Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

UNITED STATES SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of April, 2023

Commission file number: 1-10110

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

(Exact name of Registrant as specified in its charter)

BANK BILBAO VIZCAYA ARGENTARIA, S.A.

(Translation of Registrant’s name into English)

Calle Azul 4,

28050 Madrid

Spain

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F X Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes No X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes No X

LOGO

Main data



BBVA GROUP MAIN DATA (CONSOLIDATED FIGURES)

	31-03-23		Δ %		31-03-22		31-12-22

Balance sheet (millions of euros)

Total assets		739,564		9.5		675,706		712,092

Loans and advances to customers (gross)		373,481		8.0		345,970		368,588

Deposits from customers		395,880		9.6		361,195		394,404

Total customer funds		556,839		9.5		508,439		544,576

Total equity		51,471		5.4		48,847		50,517

Income statement (millions of euros)

Net interest income		5,642		43.1		3,943		19,124

Gross income		6,958		29.0		5,395		24,743

Operating income		3,942		31.9		2,989		14,042

Net attributable profit (loss)		1,846		39.4		1,325		6,358

Net attributable profit (loss) excluding non-recurring impacts ⁽¹⁾		1,846		39.4		1,325		6,559

The BBVA share and share performance ratios

Number of shares issued (million)		6,030		(9.6)		6,668		6,030

Share price (euros)		6.57		26.1		5.21		5.63

Adjusted earning (loss) per share (euros) ⁽¹⁾		0.29		37.4		0.21		1.04

Earning (loss) per share (euros) ⁽¹⁾		0.29		52.5		0.19		0.98

Book value per share (euros) ⁽¹⁾		8.02		15.1		6.97		7.78

Tangible book value per share (euros) ⁽¹⁾		7.65		15.3		6.64		7.43

Market capitalization (millions of euros)		39,624		14.1		34,740		33,974

Dividend yield (dividend/price; %) ^{(1) (2)}		5.3				2.7		6.2

Significant ratios (%)

Adjusted ROE (net attributable profit (loss)/average shareholders’ funds +/- average accumulated other comprehensive income) ⁽¹⁾		15.5				12.1		14.4

Adjusted ROTE (net attributable profit (loss)/average shareholders’ funds excluding average intangible assets +/- average accumulated other comprehensive income) ⁽¹⁾		16.3				12.6		15.1

Adjusted ROA (profit (loss) for the period / average total assets - ATA) ⁽¹⁾		1.11				0.81		0.99

Adjusted RORWA (profit (loss) for the period / average risk-weighted assets - RWA) ⁽¹⁾		2.36				1.72		2.12

Efficiency ratio ⁽¹⁾		43.3				44.6		43.2

Cost of risk ⁽¹⁾		1.05				0.82		0.91

NPL ratio ⁽¹⁾		3.3				4.0		3.4

NPL coverage ratio ⁽¹⁾		82				76		81

Capital adequacy ratios (%)

CET1 fully-loaded		13.13				12.70		12.61

CET1 phased-in ⁽³⁾		13.13				12.81		12.68

Total ratio phased-in ⁽³⁾		16.30				16.82		15.98

Other information

Number of active customers (million)		68.3		9.8		62.2		67.3

Number of shareholders		786,031		(3.6)		815,233		801,216

Number of employees		116,923		5.0		111,402		115,675

Number of branches		6,051		(0.3)		6,071		6,040

Number of ATMs		29,882		1.7		29,379		29,807

(1) For more information, see Alternative Performance Measures at the end of this report.

(2) Calculated by dividing the dividends paid in the last twelve calendar months by the closing price of the period.

(3) Phased-in ratios include the temporary treatment on the impact of IFRS 9, calculated in accordance with Article 473 bis amendments of the Capital Requirements Regulation (CRR), introduced by the Regulation (EU) 2020/873. As of March 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.

Contents


Highlights			4

Macroeconomic environment			9

Group			10

Results			10

Balance sheet and business activity			16

Solvency			18

Risk management			20

Business areas			25

Spain			28

Mexico			31

Turkey			34

South America			38

Rest of Business			43

Corporate Center			46

Other information: Corporate & Investment Banking			47

Alternative Performance Measures (APMs)			50

Cover photograph by Pedro González Ortiz.


		4

Highlights

Results and business activity

The BBVA Group generated a net attributable profit of €1,846m in the first quarter of 2023, which represents an increase of 39.4% compared to the first quarter of the previous year, driven by the performance of recurring income from the banking business, mainly net interest income.

These results include the recording, for the financial year 2023, of the temporary tax on credit institutions and financial credit institutions for €225m, included in the other operating income and expenses line of the income statement.

Operating expenses increased by 25.4% at Group level, largely impacted by the inflation rates observed in the countries in which the Group operates. Notwithstanding the above, thanks to the remarkable growth in gross income, higher than the growth in expenses, the efficiency ratio stood at 43.3% as of March 31, 2023, with an improvement of 241 basis points, in constant terms, compared to the ratio recorded 12 months earlier, placing BBVA, once again, in a leading position among its European peer group¹.

The provisions for impairment on financial assets increased (+28.9% in year-on-year terms and at constant exchange rates), with higher provisions mainly in South America and Mexico, in a context of growth in activity.

Loans and advances to customers grew by 1.4% compared to the end of December 2022, strongly favored by the evolution of retail loans (+2.9% at Group level).

Customer funds increased by 2.3% compared to the end of December 2022, thanks to the good performance of off-balance sheet funds (+7.2%), also linked to increased customer preference for them.

LOANS AND ADVANCES TO CUSTOMERS AND TOTAL CUSTOMER FUNDS (VARIATION COMPARED TO

31-12-2022)

LOGO

Business areas

As for the business areas, excluding the effect of currency fluctuation in those areas where it has an impact, in each of them it is worth mentioning:

–

In Mexico, BBVA achieved a net attributable profit of €1,285m by the end of the first quarter of 2023, representing an increase of 44.2% compared to the same period in 2022, mainly as a result of the boost in lending activity and improvement in the customer spread, which translated into significant growth in net interest income and, to a lesser extent, fee and commission income.

–

Turkey generated a net attributable profit of €277m in the first quarter of 2023, which compares very positively with the negative result of €76m in the same quarter of 2022, both periods reflecting the impact of the application of hyperinflation accounting. The accumulated result at the end of March 2023 reflects, in addition to the good business dynamics, the positive impact of the revaluation for tax purposes of the real estate and other depreciable assets of Garanti BBVA AS which has generated a credit in corporate income tax expense, due to the higher tax base of the assets, amounting to approximately €260m.

–

South America generated a cumulative net attributable profit of €184m at the end of the first quarter of the year 2023, which represents a year-on-year variation of +57.2%, mainly due to the outstanding performance of recurring income (+70.3%) and NTI, which comfortably offset the growth of expenses, in a highly inflationary environment throughout the region, and the higher provisioning requirements for impairment on financial assets.

–

Rest of Business achieved a net attributable profit of €92m accumulated at the end of the first quarter of 2023, 11.6% higher than in the same period of the previous year, thanks to a favorable performance of recurring income and NTI, which offset the increase in expenses in a context of higher inflation and a normalization of loan-loss provisions.

¹ European peer group: Barclays, BNP Paribas, Crédit Agricole, Caixabank, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, Lloyds Banking Group, Nordea, Banco Santander, Société Générale, UBS and Unicredit, comparable peer data as of the end of December 2022.


		5

The Corporate Center recorded a net attributable profit of €-531m in the first quarter of the year 2023, compared with €-215m recorded in the same period of the previous year, mainly due to a negative contribution in the NTI line from exchange rate hedges as a result of better than expected currency performance, in particular the Mexican peso.

Lastly, and for a broader understanding of the Group’s activity and results, supplementary information is provided below for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. CIB generated a net attributable profit of €550m in the first quarter of 2023. These results, which do not include the application of hyperinflation accounting, represent an increase of 28.1% on a year-on-year basis, due to the growth in recurring income and NTI, which comfortably offset the higher expenses and provisions for impairment on financial assets, highlighting the contribution of Global Transactional Banking.


NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS)				NET ATTRIBUTABLE PROFIT BREAKDOWN ⁽¹⁾ (PERCENTAGE. 1Q23)

				⁽¹⁾ Excludes the Corporate Center.

Liquidity

The availability of substantial liquidity buffers in each of the geographical areas in which the BBVA Group operates and their management, have allowed internal and regulatory ratios to be maintained well above the minimums required.

Solvency

The Group’s CET1 fully-loaded ratio stood at 13.13% as of March 31, 2023, maintaining a large management buffer over the Group’s CET1 requirement (8.75%), and also above the Group’s established target management range of 11.5-12.0% of CET1.

Shareholder remuneration

Regarding shareholder remuneration, as approved by the General Shareholders’ Meeting on March 17, 2023, in its first item on the agenda, on April 5, 2023, a cash payment of €0.31 gross per each outstanding BBVA share entitled to receive such amount was made against the 2022 results, as an additional shareholder remuneration for the financial year 2022. Thus, the total amount of cash distributions for 2022, taking into account the €0.12 gross per share that was distributed in October 2022, amounted to €0.43 gross per share.

Total shareholder remuneration includes, in addition to the cash payments mentioned above, the extraordinary remuneration resulting from the execution of BBVA’s buyback program for the repurchase of own shares announced on February 1, 2023 for a maximum amount of €422m. On April 21, 2023, BBVA announced the completion of this share buyback program, having acquired 64,643,559 BBVA shares between March 20 and April 20, 2023, representing approximately 1.1% of BBVA’s share capital as of said date.

IFRS 17 - Insurance contracts

Replacing the International Financial Reporting Standard IFRS 4, on January 1, 2023 IFRS 17 entered into force for the recognition of insurance contracts, which requires establishing January 1, 2022 as the transition date, implying a restatement of the comparative financial statements from that transition date.

The impact of the entry into force of IFRS 17 on the financial statements of the BBVA Group has not been significant.


		6

Sustainability

Channeling sustainable business

SUSTAINABLE BUSINESS BREAKDOWN (PERCENTAGE. TOTAL AMOUNT CHANNELED 2018-MARCH 2023)

LOGO

(1) In those cases where it is not feasible or there is not enough information available to allow an exact distribution between the categories of climate change and inclusive growth, internal estimates are made based on the information available.

(2) Non-Project Finance and transactional banking activity.

(3) Bonds in which BBVA acts as bookrunner.

(4) Investment products art. 8 or 9 under Sustainable Finance Disclosure Regulation (SFDR) or similar criteria outside the European Union, managed, intermediated or marketed by BBVA. Includes, in Retail: structured deposits, insurance policies for electric vehicles and self-renting of electric vehicles, mainly; and in CIB and Enterprise: structured deposits, mainly.

BBVA has mobilized a total of approximately €150 billion in sustainable business between 2018 and March 2023. Close to €14 billion have been mobilized this quarter, which represents an increase of nearly 20% compared to the same period in 2022.

Within the channeling of sustainable business² accumulated between 2018 and March 2023 which aims to promote the fight against climate change, what stands out is the contribution of the financing of sustainable projects, distinct from project finance and transactional banking activity, which represents 78% of the total channeled at the end of March 2023. It should be considered that these products have had a normal rate of amortization since the beginning of their channeling. The intermediation of third-party bonds in which BBVA acts as bookrunner, a business activity that is recorded off-balance sheet, represents 18% of the channeled business linked to the fight against climate change. Lastly, investment funds and other off-balance sheet products such as insurance and pension plans represent 4%.

