425: BBVA Reports Strong Q3 2024 Earnings, Driven by Core Revenue Growth

BBVA announces a robust Q3 2024, with net attributable profit reaching EUR2,627 million, a 26% increase year-over-year.

Summary

• BBVA's net attributable profit for Q3 2024 reached EUR2,627 million, up 26% year-over-year.
• Earnings per share grew by 32% year-over-year to EUR0.44.
• The tangible book value per share plus dividends increased by 16% year-over-year.
• The CET1 capital ratio stands at 12.84%, above the target range.
• Return on tangible equity reached a record 20.1% for the first nine months of 2024.
• Net interest income (NII) grew by 3.5% year-over-year, driven by strong activity and NIM management.
• Net fees and commissions increased by 28% year-over-year.
• The efficiency ratio improved to 38.9%.
• Asset quality metrics remained stable and within expectations.
• BBVA distributed EUR1.7 billion to shareholders through an interim dividend in October.
• The bank acquired 8.5 million new customers in the first nine months of 2024, with 67% acquired through digital channels.
• EUR71 billion in sustainable business was channeled in the first nine months of 2024, reaching a total of EUR276 billion since 2018.
• Spain exceeded expectations with profits breaking the EUR1 billion mark for the second consecutive quarter.
• Mexico's earnings reached close to EUR4.2 billion in the first nine months of 2024, growing above 5% year-on-year.
• Turkey reported a net attributable profit of EUR433 million in the first nine months of 2024.
• South America delivered a net profit of EUR471 million in the first nine months of 2024.

Sentiment

Score: 9

Explanation: The document conveys a highly positive sentiment due to strong financial results, strategic progress, and optimistic future outlook. Management expresses confidence in the bank's performance and its ability to create value for stakeholders.

Positives

• Strong net attributable profit growth of 26% year-over-year.
• Excellent tangible book value per share growth of 16% year-over-year.
• Record return on tangible equity of 20.1%.
• Industry-leading efficiency ratio of 38.9%.
• Stable asset quality metrics.
• Sound capital position above target.
• Strong NII growth of 3.5% year-over-year.
• Outstanding evolution of net fees and commissions, increasing 28% year-over-year.
• Positive activity dynamics in Spain and Mexico.
• Significant overperformance versus originally established goals for 2021-2024.
• New customer acquisition is strong, with 8.5 million new customers in the first nine months of 2024.
• Continued progress in sustainable business, channeling EUR71 billion in the first nine months of 2024.

Negatives

• Currency depreciation in some markets negatively impacted results.
• NII dynamics remain under pressure in Turkey due to high funding costs in Turkish lira.
• The recovery of spreads in Turkey is taking longer than expected due to a more demanding regulatory context.
• Higher hyperinflation adjustment in Argentina year-on-year offset positive trends in revenues.
• Cost of risk in Mexico has gone up in the quarter to 343, but if you have excluded the macro impact, because the macro forecasts for Mexico has come down for this year, when the macro forecasts come down, based on IFRS 9, you do basically provisioning for the future, no? If you take out the macro provisioning for Mexico, out the impact of macro, the cost of risk would have been 319 basis points, which is basically confirming what I have been telling you, which is at the portfolio level, the cost of risk numbers are relatively stable.

Risks

• Macroeconomic uncertainties could impact future performance.
• Potential volatility around key currencies, especially the Mexican peso.
• Geopolitical risks and market stability in Turkey.
• Potential impact of U.S. elections on the Mexican economy.
• The risk that cost of risk goes out of hand in Turkey.

Future Outlook

BBVA is optimistic about 2025, expecting return on tangible equity levels similar to 2024, despite macro uncertainties. The Sabadell VTO process continues, with BBVA confirming its conviction that it is a value-creating transaction.

Management Comments

• Onur Genc: 'We are very happy with the performance in the quarter, and we continue to focus on creating value for all our stakeholders.'
• Onur Genc: 'We are optimistic going forward, despite all the macro uncertainties, I see very positive dynamics in our businesses that might lead us to 2025 return on tangible equity levels, similar to what we will be delivering this year.'
• Maria Luisa Gomez Bravo: 'In a context of declining rates, preserving spreads across the portfolios and ensuring profitability in all business decisions are a key management priority.'

Industry Context

BBVA's strong performance is notable in the context of the European banking sector, where efficiency and profitability are key concerns. The bank's digital transformation and focus on high-growth markets like Mexico position it well for future growth. The potential acquisition of Sabadell would further consolidate its position in the Spanish market.

Comparison to Industry Standards

• BBVA's efficiency ratio of 38.9% is significantly better than many of its European peers, such as Santander, BNP Paribas, and Deutsche Bank, which typically have efficiency ratios in the 50-65% range.
• Its return on tangible equity of 20.1% is also higher than the average for European banks, which is typically in the high single digits or low teens.
• The bank's focus on digital transformation and sustainable business aligns with broader industry trends, as banks increasingly look to improve efficiency and address environmental concerns.
• BBVA's expansion in Mexico is a strategic move to capitalize on the growth potential of emerging markets, similar to Santander's presence in Latin America and HSBC's focus on Asia.

Stakeholder Impact

• Shareholders will benefit from strong financial performance and dividend distributions.
• Customers will benefit from improved services and digital offerings.
• Employees will benefit from a stable and growing company.
• The communities in which BBVA operates will benefit from the bank's commitment to sustainable business.

Next Steps

• Continue to focus on creating value for all stakeholders.
• Await final regulatory approvals for the Sabadell VTO.
• Start share buyback programs upon completion of the Sabadell transaction.
• Provide specific guidance for 2025 at the end of the fourth quarter.

Key Dates