the impact of macroeconomic factors on BBVA’s future performance.