For its part, within the channeling of sustainable business accumulated between 2018 and March 2023 which aims to promote inclusive growth, the financing of sustainable projects, financing other than project finance and transactional banking activity, represent 58% of the total amount channeled at the end of March 2023, showing a normal rate of amortization since the beginning of its channeling. The intermediation of third-party bonds in which BBVA acts as bookrunner represents 14%, while investment funds and other off-balance sheet products such as insurance and pension plans represent 8%. Finally, the activity of the BBVA Microfinance Foundation (FMBBVA), not recorded on the BBVA Group’s balance sheet, whose objective is to support entrepreneurs with microcredits, represents 20% in terms of the purpose of promoting inclusive growth.

During the first quarter of 2023, the good performance of the retail business has continued, highlighting the mobilization related to sustainable mobility, such as the acquisition of hybrid or electric vehicles, which has grown by 26% compared to the same quarter of the previous year, activity in which geographical areas such as Turkey, Mexico and Peru multiply by more than two times the mobilization compared to the same period of 2022. In financing for inclusive growth, one of the activities that stands out the most is the mobilization for entrepreneurship, which has grown by 15% compared to the same quarter of the previous year and where Turkey more than doubles the mobilization of the same quarter of the previous year.

In commercial business (enterprises), financing related to energy efficient buildings stands out, such as the developer loans or energy efficiency measures for buildings, where channeling grew by 50% in relation to the same quarter of the previous year and where Spain has been fundamental by increasing its channeling in this line by 57%.

² Channeling sustainable business is considered to be any mobilization of financial flows, cumulatively, towards activities or clients considered sustainable in accordance with existing regulations, both internal and market standards and best practices. The foregoing is understood without prejudice to the fact that said mobilization, both initially and at a later time, may not be recorded on the balance sheet. To determine the amounts of channeled sustainable business, internal criteria based on both internal and external information are used.


		7

Lastly, in the corporate business, the dynamism of the brokered bond market in which BBVA acts as bookrunner stands out. During this quarter, the mobilization related to intermediation of these bonds has experienced an increase of 102% compared to the same quarter last year, mainly driven by the greater volume of green bonds, an activity that stands out with an increase of 103% compared to the same quarter of the previous year. However, this first quarter has also been marked by signs of a slowdown in the sustainable corporate financing market, both in the long and short term.

Relevant advances in sustainability matters

•

TCFD

BBVA has published its fourth TCFD (Task Force on climate-related financial disclosure) report this quarter. As this is its fourth report, BBVA has been one of the first banks to incorporate several of the recommendations of the Glasgow Financial Alliance for Net Zero Emissions (GFANZ) to draw up a plan of transition, a crucial element to facilitate a better understanding of how the Group approaches the transition towards a low carbon economy. New features include the creation of the BBVA Sustainability Alignment Steering Group, which will monitor the objectives and transition plans of its clients.

•

Publication of the progress in the decarbonization of the BBVA portfolios

BBVA is committed to aligning its activity with a scenario of zero net emissions in 2050. To this end, it supports its customers with financing, advice and innovative solutions, and it is monitoring its customers’ decarbonization strategies and incorporating them into its tools of evaluating risks. BBVA follows operational indicators that are relevant in the transformation to obtain a prospective and individualized vision of each client.

During this quarter, BBVA has published for the first time in its TCFD report the progress made in its commitment to decarbonize its credit portfolio, publishing details of the sector plans in which alignment objectives have been set: oil and gas, electricity generation, autos, steel and cement; or phase-out targets, as in the case of the coal sector. In the oil and gas sector, according to the Net Zero Banking Alliance (NZBA) recommendations, progress must be reported 12 months after the date the target is set. BBVA set them in October 2022. For this reason, in this sector it has not published this follow-up at the moment. In all sectors in which progress has been published, there have been cumulative reductions in all decarbonization indicators, although progress is not expected to be linear in the short term.

2030 ALIGNMENT TARGETS AND EMISSIONS ALLOCATED (banking activity)


Sector and metric	2020 ⁽¹⁾	2022	2020 ⁽¹⁾ - 2030 target	% progress 2022	Emissions allocated associated with the value chain (M t CO₂e) ⁽²⁾

Oil & Gas M t CO₂e ⁽¹⁾	14	—	(30)%	n/a	n/a

Power kg CO₂e/Mwh	221	212	(52)%	(4.0)%	3.5

Autos g CO₂/v-km	205	195	(46)%	(4.8)%	0.77

Steel kg CO₂/t Steel	1,270	1,140	(23)%	(10.2)%	0.82

Cement kg CO₂ /t Cement	700	690	(17)%	(1.4)%	0.31

Coal ⁽³⁾ Total commitment (€M)		1,701			0.31

n/a: not applicable

(1) Oil & Gas baseline year 2021.

(2) The calculation of the attributed emissions associated with the value chain has been carried out by adding all the emissions from the different NACE sectors of the sectors under analysis. These NACE sectors comprise more sectors than those included in the PACTA calculation since PACTA is only calculated on the point in the value chain where most of the emissions are generated. This calculation is carried out in this way because, based on the PACTA methodology, it is assumed that by aligning the part of the value chain responsible for emissions, the sector as a whole is aligned. The calculation has been carried out using the PCAF methodology and includes the emissions of BBVA.S.A. except Portugal branches.

(3) Phase-out 2030 in developed countries and 2040 globally.


		8

•

Progress in energy efficiency products in Spain

BBVA has launched a personalized digital solution for clients in collaboration with a large energy company, for the installation of solar panels in residential homes together with a media campaign. The solution allows private customers to simulate the installation of solar panels at home, both in single-family homes and in communities of owners, with information on potential savings in electricity, the subsidies that could be applied for and financing with advantageous conditions.

During this quarter, BBVA has financed a total of approximately 4,000 panel installations with a growth of more than 67% compared to the first quarter of 2022.

•

Sustainability training for suppliers

BBVA has promoted sustainability training among 252 of its SME suppliers. With this, BBVA extends to suppliers cross-sectoral sustainability training that its employees have already received since 2020. This initiative is part of the United Nations Compact Sustainable Suppliers training program.

•

BBVA Asset Management recognized with the Best Sustainability Team Award

BBVA Asset Management has received the award for the Best Sustainability Team of a Spanish Manager at the Funds People Awards 2023. This represents the recognition of the implementation of its Global Sustainability Plan started in 2020, its adherence to UNPRI and the Net Zero Asset Managers in 2021, and the announcement in 2022 of its initial objectives of decarbonization of its portfolios.


		9

Macroeconomic environment

Global growth has shown resilience and has generally been higher than expected by analysts, despite the moderating trend in recent quarters.

Economic activity has benefited from the surprisingly rapid decline in energy prices following the sharp increase observed after the outbreak of the war in Ukraine, as well as from the process of normalization of global supply chains and the dynamism of labor markets, which have contributed to the relative strength of private consumption and the service sector. In addition, the easing of anti-COVID-19 policies in China has contributed to a more gradual than expected slowdown in growth, despite its initial negative impact on activity.

Lower energy prices and improvements in bottlenecks in production processes have contributed to a reduction in headline inflation, which, in annual terms, reached 5.0% in the United States and 6.9% in the Eurozone in March. However, despite the recent slowdown in headline inflation, measures of underlying inflation continue to show no significant improvement.

Against this backdrop of still elevated inflationary pressures, central banks have continued to tighten monetary conditions, causing tensions in the banking sector and increasing financial volatility, which eased more recently, following decisive actions taken by authorities in Europe and the United States and in line with the perception that the problems in the banking sector are not systemic.

Despite the recent turmoil in the banking sector, which has contributed to a further tightening of financial conditions, reducing to some extent the pressure for additional monetary tightening, central banks have remained focused on reducing inflation. The U.S. Federal Reserve and the European Central Bank (ECB) have raised their benchmark interest rates (refinancing rates in the case of the ECB) to, respectively, 5.00% and 3.50% in March.

Although uncertainty is high, policy rates are likely to continue rising in the short term, to around 5.25% in the United States and 4.00% in the Eurozone, and to remain at these levels at least until the end of the year. In addition, central banks in both regions are expected to continue to reduce their balance sheets and address stress in the banking sector through macroprudential measures.

BBVA Research expects global growth to be 2.8% in 2023 (0.5 percentage points higher than the previous forecast), after reaching 3.2% in 2022 and 6.1% in 2021. Recent activity data and fading supply shocks favor an upward revision of GDP forecasts for 2023 to 0.8% in the United States and 0.6% in the Eurozone (respectively 0.3 and 0.7 percentage points higher than previously forecast), while in China growth this year is most likely to be 5.2%, 0.2 percentage points above the previous forecast mainly due to the positive impact of the easing of anti-COVID-19 policies. Also, despite the upward revisions, the outlook for a slowdown in global growth remains, in a context where financial volatility is expected to remain relatively high and interest rates and inflation are expected to remain at higher than expected levels for a longer period.

Uncertainty remains high and a number of factors could determine the materialization of more negative scenarios than the one forecast by BBVA Research. In particular, persistently high inflation and interest rates could generate a deep and widespread recession, as well as new episodes of financial volatility.


		10

Group

Results

These results include the recording, for the financial year 2023, of the temporary tax on credit institutions and financial credit institutions³ for €225m, included in the other operating income and expenses line of the income statement.

CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)

Δ % at constant

1Q23

Δ %

exchange rates

1Q22

Net interest income

5,642

43.1

43.3

3,943

Net fees and commissions

1,439

15.4

15.8

1,247

Net trading income

438

(24.4)

(18.7)

580

Other operating income and expenses

(561)

49.9

18.3

(374)

Gross income

6,958

29.0

32.7

5,395

Operating expenses

(3,016)

25.4

25.7

(2,406)

Personnel expenses

(1,551)

25.2

26.4

(1,238)

Other administrative expenses

(1,127)

31.8

31.9

(855)

Depreciation

(339)

8.3

6.0

(313)

Operating income

3,942

31.9

38.6

2,989

Impairment on financial assets not measured at fair value through profit or loss

(968)

31.4

28.9

(737)

Provisions or reversal of provisions

(14)

(71.0)

(68.2)

(48)

Other gains (losses)

(16)

n.s.

Profit (loss) before tax

2,944

32.3

42.3

2,225

Income tax

(950)

5.1

10.7

(903)

Profit (loss) for the period

1,994

50.9

64.6

1,321

Non-controlling interests

(148)

n.s.

Net attributable profit (loss)

1,846

39.4

40.5

1,325

Adjusted earning (loss) per share (euros) ⁽¹⁾

0.29

0.21

Earning (loss) per share (euros) ⁽¹⁾

0.29

0.19

General note: 2022 figures have been restated according to IFRS17 - Insurance contracts.

(1) Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.

³ In compliance with Law 38/2022, of December 27, which establishes the obligation to pay a patrimonial benefit of a public and non-taxable nature during the years 2023 and 2024 for credit institutions that operate in Spanish territory whose sum of total interest income and fee and commission income corresponding to the year 2019 is equal to or greater than €800m.


