Banco Bilbao Vizcaya Argentaria S.A.

The stable outlook reflects our assumption that BBVA can manage the fact that the growth prospects of most economies it operates in will weaken in 2023. Higher interest rates will provide a significant tailwind to the bank's earnings in that regard. Turkiye will be under more pressure, but solid returns in Spain and Mexico will give BBVA room to accommodate lower earning streams from Turkiye. Equally, we expect the bank will maintain solid capitalization, with a RAC ratio above 8.5% over the outlook horizon, despite dynamic asset expansion. Finally, we do not expect that the cushion of subordinated bail-in-able instruments will change. The ratings could come under pressure over the next 18-24 months if risks were to become more acute

...Banco Bilbao Vizcaya Argentaria S.A. (BBVA) reported outstanding profitability, despite the lackluster performance of its Turkish operations. Favorable interest rate dynamics, sound volume growth, contained credit provisions, and the restructuring measures undertaken in Spain in 2021 support BBVA's strong performance in its two key geographies, Spain and Mexico. This more than offsets the significantly weaker returns from Turkish operations upon the application of inflation accounting. BBVA recorded its highest ever profit of 6.4 billion in 2022, with return on equity (RoE) reaching 14.1%. Even though the bank had to absorb the new Spanish windfall tax, profits kept growing in the first quarter of 2023 and the group's RoE climbed to 15.6%. BBVA will continue to benefit from wider margins in Spain...

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