		11

CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)

2023

2022

Net interest income

5,642

5,334

5,252

4,595

3,943

Net fees and commissions

1,439

1,328

1,385

1,413

1,247

Net trading income

438

269

573

516

580

Other operating income and expenses

(561)

(443)

(372)

(501)

(374)

Gross income

6,958

6,489

6,838

6,022

5,395

Operating expenses

(3,016)

(2,875)

(2,803)

(2,618)

(2,406)

Personnel expenses

(1,551)

(1,547)

(1,471)

(1,344)

(1,238)

Other administrative expenses

(1,127)

(990)

(993)

(935)

(855)

Depreciation

(339)

(338)

(340)

(313)

Operating income

3,942

3,614

4,035

3,404

2,989

Impairment on financial assets not measured at fair value through profit or loss

(968)

(998)

(940)

(704)

(737)

Provisions or reversal of provisions

(14)

(50)

(129)

(64)

(48)

Other gains (losses)

(16)

(6)

(3)

Profit (loss) before tax

2,944

2,559

2,985

2,634

2,225

Income tax

(950)

(850)

(1,005)

(680)

(903)

Profit (loss) for the period

1,994

1,709

1,980

1,954

1,321

Non-controlling interests

(148)

(146)

(143)

(120)

Net attributable profit (loss) excluding non-recurring impacts

1,846

1,563

1,838

1,834

1,325

Discontinued operations and Other ⁽¹⁾

—

(201)

—

Net attributable profit (loss)

1,846

1,563

1,838

1,633

1,325

Adjusted earning (loss) per share (euros) ⁽²⁾

0.29

0.25

0.29

0.21

Earning (loss) per share (euros) ⁽²⁾

0.29

0.24

0.28

0.24

0.19

General note: 2022 figures have been restated according to IFRS17 - Insurance contracts.

(1) Includes the net impact arisen from the purchase of offices in Spain in the second quarter of 2022 for €-201m.

(2) Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.

Unless expressly indicated otherwise, to better understand the changes under the main headings of the Group’s income statement, the year-on-year rates of change provided below refer to constant exchange rates. When comparing two dates or periods in this report, the impact of changes in the exchange rates against the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange rates remain constant. For this purpose, the average exchange rate of the currency of each geographical area of the most recent period is used for both periods, except for those countries whose economies have been considered hyperinflationary, for which the closing exchange rate of the most recent period is used.

The accumulated net interest income as of March 31, 2023 was higher than the previous year (+43.3%), with increase in all business areas due to the improvement in customer spread and higher performing loan volumes. Particularly noteworthy was the good evolution in Mexico, South America and Spain.

Positive evolution in the net fees and commissions line, which increased by 15.8% in the year due to favorable performance in payment systems and demand deposits. By business areas, Mexico and Turkey are particularly noteworthy.


		12


NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE)				NET INTEREST INCOME PLUS NET FEES AND COMMISSIONS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)


				⁽¹⁾ At current exchange rates: +36.5%.

NTI recorded a year-on-year variation of -18.7% at the end of March 2023, due to the negative results recorded in this line in the Corporate Center and, to a lesser extent, in Spain, partially offset by the favorable evolution of this line in all other business areas.

The other operating income and expenses line accumulated a result of €-561m as of March 31, 2023, compared to €-374m in the previous year, mainly due to the €225m recorded in this line for the temporary tax on credit institutions and financial credit institutions for the year 2023. This has been partially offset by the good performance of the insurance business, especially in Mexico.

GROSS INCOME (MILLIONS OF EUROS AT CONSTANT

EXCHANGE RATES)

LOGO

⁽¹⁾ At current exchange rates: +29.0%.

Year-over-year, operating expenses increased 25.7% at the Group level. This increase is largely impacted by the inflation rates observed in the countries in which the Group operates. On the one hand, they have been impacted by the measures implemented by the Group in 2023 to compensate the loss of purchasing power of the workforce and, on the other hand, by the impact of general expenses.

Notwithstanding the above, thanks to the remarkable growth in gross income (+32.7%), the efficiency ratio stood at 43.3% as of March 31, 2023, with an improvement of 241 basis points compared to the ratio recorded 12 months earlier. By areas, Mexico and South America recorded a favorable performance in terms of efficiency.


		13


OPERATING EXPENSES (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)				EFFICIENCY RATIO (PERCENTAGE)

⁽¹⁾ At current exchange rates: +25.4%.

Impairment on financial assets not measured at fair value through profit or loss (impairment on financial assets) at the end of March 2023 was 28.9% higher than in the first quarter of the previous year, with higher provisions mainly in South America and Mexico, in a context of growth in activity.


OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)				IMPAIRMENT ON FINANCIAL ASSETS (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)

⁽¹⁾ At current exchange rates: +31.9%.				⁽¹⁾ At current exchange rates: +31.4%.

The provisions or reversal of provisions line (hereinafter, provisions) accumulated a negative balance of €14m as of March 31, 2023, an improvement of 68.2% compared to the previous year, mainly due to lower provisions in Spain and Turkey.

For its part, the other gains (losses) line closed March 2023 with a balance of €-16m, which compares negatively with the previous year, when a positive balance of €20m was recorded mainly due to results related to real estate assets in Mexico, Spain and Turkey.

As a result of the above, the BBVA Group generated a net attributable profit, of €1,846m in the first quarter of the year 2023, which compares very positively with the same period of the previous year (+40.5%). These solid results were supported by the favorable evolution of net interest income and, to a lesser extent, net fees and commissions, which compensate higher operating expenses and the increase in provisions for impairment losses on financial assets.

The cumulative net attributable profits, in millions of euros, at the end of March 2023 for the business areas that compose the Group were as follows: €541m in Spain, €1,285m in Mexico, €277m in Turkey, €184m in South America and €92m in Rest of Business.


		14

NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF

EUROS AT CONSTANT EXCHANGE RATES)

LOGO

⁽¹⁾ At current exchange rates: +39.4%.

The Group’s excellent performance in 2022 has also allowed it accelerate value creation, as reflected in the growth of the tangible book value per share and dividends, which at the end of the first quarter of 2023 was 21.7% higher than in the same period of the previous year.


TANGIBLE BOOK VALUE PER SHARE ⁽¹⁾ AND DIVIDENDS (EUROS)				ADJUSTED EARNING (LOSS) PER SHARE ⁽²⁾ AND EARNING (LOSS) PER SHARE ⁽²⁾ (EUROS)



General note: replenishing dividends paid in the period.				General note: adjusted EPS excludes the net impact arisen from the purchase of offices in Spain in 2Q22.

(1) For more information, see Alternative Performance Measures at the end of this report.

(2) Adjusted by additional Tier 1 instrument remuneration. For more information, see Alternative Performance Measures at the end of this report.


		15

The Group’s profitability indicators improved in year-on-year terms, supported by the favorable performance of results.


ROE AND ROTE ⁽¹⁾ (PERCENTAGE)				ROA AND RORWA ⁽¹⁾ (PERCENTAGE)

(1) The ratio at the end of 2022 excludes the net impact arisen from the purchase of offices in Spain.


		16

Balance sheet and business activity

The most relevant aspects related to the evolution of the Group’s balance sheet and business activity as of March 31, 2023 are summarized below:

–

Loans and advances to customers grew by 1.4% compared to the end of December 2022, strongly favored by the evolution of retail loans (+2.9% at Group level), supported by the good performance of both credit cards and consumer loans (+6.2% overall at Group level) in Mexico and Turkey and, to a lesser extent, by the good evolution of mortgage loans in Mexico.

–

Customer funds increased by 2.3% compared to the end of December 2022, thanks to the good performance of off-balance sheet funds (+7.2%), also linked to increased customer preference for them, particularly mutual funds in Mexico and Spain. For its part, customer deposits remained stable compared to the end of the previous year (+0.4%), with a reduction in demand deposits in Spain, offset by an increase in time deposits in Turkey and, to a lesser extent, in South America.


CONSOLIDATED BALANCE SHEET (MILLIONS OF EUROS)
	31-03-23		Δ %		31-12-22		31-03-22
Cash, cash balances at central banks and other demand deposits		83,267		4.4		79,756		70,937
Financial assets held for trading		119,877		8.3		110,671		112,131
Non-trading financial assets mandatorily at fair value through profit or loss		7,227		4.9		6,888		6,625
Financial assets designated at fair value through profit or loss		997		9.2		913		1,036
Financial assets at fair value through accumulated other comprehensive income		66,277		1.4		65,374		71,079
Financial assets at amortized cost		427,259		3.1		414,421		381,838
Loans and advances to central banks and credit institutions		22,256		8.9		20,431		16,750
Loans and advances to customers		362,317		1.4		357,351		334,553
Debt securities		42,686		16.5		36,639		30,536
Investments in joint ventures and associates		920		0.4		916		911
Tangible assets		8,945		2.4		8,737		7,628
Intangible assets		2,209		2.4		2,156		2,056
Other assets		22,586		1.5		22,259		21,465
Total assets		739,564		3.9		712,092		675,706
Financial liabilities held for trading		107,185		12.1		95,611		85,960
Other financial liabilities designated at fair value through profit or loss		11,309		6.9		10,580		9,761
Financial liabilities at amortized cost		542,326		2.5		529,172		504,940
Deposits from central banks and credit institutions		75,109		15.1		65,258		73,161
Deposits from customers		395,880		0.4		394,404		361,195
Debt certificates		54,586		(1.5)		55,429		53,540
Other financial liabilities		16,751		19.0		14,081		17,045
Liabilities under insurance and reinsurance contracts		11,010		8.7		10,131		9,620
Other liabilities		16,263		1.1		16,081		16,577
Total liabilities		688,093		4.0		661,575		626,859
Non-controlling interests		3,680		1.6		3,623		5,510
Accumulated other comprehensive income		(16,195)		(8.2)		(17,642)		(14,109)
Shareholders’ funds		63,986		(0.9)		64,535		57,446
Total equity		51,471		1.9		50,517		48,847
Total liabilities and equity		739,564		3.9		712,092		675,706
Memorandum item:
Guarantees given		55,042		(0.3)		55,182		48,891

General note: 2022 figures have been restated according to IFRS17 - Insurance contracts.


		17

LOANS AND ADVANCES TO CUSTOMERS (MILLIONS OF EUROS)

31-03-23

Δ %

31-12-22

31-03-22

Public sector

21,752

4.2

20,884

20,517

Individuals

161,346

2.9

156,838

149,936

Mortgages

91,999

0.5

91,569

92,598

Consumer

37,663

4.7

35,965

32,845

Credit cards

18,997

9.3

17,382

13,326

Other loans

12,687

6.4

11,921

11,168

Business

177,168

(0.1)

177,374

160,785

Non-performing loans

13,215

(2.1)

13,493

14,731

Loans and advances to customers (gross)

373,481

1.3

368,588

345,970

Allowances ⁽¹⁾

(11,164)

(0.7)

(11,237)

(11,417)

Loans and advances to customers

362,317

1.4

357,351

334,553

(1) Allowances include valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). As of March 31, 2023, December 31, 2022 and March 31, 2022, the remaining amount was €173m, €190m and €245m, respectively.


LOANS AND ADVANCES TO CUSTOMERS (BILLIONS OF EUROS)				CUSTOMER FUNDS (BILLIONS OF EUROS)

(1) At constant exchange rates: +0.8%.
(1) At constant exchange rates: +0.8%.				(1) At constant exchange rates: +1.7%.

CUSTOMER FUNDS (MILLIONS OF EUROS)

31-03-23

Δ %

31-12-22

31-03-22

Deposits from customers

395,880

0.4

394,404

361,195

Current accounts

308,918

(2.3)

316,082

301,333

Time deposits

83,516

10.4

75,646

58,649

Other deposits

3,446

28.8

2,676

1,213

Other customer funds

160,959

7.2

150,172

147,244

Mutual funds and investment companies and customer portfolios ⁽¹⁾

118,640

8.9

108,936

106,323

Pension funds

38,901

0.6

38,653

38,460

Other off-balance sheet funds

3,418

32.4

2,582

2,461

Total customer funds

556,839

2.3

544,576

508,439

(1) Includes the customer portfolios in Spain, Mexico, Colombia and Peru.


		18

Solvency

Capital base

The BBVA Group’s strong results during the quarter contributed to the consolidated CET1 fully-loaded ratio to reach 13.13% as of March 31, 2023, maintaining a large management buffer over the Group’s CET1 requirement (8.75%)⁴, and also above the Group’s established target management range of 11.5-12.0% of CET1.

During the first quarter of the year, the CET1 ratio increased 52 basis points. Profit generation, net of dividends and the remuneration of AT1 instruments, resulted in a contribution of 25 basis points to the CET1 ratio. Growth in risk-weighted assets (RWA) deducted 23 basis points from the CET1, which was partially offset by the effect of hyperinflation on equity, the positive evolution of market effect in CET1 and lower regulatory deductions. Additionally, it includes the reversal of the CET1 deduction for prudential provisioning of non-performing exposures, once it has been incorporated into the Group’s capital requirement, the impact of which was +19 basis points.

Fully-loaded risk-weighted assets (RWA) increased by approximately €11,700m in the quarter, mainly as a result of increased activity including also the expected regulatory and supervisory impacts.

The consolidated fully-loaded additional Tier 1 capital (AT1) stood at 1.49% as of March 31, 2023, resulting in a 5 basis point decrease from the previous quarter, mainly due to the increase in risk-weighted assets.

For its part, the consolidated fully-loaded Tier 2 ratio at the end of December stood at 1.68%, with a decrease of 11 basis points in the quarter. The total fully-loaded capital ratio stands at 16.30%.

It is worth mentioning that, with effect from January 1, 2023, the application of part of the transitional effects applied by the Group in the determination of the phased-in ratio has ended, so that as of March 31, 2023, this ratio coincides with the fully-loaded ratio.

FULLY-LOADED CAPITAL RATIOS (PERCENTAGE)


CAPITAL BASE (MILLIONS OF EUROS)
	CRD IV phased-in						CRD IV fully-loaded
	31-03-23 ^(1) (2)		31-12-22		31-03-22		31-03-23 ^(1) (2)		31-12-22		31-03-22

Common Equity Tier 1 (CET 1)		45,761		42,738		40,537		45,761		42,484		40,154

Tier 1		50,948		47,931		46,364		50,948		47,677		45,982

Tier 2		5,865		5,930		6,839		5,865		6,023		6,838

Total capital (Tier 1 + Tier 2)		56,813		53,861		53,203		56,813		53,699		52,819
Risk-weighted assets		348,598		337,066		316,361		348,598		336,884		316,131

CET1 (%)		13.13		12.68		12.81		13.13		12.61		12.70

Tier 1 (%)		14.62		14.22		14.66		14.62		14.15		14.55

Tier 2 (%)		1.68		1.76		2.16		1.68		1.79		2.16
Total capital ratio (%)		16.30		15.98		16.82		16.30		15.94		16.71

(1) The difference between the phased-in and fully-loaded ratios arises from the temporary treatment of certain capital items, mainly of the impact of IFRS 9, to which the BBVA Group has adhered voluntarily (in accordance with article 473bis of the CRR and the subsequent amendments introduced by the Regulation (EU) 2020/873). As of March 31, 2023, there are no differences between phased-in and fully-loaded ratios due to the aforementioned temporary treatment.

(2) Preliminary data.

⁴ Includes the update of the countercyclical capital buffer calculated on the basis of exposure at end-December 2022.


		19

As of March 31, 2023, BBVA’s share capital stood at €2,954,757,116.36, divided into 6,030,116,564 shares, at €0.49 par value each, although, on March 20, 2023, after receiving the required authorization from the ECB, the Group began the execution of the aforementioned buyback program for the repurchase of own shares aimed at reducing BBVA’s share capital through the redemption of the shares acquired. On April 21, 2023, BBVA announced the completion of this share buyback program, having acquired 64,643,559 BBVA shares between March 20 and April 20, 2023, representing approximately 1.1% of BBVA’s share capital as of said date.


SHAREHOLDER STRUCTURE (31-03-23)

	Shareholders			Shares issued
Number of shares		Number	%		Number	%
Up to 500		326,256	41.5		61,193,570	1.0

501 to 5,000		359,832	45.8		639,344,983	10.6

5,001 to 10,000		53,578	6.8		376,518,484	6.2

10,001 to 50,000		41,760	5.3		797,609,653	13.2

50,001 to 100,000		2,973	0.4		202,817,212	3.4

100,001 to 500,000		1,359	0.2		245,800,790	4.1

More than 500,001		273	0.03		3,706,831,872	61.5

Total		786,031	100		6,030,116,564	100

With regard to MREL (Minimum Requirement for own funds and Eligible Liabilities) requirements, BBVA must maintain, from January 1, 2022, an amount of own funds and eligible liabilities equal to 21.46% of the total RWAs of its resolution group, at a sub-consolidated⁵ level (hereinafter, the “MREL in RWAs”). This MREL in RWAs does not include the combined capital buffer requirement which, according to applicable regulations and supervisory criteria, would currently be 3.30%. Given the structure of own funds and eligible liabilities of the resolution group, as of March 31, 2023, the MREL in RWAs ratio stands at 26.89%^6,7, complying with the aforementioned requirement.

With the aim of reinforcing compliance with these requirements, BBVA has made a debt issue during the first quarter of 2023. For more information on this and other issues, see “Structural risks” section within the “Risk management”- chapter.

Lastly, as of March 31, 2023, the Group’s fully-loaded leverage ratio stood at 6.6% (6.6% phased-in)⁸.

Ratings

During the first quarter of 2023, BBVA’s rating has continued to show its strength and all agencies have maintained their rating in the A category. In March, DBRS communicated the result of its annual review of BBVA, affirming the rating at A (high) with a stable outlook. S&P, Moody’s and Fitch maintained BBVA’s ratings unchanged in the quarter at A, A3 and A-, respectively, all three with a stable outlook. The following table shows the credit ratings and outlook assigned by the agencies:

RATINGS



Rating agency	Long term ⁽¹⁾	Short term	Outlook

DBRS	A (high)	R-1 (middle)	Stable

Fitch	A-	F-2	Stable

Moody’s	A3	P-2	Stable

Standard & Poor’s	A	A-1	Stable

⁽¹⁾ Ratings assigned to long term senior preferred debt. Additionally, Moody’s and Fitch assign A2 and A- rating, respectively, to BBVA’s long term deposits.

⁵ In accordance with the resolution strategy MPE (“Multiple Point of Entry”) of the BBVA Group, established by the SRB, the resolution group is made up of Banco Bilbao Vizcaya Argentaria, S.A. and subsidiaries that belong to the same European resolution group. As of March 31, 2023, the total RWAs of the resolution group amounted to €206,655m and the total exposure considered for the purpose of calculating the leverage ratio amounted to €508,210m.

⁶ Own resources and eligible liabilities to meet, both, MREL and the combined capital buffer requirement applicable.

⁷ As of March 31, 2023, the MREL ratio in terms of Leverage Ratio Exposure stands at 10.93% and the subordination ratios in terms of RWAs and in terms of Leverage Ratio Exposure, stand at 23.59% and 9.02%, respectively, being preliminary data.

⁸ The Group’s leverage ratio is provisional at the date of release of this report.


		20

Risk management

Credit risk

The global economy is currently facing a number of extraordinary challenges. The war in Ukraine and the related sanctions imposed against Russia have led to significant disruption, instability and volatility in global markets, as well as higher inflation and lower economic growth. The increase in the last year in interest rates could negatively affect the Group by reducing the demand for credit, limiting its capacity to generate credit for its customers and causing a strain on the payment capacity of individuals.

In relation to the relief measures for customers affected by the pandemic, and additionally, affected by the economic effects derived from the war in Ukraine, in Spain and Peru, the possibility of carrying out extensions both in the maturity period as well as in the grace period in financing with public guarantees are still in force. In Spain, they can be requested by companies and the self-employed from June 30, 2022, after the expiration of the Temporary State Aid Framework approved by the European Commission. In Peru, the Decree was approved in May 2022, with eligibility in this measure in place until June 30, 2023, after the extension of the initial period that ended on December 31, 2022.

In addition, on November 23, 2022, the Royal Decree-Law 19/2022, on November 22, was published. It amends the Code of Good Practices, establishes a new Code of Good Practices easing the interest rates hikes on mortgage loans agreements related to primary residences and provides for other structural measures aiming to improve the loan market. In November 30, 2022, the BBVA Board of Directors agreed the adherence to the new Code of Good Practices with effect from January 1, 2023. The number and amount of the transactions granted to clients in accordance with the new Code of Good Practices have been very low.

Regarding the direct exposure of the Group to Russia and Ukraine, this is limited for BBVA, although the Group has taken different measures aimed at reducing its impact, among which are the initial lowering of limits followed by the suspension of operations with Russia, the lowering of internal ratings and the inclusion of the country and its borrowers as impaired for subjective reasons. However, the indirect risk is greater due to the activity of customers in the affected area or sectors. The economic effects are mainly shown through higher commodity prices, mainly energy, despite the moderation observed in recent months, but also through financial channels and the confidence of economic agents.

Calculation of expected losses due to credit risk

For the estimation of expected losses, the models include individual and collective estimates, taking into account the macroeconomic forecasts in accordance with IFRS 9. Thus, the estimate at the end of the quarter includes the effect on expected losses of updating macroeconomic forecasts, which take into account the current global environment, which has been affected by the war in Ukraine, the evolution of interest rates, inflation rates and commodity prices.

Additionally, the Group can supplement the expected losses either by the consideration of additional risk drivers, the incorporation of sectorial particularities or that may affect a set of operations or borrowers, following a formal internal process established for the purpose.

Thus, in Spain, during 2021 and 2022, the Loss Given Default (LGD) of certain specific operations considered unlikely to pay was reviewed upwards, with a remaining adjustment at the end of the year 2022 of €388m; without significant variation during the three month period ended March 31, 2023. In addition, due to the earthquake that has affected an area in the south of Turkey, during the month of February 2023 the classification of the credit exposure recorded in the five most affected cities has been reviewed, which has led to a reclassification to Stage 2 of approximately €518m of balances on the balance sheet and €682m of off-balance sheet balances, as well as a charge to results of approximately €58m. It is expected that the classification of these balances and provisions evolve during the year based on events in said area, and it is expected that the classification of operations and their coverage needs will be reassessed as greater certainty is obtained.

On the other hand, the complementary adjustments pending allocation to specific operations or customers that are in force as of March 31, 2023 total €219m, of which €87m correspond to Spain, €98m to Mexico, €15m to Peru, €10m to Colombia, €4m to Chile and €6m to Rest of Business of the Group. In comparison, as of December 31, 2022, the complementary adjustments pending allocation to specific operations or clients amounted to €302m, of which €163m corresponded to Spain, €92m to Mexico,€25m to Peru, €11m to Colombia, €5m to Chile and €6m to Rest of Business of the Group. The change in the quarter is due to the utilization in the period in Spain, Peru, Colombia and Chile, with no additional provisions in the first months of the year.

BBVA Group’s credit risk indicators

The evolution of the Group’s main credit risk indicators is summarized below:

–

Credit risk increased in the first quarter of the year by 1.1% (+0.8% at constant exchange rates), with generalized growth at constant exchange rates in almost all geographic areas except Rest of Business and Spain.

–

Reduction in the balance of non-performing loans at Group level between January and March 2023 (-2.2% in current terms and -2.5% at constant rates), due to lower NPL inflows, positive dynamics in wholesale portfolios (repayments and recoveries mainly in Turkey) as well as a higher volume of write-offs in Spain. Compared to the same period of the previous year, the balance of non-performing loans decreased by 9.4% (-8.9% at constant exchange rates).


		21

NON-PERFORMING LOANS AND PROVISIONS (MILLIONS OF EUROS)

LOGO

–

The NPL ratio stood at 3.3% as of March 31, 2023, 11 basis points below the figure recorded in December 2022 and 65 basis points below that of March 2022. Noteworthy is the change in Turkey, which improved by 77 basis points compared to the end of 2022 and 239 basis points compared to the first quarter of last year.

–

Loan-loss provisions remained almost stable compared to the figure at the end of the fourth quarter (-0.9% with respect to December 2022).

–

The NPL coverage ratio stood at 82%, 112 basis points higher than the figure at the end of 2022 (655 basis points higher than the first quarter of 2022), mainly due to the evolution in Turkey and Mexico.

–

The cumulative cost of risk as of March 31, 2023 stood at 1.05%. Lower requirements compared to the previous quarter in all geographical areas except Mexico, Argentina and Rest of Business.

NPL AND NPL COVERAGE RATIOS AND COST OF RISK (PERCENTAGE)

LOGO

CREDIT RISK ⁽¹⁾ (MILLIONS OF EUROS)


	31-03-23		31-12-22		30-09-22		30-06-22		31-03-22
Credit risk		428,423		423,669		428,064		413,638		394,861

Non-performing loans		14,141		14,463		15,162		15,501		15,612

Provisions		11,661		11,764		12,570		12,159		11,851

NPL ratio (%)		3.3		3.4		3.5		3.7		4.0

NPL coverage ratio (%) ⁽²⁾		82		81		83		78		76

(1) Includes gross loans and advances to customers plus contingent liabilities.

(2) The NPL coverage ratio includes the valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). If these valuation corrections had not been taken into account, the NPL coverage ratio would have stood at 81% as of March 31, 2023, 80% as of December 31, 2022 and 74% as of March 31, 2022.


		22

NON-PERFORMING LOANS EVOLUTION (MILLIONS OF EUROS)


	1Q23 ⁽¹⁾		4Q22		3Q22		2Q22		1Q22
Beginning balance		14,463		15,162		15,501		15,612		15,443
Entries		2,259		2,332		1,871		2,085		1,762
Recoveries		(1,526)		(1,180)		(1,595)		(1,697)		(1,280)
Net variation		733		1,152		276		388		482
Write-offs		(1,102)		(928)		(683)		(579)		(581)
Exchange rate differences and other		48		(923)		67		80		269

Period-end balance		14,141		14,463		15,162		15,501		15,612
Memorandum item:
Non-performing loans		13,215		13,493		14,256		14,597		14,731
Non performing guarantees given		926		970		906		904		881

⁽¹⁾ Preliminary data.

Structural risks

Liquidity and funding

Liquidity and funding management at BBVA aims to finance the recurring growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of financing. BBVA’s business model, risk appetite framework and funding strategy determine a solid funding structure based on stable customer deposits, mainly retail (granular). As a result of this model, deposits have a high degree of insurance in each geographical area, close to 60% in Spain and Mexico. In this regard, it is important to note that, given the nature of BBVA’s business, lending is mainly financed through stable customer funds.

One of the key elements in the BBVA Group’s liquidity and funding management is the maintenance of large high-quality liquidity buffers in all geographical areas. In this respect, the Group has maintained during the last 12 months an average volume of high quality liquid assets (HQLA) of €141.3 billion, of which 96% corresponds to maximum quality assets (level 1 in the LCR).

Due to its subsidiary-based management model, BBVA is one of the few major European banks that follows the Multiple Point of Entry (MPE) resolution strategy: the parent company sets the liquidity policies, but the subsidiaries are self-sufficient and responsible for managing their own liquidity and funding (taking deposits or accessing the market with their own rating), without fund transfers or financing occurring between either the parent company and the subsidiaries or between the different subsidiaries. This strategy limits the spread of a liquidity crisis among the Group’s different areas and ensures that the cost of liquidity and financing is correctly reflected in the price formation process.

The BBVA Group maintains a solid liquidity position in every geographical area in which it operates, with ratios well above the minimum required:

–

The liquidity coverage ratio (LCR) requires banks to maintain a volume of high-quality liquid assets sufficient to withstand liquidity stress for 30 days. BBVA Group’s consolidated LCR remained comfortably above 100% during 2022 and stood at 142% as of March 31, 2023. It should be noted that, given the MPE nature of BBVA, this ratio limits the numerator of the LCR for subsidiaries other than BBVA S.A. to 100%. Therefore, the resulting ratio is below that of the individual units (the main components, the LCR of BBVA S.A. is 161%, Mexico 188% and Turkey 217%). If this restriction was eliminated, the Group’s LCR ratio would reach 184%.

–

The net stable funding ratio (NSFR) requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. The BBVA Group’s NSFR ratio, stood at 132% as of March 31, 2023.

The breakdown of these ratios in the main geographical areas in which the Group operates is shown below:


LCR AND NSFR RATIOS (PERCENTAGE. 31-03-23)
	BBVA, S.A.	Mexico	Turkey	South America

LCR	161%	188%	217%	All countries >100

NSFR	123%	138%	173%	All countries >100

It should be noted that episodes of volatility in the financial markets during the first quarter of 2023, related to events in American regional banks and a Swiss bank, have had no significant impact on the liquidity and financing situation of the BBVA Group units. In addition to the above, the most relevant aspects related to the main geographical areas are the following:

–

BBVA, S.A. has maintained a comfortable position with a large high-quality liquidity buffer. During the first quarter of 2023, commercial activity has been characterized by the decline in lending volumes and customer deposits, these latter influenced by the seasonal component and by the transfer to off-balance sheet funds. In addition, in December 2022 the Bank started the repayment of the TLTRO III program for an amount of €12 billion, plus an additional repayment of €12 billion between February and March 2023, which together represent approximately two thirds of the original amount. BBVA’s solid liquidity situation has allowed the Bank to bring forward a part of the maturities while maintaining regulatory liquidity metrics well above the established minimums.


		23

–

BBVA Mexico, continues to present a comfortable liquidity situation, which has contributed to an efficient management of the cost of funds, in an environment of rising interest rates. During the first quarter of the year, however, commercial activity has drained liquidity mainly due to the seasonal outflow of funds, coupled with sustained loan growth.

–

In Turkey, in the first quarter of 2023, the lending gap in local currency has been reduced, due to a greater growth in deposits than in loans. The lending gap in foreign currency has increased due to reductions in deposits as a result of the mechanism established to encourage Turkish lira deposits, and an increase in in foreign currency loans. Garanti BBVA continues to maintain a stable liquidity position with comfortable ratios. For its part, the Central Bank of Turkey has continued to implement measures in order to reduce the dollarization of the economy.

–

In South America, the liquidity situation remains adequate throughout the region. In Argentina, liquidity continues to increase in the system and in BBVA due to a higher growth in deposits than in loans in local currency. In BBVA Colombia, the liquidity situation also improves in the quarter, with deposits growing more than loans. BBVA Peru maintains solid liquidity levels, thanks to the higher growth in deposits than in lending, affected by the expiration of loans covered by COVID-19 programs. The political instability is not having material impacts in terms of liquidity.

The main wholesale financing transactions carried out by the entities of the BBVA Group are listed below.

In January 2023, BBVA, S.A. carried out two public bond issuance operations: a senior non-preferred bond for €1,000m with a term of 8 years and an early redemption option in the 7th year at 4.625% and a €1,500m mortgage bond with a term of 4 and a half years at 3.125%.

For its part, on February 15, BBVA Mexico carried out two operations, the first of which involved the issue of a green bond for 8,689 million Mexican pesos (approximately €442m) with a maturity of 4 years, the second issue of this type by BBVA Mexico, using the TIIE (Balanced Interbank Interest Rate used in Mexico) rate as benchmark, at one day +32 basis points; and the second was the issue of a senior bond for 6,131 million Mexican pesos (approximately €312m) at a fixed rate of 9.54% and a term of 7 years.

Foreign exchange

Foreign exchange risk management aims to reduce both the sensitivity of the capital ratios and the net attributable profit variability to currency fluctuations.

The factors affecting the Group’s main currencies during the first quarter of 2023 have been very disparate, hence the diversity of performance. On the positive side, due to its relevance for the Group, it is worth highlighting the continued strength of the Mexican peso, which has appreciated 6.2% against the euro. Other Latin American currencies that also performed well in the first three months of the year were the Chilean peso (+6.8%) and the Colombian peso (+2.0%). On the other hand, the Argentine peso’s depreciation (-16.9%) was higher than it had been in the past, while that of the Peruvian sol was irrelevant (-0.8%). As for the Turkish lira, the 4.3% depreciation can be described as moderate. For its part, the U.S. dollar fell 1.9% against the euro, although it moved in a narrower range than in previous quarters.

EXCHANGE RATES (EXPRESSED IN CURRENCY/EURO)


	Period-end exchange rates						Average exchange rates
			Δ % on		Δ % on				Δ % on
	31-03-23		31-03-22		31-12-22		1Q23		1Q22
U.S. dollar		1.0875		2.1		(1.9)		1.0730		4.5

Mexican peso		19.6392		12.5		6.2		20.0431		14.7

Turkish lira ⁽¹⁾		20.8632		(22.0)		(4.3)		—		—

Peruvian sol		4.0902		0.7		(0.8)		4.0902		4.3

Argentine peso ⁽¹⁾		226.85		(45.7)		(16.9)		—		—

Chilean peso		858.39		1.8		6.8		871.43		4.2

Colombian peso		5,032.16		(17.3)		2.0		5,107.57		(14.1)

(1) According to IAS 21 “The effects of changes in foreign exchange rates”, the year-end exchange rate is used for the conversion of the Turkey and Argentina income statement.

In relation to the hedging of the capital ratios, BBVA covers, in aggregate, 70% of its subsidiaries’ capital excess. The sensitivity of the Group’s CET1 fully-loaded ratio to 10% depreciations in major currencies is estimated at: +17 basis points for the U.S. dollar, -11 basis points for the Mexican peso and -1 basis point for the Turkish lira. With regard to the hedging of results, BBVA hedges between 40% and 50% of the aggregate net attributable profit it expects to generate in the next 12 months. For each currency, the final amount hedged depends on its expected future evolution, the costs and the relevance of the incomes related to the Group’s results as a whole.

Interest rate

Interest rate risk management seeks to limit the impact that BBVA may suffer, both in terms of net interest income (short-term) and economic value (long-term), from adverse movements in the interest rate curves in the various currencies in which the Group operates. BBVA carries out this work through an internal procedure, pursuant to the guidelines established by the European Banking Authority (EBA), in order to analyze the potential impact that could derive from a range of scenarios on the Group’s different balance sheets.


		24

The model is based on assumptions intended to realistically mimic the behavior of the balance sheet. Of particular relevance are assumptions regarding the behavior of accounts with no explicit maturity and prepayment estimates. These assumptions are reviewed and adapted at least once a year to take into account any changes in observed behavior.

At the aggregate level, BBVA continues to have a positive sensitivity toward interest rate increases in the net interest income.

The first quarter of 2023 was characterized by persistent inflation in most of the countries where the Group operates. While it is true that some improvement in headline inflation is observable, core inflation is still resilient and, therefore, offers central banks a solid argument to continue with their strategy of raising interest rates. It is important to note that financial markets experienced a strong bout of volatility in March, stemming from the crisis arisen in certain American regional banks and another bank of Swiss origin. These events triggered sharp falls in sovereign debt curves and markets came to question whether central banks should pause their rate hike strategy. As a result, while the short tranches of sovereign curves remained under pressure, longer-term benchmarks fell in the quarter, with significant declines in 10-year benchmarks in both Germany and the United States. Meanwhile, the risk premium in Spain and especially Italy experienced an improvement with respect to the German curve. In Mexico, the central bank also continues to raise rates, a situation that is repeated in several South American countries, such as Colombia, Peru and Argentina. Turkey, for its part, continues with the opposite strategy of lowering rates.

By area, the main features are:

–

Spain has a balance sheet characterized by a high proportion of variable-rate loans (mortgages and corporate lending) and liabilities composed mainly by customer demand deposits. The ALCO portfolio acts as a management lever and hedging for the balance sheet, mitigating its sensitivity to interest rate fluctuations. The balance sheet interest rate risk profile remained stable during the year, with Spain as the franchise with the highest positive sensitivity to rates in the Group.

On the other hand, in March 2023 the ECB set the benchmark interest rate at 3.50%, held the marginal deposit facility rate at 3.00% and the marginal loan facility rate at 3.75%. Thus, Euribor reference rates continued to rise in the quarter. In this regard, customer spread is benefiting from the interest rate hikes and the containment in the cost of deposits.

–

Mexico continues to show a balanced situation between fixed and variable interest rates balances, which results in a limited sensitivity to interest rates fluctuations. In terms of assets that are most sensitive to interest rate fluctuations, the commercial portfolio stands out, while consumer loans and mortgages are mostly at a fixed rate. With regard to the customer funds, the high proportion of non-interest bearing deposits should be highlighted, which are insensitive to interest rate movements. The ALCO portfolio is invested primarily in fixed-rate sovereign bonds with limited maturities. The monetary policy rate stands at 11.25%, 75 basis points above the end-of-year level of 2022. Regarding customer spread, there has been improvement so far in the first quarter of 2023, favored by both the contained cost of deposits and the positive evolution of loan yield.

–

In Turkey, the sensitivity of loans, which are mostly fixed-rate but with relatively short maturities, and the ALCO portfolio balance the sensitivity of deposits on the liability side. Thus, the sensitivity of net interest income remains limited, both in Turkish lira and in foreign currencies. The customer spread worsened in the first quarter of 2023 due to the higher cost of deposits and the limits on lending rates.

–

In South America, the interest rate risk profile remains low as most countries in the area have a fixed/variable composition and maturities that are very similar for assets and liabilities, with limited net interest income sensitivity. In addition, in balance sheets with several currencies, interest rate risk is managed for each of the currencies, showing a very low level of risk. Regarding the benchmark rates of the central banks of Peru and Colombia, they have raised interest rates by 25 and 100 basis points, respectively, during the first quarter of 2023. The customer spread worsens in Colombia, impacted by an increase in the cost of deposits which does not apply in the same way to loan yields, and remains almost flat in Peru.

INTEREST RATES (PERCENTAGE)


	31-03-23		31-12-22		30-09-22		30-06-22		31-03-22
Official ECB rate		3.50		2.50		1.25		0.00		0.00

Euribor 3 months ⁽¹⁾		2.91		2.06		1.01		(0.24)		(0.50)

Euribor 1 year ⁽¹⁾		3.65		3.02		2.23		0.85		(0.24)

USA Federal rates		5.00		4.50		3.25		1.75		0.50

TIIE (Mexico)		11.25		10.50		9.25		7.75		6.50

CBRT (Turkey)		8.50		9.00		12.00		14.00		14.00

(1) Calculated as the month average.


		25

Business areas

This section presents the most relevant aspects of the Group’s different business areas. Specifically, for each one of them, it shows a summary of the income statements and balance sheets, the business activity figures and the most significant ratios.

The structure of the business areas reported by the BBVA Group as of March 31, 2023, is identical with the one presented at the end of 2022.

The composition of BBVA Group’s business areas is summarized below:

–

Spain mainly includes the banking, insurance and asset management activities that the Group carries out in this country.

–

Mexico includes banking, insurance and asset management activities in this country, as well as the activity that BBVA Mexico carries out through its agency in Houston.

–

Turkey reports the activity of the group Garanti BBVA that is mainly carried out in this country and, to a lesser extent, in Romania and the Netherlands.

–

South America includes banking, financial, insurance and asset management activities conducted, mainly, in Argentina, Chile, Colombia, Peru, Uruguay and Venezuela.

–

Rest of Business mainly incorporates the wholesale activity carried out in Europe (excluding Spain), the United States, and BBVA’s branches in Asia.

The Corporate Center contains the centralized functions of the Group, including: the costs of the head offices with a corporate function; structural exchange rate positions management; portfolios whose management is not linked to customer relations, such as financial and industrial holdings; stakes in Funds & Investment Vehicles in tech companies; certain tax assets and liabilities; funds due to commitments to employees; goodwill and other intangible assets as well as such portfolios and assets’ funding.

In addition to these geographical breakdowns, supplementary information is provided for the wholesale business carried out by BBVA, Corporate & Investment Banking (CIB), in the countries where it operates. This business is relevant to have a broader understanding of the Group’s activity and results due to the important features of the type of customers served, products offered and risks assumed.

The information by business areas is based on units at the lowest level and/or companies that make up the Group, which are assigned to the different areas according to the main region or company group in which they carry out their activity.

Regarding the shareholders’ funds allocation, in the business areas, a capital allocation system based on the consumed regulatory capital is used.

Finally, it should be noted that, as usual, in the case of the different business areas, that is, Mexico, Turkey, South America and Rest of Business, and, additionally, CIB, in addition to the year-on-year variations applying current exchange rates, the variations at constant exchange rates are also disclosed.

GROSS INCOME ⁽¹⁾, OPERATING INCOME ⁽¹⁾ AND NET ATTRIBUTABLE PROFIT ⁽¹⁾ BREAKDOWN (PERCENTAGE. 1Q23)

LOGO

⁽¹⁾ Excludes the Corporate Center.


		26



MAIN INCOME STATEMENT LINE ITEMS BY BUSINESS AREA (MILLIONS OF EUROS)

			Business areas
	BBVA Group		Spain		Mexico		Turkey		South America		Rest of Business		Σ Business areas		Corporate Center

1Q23

Net interest income		5,642		1,183		2,589		626		1,190		113		5,702		(60)

Gross income		6,958		1,726		3,306		802		1,175		260		7,269		(311)

Operating income		3,942		974		2,318		403		642		122		4,458		(516)

Profit (loss) before tax		2,944		851		1,768		327		405		111		3,463		(519)

Net attributable profit (loss)		1,846		541		1,285		277		184		92		2,378		(531)

1Q22 ⁽¹⁾

Net interest income		3,943		856		1,748		492		809		75		3,980		(37)

Gross income		5,395		1,655		2,232		500		885		202		5,474		(79)

Operating income		2,989		946		1,487		262		473		87		3,255		(266)

Profit (loss) before tax		2,225		837		1,067		155		315		105		2,480		(255)

Net attributable profit (loss)		1,325		598		777		(76)		160		81		1,540		(215)

⁽¹⁾ Restated balances according to IFRS17 - Insurance contracts.



MAIN BALANCE-SHEET ITEMS AND RISK-WEIGHTED ASSETS BY BUSINESS AREA (MILLIONS OF EUROS)

			Business areas
	BBVA Group		Spain		Mexico		Turkey		South America		Rest of Business		Σ Business areas		Corporate Center		Deletions

31-03-23

Loans and advances to customers		362,317		172,085		77,277		38,995		39,185		35,946		363,488		402		(1,573)

Deposits from customers		395,880		214,476		80,172		51,234		40,782		10,070		396,733		186		(1,039)

Off-balance sheet funds		160,959		90,577		44,408		7,491		17,971		510		160,958		0		—

Total assets/liabilities and equity		739,564		441,720		151,955		71,222		63,063		50,407		778,367		22,396		(61,198)

RWAs		348,598		116,550		78,316		58,683		47,341		33,725		334,615		13,983		—

31-12-22 ⁽¹⁾

Loans and advances to customers		357,351		173,971		71,231		37,443		38,437		37,375		358,456		278		(1,383)

Deposits from customers		394,404		221,019		77,750		46,339		40,042		9,827		394,978		187		(760)

Off-balance sheet funds		150,172		86,759		38,196		6,936		17,760		520		150,170		2		—

Total assets/liabilities and equity		712,092		427,116		142,557		66,036		61,951		49,952		747,613		22,719		(58,239)

RWAs		337,066		114,474		71,738		56,275		46,834		35,064		324,385		12,682		—

⁽¹⁾ Restated balances according to IFRS17 - Insurance contracts.


		27


NUMBER OF EMPLOYEES				NUMBER OF BRANCHES




NUMBER OF ATMS


		28

Spain

Highlights

•

Seasonal drop in lending

•

Significant improvement in net interest income

•

Recording of the temporary tax on credit institutions for the financial year 2023

•

Cost of risk remains at low levels, in line with the end of 2022


BUSINESS ACTIVITY ⁽¹⁾ (VARIATION COMPARED TO 31-12-22)				NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE)

⁽¹⁾ Excluding repos.


OPERATING INCOME (MILLIONS OF EUROS)				NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS)


		29



FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

Income statement	1Q23		Δ %		1Q22 ⁽¹⁾

Net interest income		1,183		38.2		856

Net fees and commissions		536		—		536

Net trading income		120		(36.9)		190

Other operating income and expenses		(112)		n.s.		73

Of which: Insurance activities		99		10.2		90

Gross income		1,726		4.3		1,655

Operating expenses		(753)		6.2		(709)

Personnel expenses		(414)		8.2		(383)

Other administrative expenses		(245)		10.3		(222)

Depreciation		(94)		(9.8)		(105)

Operating income		974		2.9		946

Impairment on financial assets not measured at fair value through profit or loss		(114)		27.0		(89)

Provisions or reversal of provisions and other results		(9)		(55.0)		(19)

Profit (loss) before tax		851		1.7		837

Income tax		(310)		30.1		(238)

Profit (loss) for the period		541		(9.6)		599

Non-controlling interests		(1)		(33.3)		(1)

Net attributable profit (loss)		541		(9.5)		598

Balance sheets	31-03-23		Δ %		31-12-22 ⁽¹⁾

Cash, cash balances at central banks and other demand deposits		50,952		3.6		49,185

Financial assets designated at fair value		137,432		8.7		126,413

Of which: Loans and advances		47,764		13.9		41,926

Financial assets at amortized cost		207,349		1.4		204,528

Of which: Loans and advances to customers		172,085		(1.1)		173,971

Inter-area positions		37,955		(2.5)		38,924

Tangible assets		2,957		(1.1)		2,990

Other assets		5,075		(0.0)		5,076

Total assets/liabilities and equity		441,720		3.4		427,116

Financial liabilities held for trading and designated at fair value through profit or loss		96,927		14.5		84,619

Deposits from central banks and credit institutions		60,305		16.6		51,702

Deposits from customers		214,476		(3.0)		221,019

Debt certificates		40,898		0.3		40,782

Inter-area positions		—		—		—

Other liabilities		14,777		(6.9)		15,870

Regulatory capital allocated		14,337		9.2		13,124

Relevant business indicators	31-03-23		Δ %		31-12-22

Performing loans and advances to customers under management ⁽²⁾		169,215		(1.2)		171,209

Non-performing loans		7,668		(2.8)		7,891

Customer deposits under management ⁽²⁾		213,311		(3.1)		220,140

Off-balance sheet funds ⁽³⁾		90,577		4.4		86,759

Risk-weighted assets		116,550		1.8		114,474

Efficiency ratio (%)		43.6				47.5

NPL ratio (%)		3.9				3.9

NPL coverage ratio (%)		59				61

Cost of risk (%)		0.27				0.28

⁽¹⁾ Restated balances according to IFRS17 - Insurance contracts.

⁽²⁾ Excluding repos.

⁽³⁾ Includes mutual funds, customer portfolios and pension funds.


		30

Macro and industry trends

After growing by 5.5% in 2022, GDP will increase by around 1.6% in 2023 according to BBVA Research, a forecast two tenths of a percentage point higher than the previous forecast, mainly due to the significant reduction in energy prices and the dynamism of economic activity in recent months. Growth is also expected to moderate further ahead, in line with the outlook of tighter monetary conditions and a slowdown in global and European growth. Annual inflation, which closed 2022 at 5.7%, moderated to 3.3% in March, helped by lower energy prices and favorable base effects. It is expected to average around 3.9% in 2023, above the ECB’s 2% target.

As for the banking sector, based on data as of January 2023, the volume of credit to the private sector remained stable, with a slight decline of 0.6% year-on-year. At the end of December 2022 (latest data available by credit portfolios), lending to households remains stable while lending to companies fell by 1.1% in the year. Customer deposits grew by 0.6% year-on-year with data as of the end of January 2023, thanks to the growth in demand deposits, as time deposits continued their downward trend, albeit at a slower pace (-4.5% year-on-year). The NPL ratio continued to fall to 3.56% in January 2023, 77 basis points lower than in January 2022. It should also be noted that the system maintains comfortable solvency and liquidity levels.

Activity

The most relevant aspects related to the area’s activity during the first quarter of 2023 were:

–

Lending activity decreased (-1.2%), as a result of mortgage payoffs by some customers, which were not offset by the growth in the loans to SMEs (+0.7%) and the public sector (+3.5%).

–

In terms of credit quality, the NPL ratio showed a minor decrease of 5 basis points compared to the end of December 2022 and stood at 3.9%, mainly due to the volume of write-offs made during the quarter. The coverage ratio also decreased during the quarter, to 59%, due to the aforementioned shift to write-offs.

–

Total customer funds recorded a reduction of 1.0%, which is explained by the lower balances of customer deposits under management, which in December 2022 included extraordinary payments, and customer contributions to off-balance sheet funds. Thus, the variation in demand deposits was -3.8% and +3.3% in the case of time deposits, with the latter having a limited weight in total customer deposits (10.7% at the end of March 2023). Off-balance sheet funds (mutual and pension funds) increased by 4.4%, favored by net contributions in the quarter, despite the turbulence in the markets towards the end of the quarter.

Results

Spain generated a net attributable profit of €541m in the first quarter of the year 2023, 9.5% lower than in the same period of the previous year, due to the recording, on January 1, 2023, of the temporary tax on credit institutions and financial credit institutions for €225m, included in the other operating income and expenses line of the income statement. In addition, the dynamism of the net interest income stands out.

The most notable aspects of the year-on-year changes in the area’s income statement at the end of March 2023 were:

–

Net interest income, with a significant year-on-year growth of 38.2%, continued to benefit from the improvement in customer spreads, in a context of interest rate hikes.

–

Net fees and commissions were in line with the previous year, as a result of a lower contribution from asset management and banking services fees, offset by higher income from wholesale operations.

–

Decrease in the year-on-year NTI contribution (-36.9%), with a lower contribution from the ALCO portfolios, partially offset by the good performance of Global Markets.

–

Other operating income and expenses compared negatively with the previous year, due to the €225m recorded in this line for the temporary tax on credit institutions and financial credit institutions for the year 2023. For its part, the performance of the insurance business was higher than in the previous year (+10.2%).

–

Growth in operating expenses (+6.2%), both in personnel expenses due to higher fixed remuneration, with additional measures that improve those of the sectoral wage increase agreement, and in general expenses, as a result of inflation, especially higher IT expenses.

–

For its part, the gross income increased by 4.3%, below the growth in expenses. This increase is affected by the recording of the temporary tax on credit institutions and financial credit establishments. Thus, the efficiency ratio stood at 43.6%.

–

Impairment on financial assets was 27.0% higher than in the first quarter of 2022, due to higher provisions needs in the loan portfolio, as well as the recording of some non-recurring positive items in the first quarter of 2022. As a result of the above, the cumulative cost of risk at the end of March 2023 stood at 0.27%, below the 0.28% registered at the end of December 2022.

–

Provisions and other results closed the first quarter of 2023 at €-9m, which compares favorably with the previous year, thanks, among other factors, to lower provisions for legal contingencies and higher release of provisions for risks and contingent commitments.


		31

Mexico

Highlights

•

Favorable performance of the portfolio, with greater dynamism of the retail segment

•

Increase in net interest income as a result of effective spread management

•

Outstanding evolution of the efficiency ratio

•

Significant growth in net attributable profit


BUSINESS ACTIVITY ⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-22)				NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATE)

⁽¹⁾ Excluding repos.


OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)				NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)



⁽¹⁾ At current exchange rate: +55.9%.				⁽¹⁾ At current exchange rate: +65.4%.


		32


FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

Income statement	1Q23		Δ %		Δ %⁽¹⁾		1Q22 ⁽²⁾

Net interest income		2,589		48.2		29.2		1,748

Net fees and commissions		483		40.4		22.4		344

Net trading income		149		61.9		41.1		92

Other operating income and expenses		86		77.2		54.5		48

Gross income		3,306		48.2		29.2		2,232

Operating expenses		(988)		32.8		15.7		(744)

Personnel expenses		(455)		37.3		19.7		(332)

Other administrative expenses		(424)		31.6		14.8		(322)

Depreciation		(109)		20.0		4.6		(90)

Operating income		2,318		55.9		35.9		1,487

Impairment on financial assets not measured at fair value through profit or loss		(549)		31.2		14.4		(419)

Provisions or reversal of provisions and other results		(1)		(38.7)		(46.5)		(1)

Profit (loss) before tax		1,768		65.6		44.4		1,067

Income tax		(483)		66.2		44.9		(291)

Profit (loss) for the period		1,285		65.4		44.2		777

Non-controlling interests		(0)		69.6		47.8		(0)

Net attributable profit (loss)		1,285		65.4		44.2		777

Balance sheets	31-03-23		Δ %		Δ% ⁽¹⁾		31-12-22 ⁽²⁾

Cash, cash balances at central banks and other demand deposits		12,726		(3.8)		(9.4)		13,228

Financial assets designated at fair value		48,366		3.8		(2.2)		46,575

Of which: Loans and advances		1,386		(8.0)		(13.4)		1,507

Financial assets at amortized cost		84,617		9.6		3.2		77,191

Of which: Loans and advances to customers		77,277		8.5		2.2		71,231

Tangible assets		2,098		6.5		0.3		1,969

Other assets		4,148		15.4		8.7		3,593

Total assets/liabilities and equity		151,955		6.6		0.4		142,557

Financial liabilities held for trading and designated at fair value through profit or loss		28,035		8.5		2.2		25,840

Deposits from central banks and credit institutions		6,862		55.9		46.8		4,402

Deposits from customers		80,172		3.1		(2.9)		77,750

Debt certificates		8,317		7.2		1.0		7,758

Other liabilities		19,224		13.2		6.6		16,976

Regulatory capital allocated		9,344		(4.9)		(10.5)		9,831

Relevant business indicators	31-03-23		Δ %		Δ % ⁽¹⁾		31-12-22

Performing loans and advances to customers under management ⁽³⁾		77,997		8.6		2.3		71,788

Non-performing loans		1,951		0.6		(5.3)		1,939

Customer deposits under management ⁽³⁾		79,665		3.3		(2.7)		77,117

Off-balance sheet funds ⁽⁴⁾		44,408		16.3		9.5		38,196

Risk-weighted assets		78,316		9.2		2.8		71,738

Efficiency ratio (%)		29.9						31.7

NPL ratio (%)		2.3						2.5

NPL coverage ratio (%)		137						129

Cost of risk (%)		2.88						2.49

⁽¹⁾ At constant exchange rate.

⁽²⁾ Restated balances according to IFRS17 - Insurance contracts.

⁽³⁾ Excluding repos.

⁽⁴⁾ Includes mutual funds, customer portfolios and other off-balance sheet funds.


		33

Macro and industry trends

Economic activity is likely to lose some of the dynamism it showed in 2022, when GDP grew by 3.1%, slightly above BBVA Research’s forecast. However, the moderation this year will be less accentuated than previously expected: GDP will grow by 1.4%, eight tenths of a percentage point more than the forecast of three months ago, supported mainly by private consumption. Inflation, which closed 2022 at 7.8%, reached 6.9% in March and could average around 5.7% in 2023, well above the inflation target. Price pressures, as well as the monetary policy stance in the United States, are likely to contribute to Banxico maintaining official interest rates at current levels of 11.25%, or even slightly higher, until the end of the year.

As for the banking system, with data as of the end of February 2023, the volume of outstanding credit to the non-financial private sector increased by 12.8% year-on-year, with a greater boost from the consumer portfolio (+18.0%) in relation to mortgages and companies (+11.8% and +11.2%, respectively). Total deposits growth moderated slightly to 6.1% year-on-year in February 2023, highlighting the incipient shift towards time deposits (+13.1% year-on-year). The system’s NPL ratio remains stable at around 2.35% in February 2023 and capital indicators are at comfortable levels.

Unless expressly stated otherwise, all the comments below on rates of change, for both activity and results, will be given at constant exchange rate. These rates, together with changes at current exchange rates, can be found in the attached tables of financial statements and relevant business indicators.

Activity

The most relevant aspects related to the area’s activity in the first quarter of 2023 were:

–

Lending activity (performing loans under management) grew by 2.3% between January and March 2023, with a more dynamic growth in the retail portfolio. The wholesale portfolio, which includes larger companies and the public sector, recorded a growth of 1.2%, highlighting the dynamism of the corporate banking segment, partially explained by fewer corporate bond issuances due to the high cost of accessing wholesale financing markets. For its part, the retail portfolio grew at a rate of 3.2%. Within this segment, loans to SMEs grew by 6.7%, consumer loans by 4.4%, mortgage loans by 2.1%, and credit cards surprised positively with an increase of 1.7% in the quarter which is usually affected by the seasonal effect of the year-end campaigns. The aforementioned has supported a stable composition in lending activity, with a balanced distribution in lending between wholesale and retail portfolio.

–

With regard to the asset quality indicators, the NPL ratio decreased to 2.3% at the end of March 2023, which represents a reduction of 18 basis points compared to the previous year-end, with lower non-performing loans volume, mainly due to the management of write-offs and a good level of recoveries, as well as to the effect of the increase in activity. For its part, the NPL coverage ratio stood at 137% at the end of March 2023, showing an increase in the quarter as a result of the decrease of the non-performing loans volume, excluding the impact of changes in the exchange rate.

–

Customer deposits under management decreased between January and March 2023 (-2.7%), as retail customer balances at the end of the previous year recorded extraordinary remunerations, which are typically used during the first quarter. For its part, thanks to the commercial effort and the strategy to promote the growth of investment funds, with lower commissions in a highly competitive environment, off-balance sheet funds grew at a rate of 9.5% between January and March 2023.

Results

The most relevant aspects of the year-on-year changes in the income statement at the end of March 2023 are summarized below:

–

Net interest income grew by a remarkable 29.2%, as a result of strong lending and effective price management, in a context of rising interest rates, with an improvement in customer spreads.

–

Net fees and commissions increased by 22.4% thanks to a higher volume of customer transactions, especially in credit cards, as well as to the income derived from mutual funds management.

–

The contribution from NTI increased (+41.1%), due to the good management of Global Markets and, to a lesser extent, foreign exchange trading.

–

Other operating income and expenses grew by 54.5% due to the good performance of the insurance business.

–

Operating expenses increased (+15.7%), mainly due to higher personnel expenses for salary adjustment and increase in workforce in a context of strong momentum in activity and the increase of general expenses linked to inflation, particularly marketing and technology. Despite the above, the efficiency ratio continued to evolve favorably, with a significant improvement of 346 basis points compared to twelve months earlier.

–

Loan-loss provisions increased (+14.4%), mainly due to the higher provisioning needs of the retail portfolio. As a result, the cumulative cost of risk at the end of March 2023 stood at 2.88%, in line with the one registered at the end of March 2022.


		34

Turkey

Highlights

●

Significant de-dollarization of the balance sheet

●

Improved risk indicators compared to year-end 2022

●

Net attributable profit positively affected by lower income tax


BUSINESS ACTIVITY ⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-22)				NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATE)

⁽¹⁾ Excluding repos.


OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)				NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATE)

Note: variation at current exchange rate: +53.8%.


		35



FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

Income statement	1Q23		Δ %		Δ % ⁽¹⁾		1Q22 ⁽²⁾

Net interest income		626		27.4		63.0		492

Net fees and commissions		172		25.9		61.0		137

Net trading income		224		27.9		64.0		175

Other operating income and expenses		(220)		(27.3)		(48.7)		(303)

Gross income		802		60.4		n.s.		500

Operating expenses		(399)		67.7		112.7		(238)

Personnel expenses		(209)		58.7		103.1		(132)

Other administrative expenses		(154)		99.6		154.5		(77)

Depreciation		(36)		24.2		49.6		(29)

Operating income		403		53.8		n.s.		262

Impairment on financial assets not measured at fair value through profit or loss		(59)		(38.0)		(20.3)		(96)

Provisions or reversal of provisions and other results		(16)		48.9		63.6		(11)

Profit (loss) before tax		327		110.7		n.s.		155

Income tax		(5)		(98.4)		(98.0)		(308)

Profit (loss) for the period		323		n.s.		n.s.		(153)

Non-controlling interests		(45)		n.s.		n.s.		77

Net attributable profit (loss)		277		n.s.		n.s.		(76)

Balance sheets	31-03-23		Δ %		Δ % ⁽¹⁾		31-12-22 ⁽²⁾
Cash, cash balances at central banks and other demand deposits		8,479		39.9		46.2		6,061
Financial assets designated at fair value		5,109		(1.8)		2.6		5,203
Of which: Loans and advances		1		(50.8)		(48.6)		3
Financial assets at amortized cost		54,240		5.1		9.8		51,621
Of which: Loans and advances to customers		38,995		4.1		8.8		37,443
Tangible assets		1,368		12.8		17.2		1,213
Other assets		2,025		4.5		9.0		1,938

Total assets/liabilities and equity		71,222		7.9		12.7		66,036
Financial liabilities held for trading and designated at fair value through profit or loss		2,079		(2.7)		1.6		2,138
Deposits from central banks and credit institutions		2,756		(4.0)		0.3		2,872
Deposits from customers		51,234		10.6		15.5		46,339
Debt certificates		2,904		(10.2)		(6.2)		3,236
Other liabilities		5,087		7.3		11.9		4,741
Regulatory capital allocated		7,161		6.7		11.5		6,711

Relevant business indicators	31-03-23		Δ %		Δ % ⁽¹⁾		31-12-22
Performing loans and advances to customers under management ⁽³⁾		38,958		4.8		9.5		37,191
Non-performing loans		2,333		(10.2)		(6.1)		2,597
Customer deposits under management ⁽³⁾		49,806		9.2		14.2		45,592
Off-balance sheet funds ⁽⁴⁾		7,491		8.0		12.9		6,936
Risk-weighted assets		58,683		4.3		8.9		56,275
Efficiency ratio (%)		49.7						33.5
NPL ratio (%)		4.3						5.1
NPL coverage ratio (%)		99						90
Cost of risk (%)		0.52						0.94

⁽¹⁾ At constant exchange rate.

⁽²⁾ Restated balances according to IFRS17 - Insurance contracts.

⁽³⁾ Excluding repos.

⁽⁴⁾ Includes mutual funds and pension funds.


		36

Macro and industry trends

After growing by 5.6% in 2022, one tenth of a percentage point above BBVA Research’s forecast, GDP is expected to grow by around 3.0% in 2023 (unchanged from the previous forecast). The negative impact on growth from the strong earthquakes recorded at the beginning of the year is expected to be offset by the impact of construction work and the greater fiscal stimulus. Despite the recent moderation, inflation remains excessively high (50.5% in March), largely due to relatively strong demand, the depreciation of the Turkish lira and the high inertia of the price revision process. The future evolution of inflation, in particular, and of the economy, in general, will depend, among other factors, on the policies implemented after the general elections announced for May. Moreover, the economic environment is highly volatile, given the combination of high inflation, very negative real interest rates, economic policy uncertainty, pressure on the Turkish lira, high external financing needs and the current global and regional background.

Regarding the Turkish banking system, with data as of February 2023, where the effect of inflation remains clear, the total volume of credit in the system increased by 55.8% year-on-year, in line with the growth of previous months. The credit stock continues to be driven by the acceleration in consumer and credit card lending (+75.8% year-on-year) while corporate lending grew less (+49.8% year-on-year). Total deposits grew strongly (+70.4% year-on-year as of February 2023). Growth in Turkish lira deposits accelerated (+138.0%) while dollar deposits grew much more slowly (+23.1%), reducing dollarization to 29% at the end of February 2023 (vs. 49% a year earlier, driven by regulatory measures announced throughout the year to encourage the growth of Turkish lira deposits). As for the system’s NPL ratio, it improved substantially to 1.93% as of February 2023 (109 basis points lower than the same month of 2022).

Unless expressly stated otherwise, all comments below on rates of changes for both activity and results, will be presented at constant exchange rates. For the conversion of these figures, the exchange rate as of March 31, 2023 is used. These rates, together with changes at current exchange rates, can be observed in the attached tables of the financial statements and relevant business indicators.

Activity

The most relevant aspects related to the area’s activity in the first quarter of 2023 were:

–

Lending activity (performing loans under management) increased by 9.5% between January and March 2023, mainly driven by the growth in Turkish lira loans (+10.4%). This growth was mainly supported by the performance of credit cards and, to a lesser extent, consumer loans. Foreign currency loans (in U.S. dollars) increased by 6.6%, boosted by the increase in activity with customers focused on foreign trade (with natural hedging of exchange rate risk).

–

In terms of asset quality, the NPL ratio decreased 77 basis points from that at the end of December 2022 to 4.3% and 239 basis points below the figure for the first quarter of 2022 due to the good performance in the wholesale portfolio, mainly in recoveries and repayments. Improvement in the NPL coverage ratio in the quarter to 99% as of March 31, 2023 due to the decrease in the non-performing loans balance.

–

Customer deposits (72% of the area’s total liabilities as of March 31, 2023) remained the main source of funding for the balance sheet and increased by 14.2%. Noteworthy is the positive performance of Turkish lira time deposits (+40.3%), which represent a 77.3% of total customer deposits in local currency, as well as demand deposits (+10.7%). Balances deposited in foreign currency (in U.S. dollars) continued their downward path and decreased by 8.1%, with transfers from foreign currency time deposits to Turkish lira time deposits observed under a foreign exchange protection scheme. Thus, as of March 31, 2023, Turkish lira deposits accounted for 62% of total customer deposits in the area. For its part, off-balance sheet funds grew by 12.9%.

Results

The most significant aspects of the year-on-year evolution in the area’s income statement at the end of March 2023 are summarized below:

–

Net interest income recorded a year-on-year growth of 63.0%, reflecting growth in Turkish lira loan, improved foreign currency spread, as well as lower funding costs and higher income from the securities portfolio.

–

Net fees and commissions increased by 61.0%, favored by the performance in payment systems fees, money transfers, brokerage activity and guarantees and asset management.

–

NTI showed an excellent performance (+64.0%) thanks to the increase in the results of the Global Markets unit as well as gains from foreign exchange positions, derivatives and securities.

–

The other operating income and expenses line showed a balance of €-220m, which compares favorably with the negative balance of the previous year. This line includes among others, the loss in the value of the net monetary position due to the country’s inflation rate, which stood below the loss recorded in the first quarter of 2022, partially offset by the income derived from inflation-linked bonds (CPI linkers), which were slightly lower in relation to those obtained in the first quarter of 2022. It is also worth highlighting the improved performance of Garanti BBVA’s subsidiaries, also included in this line.


		37

–

Operating expenses increased by 112.7%, with growth both in personnel, as a result of salary improvements to compensate for the loss of purchasing power of the workforce, and in general expenses, mainly due to the institutional donation of approximately €32m made by the BBVA Group to help those affected by the earthquake that struck an area in the south of the country last February.

–

Impairment on financial assets decreased by 20.3%, mainly due to strong recoveries in the wholesale segments and good dynamics of non-performing entries. For its part, the accumulated cost of risk at the end of March 2023 recorded a significant improvement to reach 0.52% from the 0.94% at the end of the previous year.

–

The provisions and other results line closed March 2023 with a higher loss than in the same quarter of the previous year, mainly due to lower results related to real estate assets.


		38

South America

Highlights

•

Growth in lending activity and customer funds

•

Favorable performance of recurring income

•

Higher adjustment for hyperinflation in Argentina

•

Improvement of the efficiency ratio



BUSINESS ACTIVITY ⁽¹⁾ (VARIATION AT CONSTANT EXCHANGE RATES COMPARED TO 31-12-22)				NET INTEREST INCOME / AVERAGE TOTAL ASSETS (PERCENTAGE AT CONSTANT EXCHANGE RATES)



⁽¹⁾ Excluding repos.

OPERATING INCOME (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)				NET ATTRIBUTABLE PROFIT (LOSS) (MILLIONS OF EUROS AT CONSTANT EXCHANGE RATES)



⁽¹⁾ At current exchange rates: +35.7%.				⁽¹⁾ At current exchange rates: +14.8%.


		39

FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)

Income statement

1Q23

Δ %

Δ % ⁽¹⁾

1Q22 ⁽²⁾

Net interest income

1,190

47.0

81.7

809

Net fees and commissions

184

3.4

21.0

178

Net trading income

127

36.3

66.1

Other operating income and expenses

(326)

66.9

85.3

(195)

Gross income

1,175

32.7

66.1

885

Operating expenses

(533)

29.2

53.6

(413)

Personnel expenses

(252)

25.5

50.6

(201)

Other administrative expenses

(239)

34.4

61.7

(177)

Depreciation

(43)

24.0

32.1

(35)

Operating income

642

35.7

78.1

473

Impairment on financial assets not measured at fair value through profit or loss

(227)

61.2

98.2

(141)

Provisions or reversal of provisions and other results

(9)

(45.8)

(38.5)

(16)

Profit (loss) before tax

405

28.6

75.4

315

Income tax

(124)

38.3

94.8

(89)

Profit (loss) for the period

282

24.7

68.1

226

Non-controlling interests

(98)

48.7

92.9

(66)

Net attributable profit (loss)

184

14.8

57.2

160

Balance sheets

31-03-23

Δ %

Δ % ⁽¹⁾

31-12-22

⁽²⁾

Cash, cash balances at central banks and other demand deposits

7,646

(0.6)

2.8

7,695

Financial assets designated at fair value

10,559

(1.7)

3.7

10,739

Of which: Loans and advances

(59.6)

(60.4)

152

Financial assets at amortized cost

41,734

3.2

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